CBOT Grain Futures Calls:
-December corn called 5 to 10 higher.
-November soybeans called 15 to 20 higher.
-December CBOT wheat called 1 to 3 higher.
US dollar is down 37 at 78.53. September crude is up $1.74 at $71.90. Dow futures are up 102 points.
Economic Information:
-Weekly jobless benefit claims are expected to run between 545,000 and 550,000.
-EU reported a .1% drop in GDP for the second quarter. Both Germany and France reported a .3% increase however which suggests they came out of their recessions.
-The Fed said the economy appears to be leveling out.
-Retail sales are expected to show a .7% increase for the month of July. June was up .6%.
-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:
-Market hyped up by hopes from the GFS model showing colder air from Canada coming down in the second half of next week. Neither of the two big forecasters we watch closely, one being Drew Lerner of World Weather Inc., is putting much stock into this model. They are still saying dry weather in the near term with chances of rain late in the weekend through early next week. This rain has been upped from a range of .25 to .75 inch and is now .50 to 1.00 inch. Later next week another .25 to .75 inch is expected. Temperatures are expected to hit the low 90’s this weekend then cool back down next week. Officially, the late next week forecast shows temps in the low 40’s in the far north…no frost risk.
Grain Market Influences:
Weekly export sales are viewed as bullish soybeans, neutral corn and wheat, and bearish soymeal and soyoil.
Corn summary… Somehow, out of all the bearish supply news, this report came out almost supportive. On the acreage front, even though USDA said it would be resurveying farmers on their corn and sorghum plantings, USDA did not change the corn planting number. Instead of a 667,000 acre decline, as the average trade guess implied, there was no change. At the same time, USDA posted a massive 6.1 bushel increase on yields. That was not as large as last year’s 6.6 bushel increase in August but was a big deal just the same. So we added 471 million bushels to supply. The real surprise here was USDA guessed increased demand would take care of 350 million of that. Increases were seen for feed use, ethanol use, and exports.
South Korea purchased 110,000 tonnes of US corn overnight. This is separate from the 55,000 tonne purchased yesterday.
Soybean summary… When South America starts planting we expect USDA to take a good lop off their new crop export estimate. There is nothing wrong with this market keeping its blinders on and even moving higher into September. There is nothing wrong with that at all. We have simply pointed out at harvest November futures have a good change of being back down to $9. After harvest, it is likely that $8.10 point will get hit. Keeping our blinders on, if soybeans can post a close above the recent sideways trade we will go-with.
Wheat summary…Of the grain and oilseed numbers out today, the wheat picture was about right on expectations. USDA upped its estimate of the spring wheat crop by 42 million bushels this morning. You may not believe it but spring wheat yields, at 41.5 bushels per acre, are a record. With some other small changes we saw ending stocks go from 706 to 743 million bushels which was close to everyone’s expectations. Stocks, both US and world, are at the largest level since 2001. Fundamentally, a move to 475 on the December contract is where value is. However, with wheat also looking at corn pricing we are now sure of the timing of when that could be seen. For trades we are keeping it simply with option plays and the new Chicago/Minneapolis spread.
A French analysis group, Strategie Grains, estimates the EU wheat crop at 130 million metric tonnes. That is up from their 126.5 mmt estimate made last month.
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Livestock Comments:
-Wholesale beef closes down $.43 for choice and up $.31 for select.
-Pork carcass cutout closes down $1.34.
-Cash hogs are called steady to $.50 lower.
Livestock Futures:
October Lean Hogs are called steady to 10 higher.
----Chart support 43.20 and resistance 52.00
October Live Cattle futures called 10 to 20 higher.
----Chart support 87.00 and resistance 89.75.
October Feeder Cattle futures are called 20 to 30 higher.
----Chart support 99.65 and resistance 102.00.
Livestock Market Influences:
USDA says it lacks the funding to do the pork purchase the industry is asking for.
Lean hogs summary… The pork cutout, a measure of wholesale pork prices, closed down $1.34 this afternoon. The past two days have now reversed Monday’s $2.08 rebound in cash pork. Packers are lined up for a good deal of hogs that should have been marketed a couple weeks ago. Also, on last night’s wrap up we noted the news that South Korea lifted its ban on live hogs should have no impact on prices. Last year they bought 1,014 head and this year they purchased a small 65 head. The last factor to note is this H1N1 panic. We would guess we have to get into the flu season before the market realizes it overreacted. That will not be for a few more weeks.
Live cattle summary… There was nothing but great news today for the long term beef supply picture. USDA recognized the fact 2010 beef supplies will make another sharp decline on top of the 2009 numbers. We reported on the 830 AM Livestock Fundamentals page USDA took 423 million lbs off their 2009 beef production estimate and 810 million lbs off their 2010 beef production estimate. These are huge declines to make in one month.