CBOT Grain Futures Calls:
-December corn called 1 to 3 higher.
-November soybeans called 5 to 7 higher.
-December CBOT wheat called steady to 2 higher.
US dollar is down 2 at 79.26. September crude is unchanged at $69.45. Dow futures are down 12 points.
Economic Information:
-Two day Federal Reserve meeting ends today. The trade expects no change in the 0 to .25% target for short term rates.
-Chinese stocks, as measured by the Shanghai A, fell 4.7%.
-Weekly API energy stocks report showed a 1.4 million barrel decline in crude oil and a 2.3 million barrel decline in gasoline stocks. The US Department of Energy’s Energy Information Administration weekly comparable report is due this morning. The trade expects this report to show a 700,000 barrel increase in crude stocks, a 1.3 million barrel decrease in gasoline stocks, and a 200,000 barrel drop in distillate stocks.
- International Energy Agency suggests 2010 world oil demand will be up by 1.3 million barrels per day. Previously they had expected a 1.4 million barrel per day increase.
-Retail sales, out on Thursday, may show a boost due to “Cash for Clunkers”.
-Consumer Price Index, the broad measure of inflation, will be out Friday.
Go to our homepage, www.allendale-inc.com, to view our latest market update videos, recorded twice a day (before and after the grain market session).
Weather:
-No change in the forecast. The bulk of this week will see normal temps and limited rainfall. Into the weekend temps will warm back into the mid 90’s again with chances for .25 to .75 inch. Overall, a little heat and a little precip are beneficial for the crop.
Grain Market Influences:
This morning’s supply/demand report is viewed as neutral to slightly supportive corn and soybeans and bearish wheat.
Corn summary…Traders evened up positions ahead of USDA’s report. This report will include a rare August survey to adjust acres due to the tough spring planting weather, a yield assessment, demand adjustment and whatever is left will be ending stocks. Hence the risk to traders and producers is significant. After the market responds to the USDA report, focus will have to shift to weather and what we will do with this potential crop.
China is estimating corn production in 2009 will total 166.5 million metric tonnes. That is up from last year’s 165.91 mmt figure. It is also higher than their previous 163.0 estimate for 2009.
South Korea purchased 55,000 tonnes of US corn overnight
Soybean summary… USDA report should be bullish. That is what everyone is expecting. After the initial response to the report, look out the window and if the crop is struggling then buy, if it is flourishing then sell. Special note that needs to be disclosed and explains why we are bearish $10.50 beans: The average trade guess is to see new crop ending stocks fall from 250 down to 221 million bushels. This is based on the assumption that US exports will increase in 2009/10.
China is estimating soybean production in 2009 will total 15.0 million metric tonnes. That is down from last year’s 15.5 mmt figure. It is unchanged from their previous estimate for 2009.
The Chinese government offered 502,000 tonnes of soybeans for the regular weekly sale. There was a total purchase of 15,000 tonnes from food companies. No crushers bid for the product.
Wheat summary… The US and world stocks continue to grow. Demand for wheat continues to choose optional origin rather than buy from the US. This along with reduced feed demand is causing wheat prices to stumble. Even with rounds of fund buying on seasonal and pre-inflation reasons, there is just a lot of wheat around and it is starting to sound like the hog market. After appearing to have bottomed on the chart for about 2 months, we have seen a break out to the downside and now the down trend has resumed.
China is estimating wheat production in 2009 will total 115.5 million metric tonnes. That is up from last year’s 112.46 mmt figure. It is also higher than their previous 113.2 estimate for 2009.
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Livestock Comments:
-Wholesale beef closes up $.77 for choice and up $.05 for select.
-Pork carcass cutout closes down $1.05.
-Cash hogs are called steady to $.50 lower.
Livestock Futures:
October Lean Hogs are called steady to 10 lower.
----Chart support 43.20 and resistance 52.00
October Live Cattle futures called 10 to 20 lower.
----Chart support 87.00 and resistance 89.75.
October Feeder Cattle futures are called 20 to 30 lower.
----Chart support 99.65 and resistance 102.00.
Livestock Market Influences:
Lean hogs summary… This morning we pointed out the problem with yesterday’s exciting $2.08 jump in the wholesale pork. The $7 rally in ham prices yesterday supported the cutout. However it was done on a miniscule 4 reported loads. This afternoon we see that was $1.05 lower. Essentially on the fundamental side, we have no sign of a bottom. We are still watching the daily technical signals such as volume and open interest but so far do not have a glaringly bullish signal on that side. Current December futures are undervalued but we do not look for prices to rebound yet. We are still testing downside and not ready to turn this ship around yet.
Live cattle summary… The bad news is cattle futures spent another day looking over their shoulder at the hog pit. The good news is beef fundamentals may make sure this two week break does not extend too long. In Nebraska, packers are bidding steady with last week. That sets tomorrows cash cattle trade for steady at the worst and potentially up $1. Also, boxed beef closed moderately higher.