* Welcome to Allendale's 19th annual farmer driven crop yield survey. The formula to estimate yield is found on our Commodity Calendar page. The survey results will be released at 7:30 am central time on Sept. 5, with USDA releasing its results on Sept. 12. You may fill out the survey form via calling an Allendale Representative at (800) 551 4626 or on the Allendale Website: www.allendale-inc.com. Call between 7 am to 5 pm or evening hours of 6 pm to 8 pm Central time to participate.
Corn condition: The National Agriculture Statistics Service released its twelfth crop conditions report for the 2008 corn crop. Prerelease estimates suggested good-to-excellent corn conditions to come in a range of 63% to 66%. NASS estimates the Aug. 17 conditions at 67% vs. last weeks 67% and year-earlier levels of 58% good-to-excellent and a five-year average of 60%.
The trade is anticipating crop conditions to ease given the time of the year. Allendale suggests crop conditions to remain steady to decrease 2% throughout most of this week based on private and public weather forecast calling for less than beneficial weather.
Cumulative dough stage of corn at 19% behind the five-year average vs. 20% last week. Private weather forecasts have yet to flash any prewarning signals of frost or freeze, normal or early
Conclusion: Provided NASS's results above compared to pre release crop condition estimates, Allendale views Monday release as neutral/bearish to Dec. corn futures. However, crop maturity continues to lag its five-year average, may be vulnerable even to a normal frost-freeze date, and would be viewed as bullish to futures.
Soybean Condition: The National Agriculture Statistics Service released its eleventh 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 63%. NASS estimates the Aug. 17 good-to-excellent conditions at 62% vs. last week’s 63%, year-earlier levels of 54% good-to-excellent and a five-year average of 58%. The percent of soybeans setting pods as of Aug. 17 is estimated at 75% vs. a five-year average of 87% vs. year-earlier levels of 89%. Concerning is this weeks mostly dryer than normal rain forecast.
Conclusion: Provided NASS's results above compared to pre release estimates, Allendale views Monday's releases as neutral to bullish November soybean futures. It certainly does appear as though we have a good in appearance, but notably lagging in maturity corn and soybean crop.
Spring Wheat Conditions: USDA estimates spring wheat good to excellence ratings are 56% vs. week earlier levels of 53% vs. year-earlier levels of 66% good-to-excellent and a five-year average of 63%.
The trade was anticipating a 1% to 2% reduction in the good-to-excellent ratings. Allendale views this spring-wheat crop-condition report as bullish for Sept. MGEX futures.
Technicals: For the short-term trader, Allendale uses its own unique custom moving averages (MA) 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 to turn bulls. 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.
Conclusion: Most immediately, corn has support of its identical #1 and #2 moving averages for September futures but overhead resistance of the pivot point. Technically the trade could be willing to buy against the support and use a target of the pivot point. December corn futures may need at least one more day with a close above its key pivot point to help confirm in trader attitude from neutral to bullish.
Corn Fundamentals: Interesting to note, even with a slightly weaker crude oil market and mild lower dollar, corn futures staged a rally on Monday on light trade volume. Both Japan and China suggest corn futures may have found a near-term bottom. We have not heard from, until Monday, Mexico a buyer of 155,000 tonnes of USA new crop corn. Weekly export inspections were rock solid. Bearish to corn is any surprise announcement of big coverage of big rains. Bullish to corn is even a normal frost freeze, which could damage 200 million bushels.
In the big picture, corn is still in the passenger’s seat of the crude oil driver. Key technical support for crude oil is $111.50 per barrel with resistance of $116.17. There remains a chance for corn to disassociate itself from crude oil if an earlier than expected frost were actually to begin trimming corn for grain production.
Trade Posture: Fundamentally Allendale remains long term bullish to corn on tight stocks to use that we feel will get tighter in the coming months. For the chart picture, a close above the key pivot point is encouraging but in order to confirm a shift in trader attitude from neutral to bullish another day's close above 5700 is needed.
Corn for Ethanol Webinar: Allendale has published an ethanol demand for corn Webinar on Friday, Aug. 15, 2008. Has the recent slide in cash corn prices returned the days of glory profits for the ethanol producers? To access this Webinar contact Greg McBride at (800) 551 4626.
Price Projections: Allendale's December corn futures price projections suggest futures may have bottomed and now point to a move higher to the 6500 level. What this may suggest is for end users to lock in inputs at present levels and cover with longs puts in case crude oil continues to drag futures lower. Producers may want to buy calls at these lower levels and use a target very near the 6500 level to catch up on hedges for 2008 corn production.
Price Projections: Allendale's November soybean futures price projections suggest futures may have bottomed and now point to a move higher to the 13750 level. What this may suggest is for end users to lock in inputs at present levels and cover with longs puts in case crude oil continues to drag futures lower. Producers may want to buy calls at these lower levels and use a target very near the 13750 level to catch up on hedges for 2008 soybean production.
