Technicals: For the short term trader, Allendale uses its own unique custom Moving Averages to monitor price momentum, define key support and resistance levels as well as advise where key pivot points are located when bulls may turn bearish and bears may turn bullish. We also include last week’s closing price for the weekly chartist as we draw closer to the end of the week to anticipate the possibility for futures to have a positive weekly close or if weakness is ensuing. A detailed technical look at the grains and livestock are available within our Allendale Advanced Charts.
Corn Futures Close Moving Ave #1 Moving Ave #2 Pivot Last Wks Close
Sep 5820 5820 6010 5540 5772
Dec 6012 6010 6200 5580 5964
Bean Futures Close Moving Ave #1 Moving Ave #2 Pivot Last Wks Close
Sep 13962 14750 14900 12750 13884
Nov 13960 14700 14840 12480 13864
Wheat Futures Close Moving Ave #1 Moving Ave #2 Pivot Last Wks Close
Sep CBOT 7976 7950 8020 8530 8110
Sep KCBT 8244 8210 8300 8900 8322
Sep MGEX 8762 8740 8790 9220 8860
Conclusion: Technically the most vulnerable of corn, soybeans and wheat, it is the corn as Monday's close rest on the # 1 moving average and in jeopardy of falling back to its respective pivot point value.
Corn Condition: The National Agriculture Statistics Service released its ninth crop conditions report for the 2008 corn crop. Pre-release estimates suggested good to excellent corn conditions to come in a range of 64-66%. NASS estimates the July 27 conditions at 66% vs. last week’s 65% and year earlier levels of 58% good to excellent and a five year average of 63%. Allendale suggests crop conditions to remain steady to decrease 1% throughout most of this week based on private and public weather forecast calling for less than beneficial weather. Cumulative pollination as of July 27 is estimated at 59% vs. 34% a week earlier, 87% a year earlier and a five year average of 81%. The lag in the reproductive phase suggests a notable amount of the 2008 corn to pollinate in the last week of July and first week of August. The timing of the majority of the pollination may actually escape the most intense mid July heat.
Conclusion: Provided NASS's results above compared to pre-release estimates, Allendale views Monday’s release as neutral for Dec corn futures.
Soybean Condition: The National Agriculture Statistics Service released its eighth crop conditions report for the 2008 soybean crop. Pre release estimates suggested good to excellent soybean conditions to come in a range of 60 to 62%. NASS estimates the July 27 good to excellent conditions at 62% vs. last week’s 61%, year earlier levels of 58% good to excellent and a five year average of 60%. The percent bloom of soybeans at 62% is a full 20% behind year earlier levels and 17% behind the five year average, add to this lag, present pod fill of 21% vs. year earlier levels of 45% and five year average of 38%, the trade is likely to remain very much focused on forecasted precipitation for the next 2-3 weeks to anticipate the potential crop size for 2008.
Conclusion: Provided NASS's results above compared to pre-release estimates, Allendale views Monday's releases as neutral to November soybean futures.
Spring Wheat Conditions: USDA estimates spring wheat good to excellence ratings are 60% vs. week earlier levels of 63% vs. year earlier levels of 68% good to excellent. Allendale views this spring wheat crop condition report as neutral to slightly bullish for September MGEX futures as the trade was expecting a decline of only 1-2%.
Winter Wheat Harvest: The 18 states which made up 90% of the 2007 winter wheat acreage are collectively estimated to have 79% of the 2008 winter wheat crop harvested vs. 71% a week earlier, 87% a year earlier and 86% for its five year average. With the harvest now more than three quarters complete, look for less discussion of harvest pressure and more concentration on demand.
Corn: Technically bearish, potentially finding support at 5710 vs. the Dec futures. Corn futures find support from immediate weather forecast calling for high heat late this week and renewed South Korea interest in U.S. corn vs. international feedwheat supplies. Bearish to corn is the lack of a lengthy stay for the proposed high ridge of pressure as rains are forecasted to return to the Midwest by the middle of next week.
Ethanol: The Energy Information Administration has released its most recent ethanol production and end stocks data (for the month of May). The EIA has released its month of May ethanol production estimate at 18.543 million barrels vs. a previous record 17.4 million barrels for the month of March. The 18.543 million barrels of May 2008 production represents an increase of 46% over May 2007 production of 12.6 million barrels. The May 2008 production narrowly missed a target of 18.6 million barrels needed to be produced in order to maintain the pace required to meet USDA's target for corn use in 2007/08. More news from the EIA is the ethanol end stocks level had an increase to a level of 12 million barrels vs. 11.5 mb in April. One year ago for the month of April ethanol end stocks were estimated to be 9 million barrels. This suggests a year on year stock build of 33%.
Conclusion: Record production for the month of May is a positive indicator for corn use for ethanol but offsetting the production increase is an over exuberant stock build.
Looking Forward: Of the most recent nine years, May to June ethanol production has increased two years, unchanged three years and decreased four years. With regards to end stocks of the most recent nine years, five of the years had stocks increase from May to June, and had a stocks decrease from May to June four years.
New Crop Marketing: Allendale is long 650 Dec calls to cover 50% of anticipated 2008 production at 34 cents. The total amount of anticipated 2008 production hedged is 25%. 5420 vs. the Dec 2008 is key support, immediate resistance is 6250. We will monitor and alert when to resume hedges.
Trade Posture: Fundamentally Allendale remains long term bullish to corn on tight stocks to use for specifically corn and total world grain stocks to use. Allendale is probing a summer bottom in corn via long Dec calls. It will be important for further demand from Mexico, Japan and South Korea to follow through this week as was apparent last week.
Wheat: The trade continued to digest talk of Iran's recent purchase of 3 million tonnes of wheat and is attempting to add fuel to the bullish fire by implying the Middle East country may need to buy one million tonnes of wheat each month through March 2009. Iran wheat production is off by as much as 5 million tonnes. USDA has increased its imports from 2.5 million tonnes to 4.5 million tonnes. Allendale suggests at most Iran may need to import an additional 2 to 2.5 million tonnes, not the eight millions tonnes suggested by an Iran news article. Australia wheat continues to do well but weather stress is evident in the number 2 and 3 producing west central region of the country. Supportive to wheat futures is news of Egypt's tender for 55-60 k tonnes of wheat.
Wheat Crop Marketing: $5.72 cash wheat requires 4.4 cents of carry per month. If not hedged, make certain your local cash markets are offering you sufficient carry. The present Sept-Dec wheat futures spread is offering 24 cents carry (actual cost is 13.2 cents) Allendale has 65% of anticipated 2008 wheat production hedged in the Dec futures. We see no reason to hedge new crop above the 65% level we have on for now.
Cash Peak: Dating back to 2000, odds favor a national cash wheat peak for the month of December. Of the most recent eight years, dating back to the year 2000, the national cash peaked has hit the month of December 50% of the time with various other months such as Oct and Nov, April and May only once. We will monitor cash and futures spreads and the history stated above to make our decision to make initial 2008 cash sales.
Trade Posture: Technicals are neutral as long as 7950 vs. the CBOT Dec can hold. A close above 8530 turns trader momentum to bullish. Fundamentals are bullish as the demand is more positive than year ago levels.
Soybeans: Much like corn, soybeans are in the midst of its production phase and as long as weather does not provide an immediate threat to the crop, overhead fundamental pressure exist. The trade is likely to remain on high weather alert as we approach the middle of August as it will be determined whether rains could be sufficient for pod fill for the second and third week of August. Technically it appears as though soybeans are attempting to consolidate after late last weeks near double bottom. A potential upside target may be the 14580-14546 chart gap vs. the Sept futures.
New Crop Marketing: We will hold hedges of new crop at 40% of anticipated 2008 production and alert when to resume. Technical chart based support is 13550. We will alert before resuming hedges, and plan to cover short futures hedges with bull call spreads.
Trade Posture: Allendale remains long term bullish to soybeans as 2008/09 ending stocks are estimated at 140 million bushels and has a projected end stocks to use of 4.7% vs. old crop stocks to use of a record low 4.1%. Any forecast calling for extended high heat for the first 2-3 weeks of August, during the critical pod fill stage is deemed bullish to new crop Nov futures. Present forecast calling for high heat late this week is expected to be followed by rains by the middle of next week. Because of the less than stable day to day weather forecast for this time of year, look for futures volatility to persist.
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Lean Hogs: Technically Allendale remains bullish to lean hog futures as long as 7765 hold vs. the August futures. The chart gap between Wednesday's high of 7845 and Friday's low of 7850 was officially filled on Monday. Immediately pressing the nearby futures are ideas of the cash hogs topping, after the pork carcass slipped for the first time last week by 22 cents, Monday's value was able to rebound by a nickel suggesting steady cash and futures prices for Tuesday. At present Allendale is a willing buyer of futures but on a technical pull back as outlined within our Livestock Trading Strategies page and is well aware of the double top of 7975.
Live Cattle: August live cattle futures reached a low of 9685, a level last experienced on April 15. There remains a chart gap between April 14 9640 and the April 15 low of 9680. The spec trade took last Friday's bearish cattle on feed report to heart by pressing futures to a gap open lower from Friday's low of 9765 to Monday's high of 9735. Immediate technical resistance is 9790. Box beef prices continued its three day decent lower on Monday but expectations are calling for a nearby bottom potentially supporting futures.
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The thoughts expressed and the basic data from which they are drawn are believed to be reliable but cannot be guaranteed. Any opinions expressed herein are subject to change without notice. Hypothetical or simulated performance results have certain inherent limitations. Simulated results do not represent actual trading. Simulated trading programs are subject to the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. Commodity trading may not be suitable for recipients of this publication. This is not a solicitation of the purchase or sale of any commodities. Those acting on this information are responsible for their own actions. Any republication, or other use of this information and thoughts expressed herein without the written permission of Allendale, Inc., is strictly prohibited. Allendale Inc. c2008