Price Projections: Allendale's December wheat futures price projection suggests futures may have bottomed at the 7800 level and now point to a move higher to the 900 level. What this may suggest is for end users to lock in inputs at present levels and cover with longs puts in case corn and soybeans technically pull futures lower. Producers may want to buy calls at these lower levels and use a target very near the 9000 level to convert present hedges to the cash market.
Need to See: Allendale Internet subscribers are able to view the most recent prices projections within the web site via the "Price Outlook" toggle on the left hand column. Allendale subscribers via DTN and or Farm Data may either call (800) 551 4626 or e-mail us at research@allendale-inc.com to request a copy
Soybeans: At present it’s all about the dry weather forecast and the trades perception that the U.S. soybean crop's pod fill is at risk. Interesting to note China suggest it will most likely re enter the world soybean market as a buyer as soon as the Olympics are complete. Argentina is making headlines once again. It appears the country's farmers are protesting once again. The farmers claim state intervention has cut profits for small and medium size producers. The farm leaders demand the government reduce export levies for smaller scale producers and demand help for cattle and dairy farmers. This news was traded within Monday's action. However if more farm groups do join the protest, look for additional bullish premium to be added at a time when China is expected to re enter the world market as a buyer. The first hint of rains moving into the Midwest within the next week to ten days could be interpreted as bearish to futures.
Trade Posture: Allendale remains long term bullish to soybeans as 2008/09 ending stocks are estimated at 135 million bushels. However, the immediate technical trend is mixed with outside old crop fundamentals mostly bearish. Allendale sold short covering rallies in soybeans, meal and soybean oil.
Wheat Fundamentals: Spring wheat crop conditions improve and its harvest pace of 35% vs. a five-year average of 54%, one cancels the other. Big news coming out of Australia as its #2 producing state of New South Wales has increasing drought at a time when the crop is in the heading phase. More than two thirds of NSW's is now experiencing drought. Demand for U.S. wheat remains rock solid both domestically and in the export market. Monday’s higher high and higher low is technically friendly but does need two consecutive closes above its 200-day Moving Average of 8620. Fortunately, wheat was the recipient of the rally in corn and soybeans on Monday. Look for a continued wide range of trade in these thinly traded futures. Wheat Domestic Stocks and Stocks to Use: 2008/09 end stocks are projected at 574 million bushel via the July WASDE vs. 537 million bushels estimates in the July WASDE, an increase of 6.8%. 2008/09 end stocks to use projections are 25% for the August WASDE report vs. 23.1% in July up 87% year on year.
World Stocks and Stocks to Use: 2008/09 world end stocks are projected at 136 million tonnes vs. the July WASDE estimate of 133 million tonnes, up 21 MMT year on year. This compares to the 1995/96 year on year increase of 8 MMT regarded as a notable increase. 2008/09 world end stocks to use for August are estimated at 17.7% vs. 17.3% estimated in the month of June vs. 15.7% for the 2007/08 marketing year. At 17.7% end stocks to use, it represents the third tightest level dating back to 1980.
Trade Posture: Technicals are neutral to bullish. Despite record world wheat production, the day’s supply of all grains has shrunk from 59 this year to 58 days for 2009 vs. 115 days in 1999/2000 and 2000/01. Although U.S. end stocks have increased dramatically by 87%, world end stocks to use remain precariously razor thin. Allendale would recommend building a bullish base via at the money or slightly out of the money long calls or bull call spreads and then add to the long position with futures when its respective key pivot point are penetrated above.
Lean Hogs: In this afternoon's Monday meeting for the brokers and branch offices, which is available to you, we overlaid corn and a summer hog futures chart.
The relationship is very clear. Corn up means 2009 hog futures up. With that in mind, we are not advising new hedges as we feel corn may be a little undervalued. For short-term livestock fundamentals, we are still looking for cash pork to form a clear top here. We are still feeling the October lean hog contract could stand to shed a little more weight. As we have said before our overall plan is to be slightly bearish the October and December. The 2009's may be a little too low actually. Even if we are not advising new hedges for hog prices we still feel all hog producers who buy feed need to be working on a feed hedge plan.
Live Cattle: There is a little conflict going on regarding short-term fundamentals. On the bear side today marked the first time since August 1 that boxed beef closed lower for both choice and select. That lower action on the wholesale end could indicate to bears that demand will be wrapping up for the post-Labor Day period. On the other hand, though we are getting reports that show lists are generally lower than last week. This is interesting as the number of cattle sales last week was actually down from the previous week. That would indicate the number of cattle coming due was much lower than the number of unsold cattle from the previous week. It also confirms that we are on the road for lower and lower beef supplies into summer. At this point asking prices are $102 compared with last week's $100 action. While normally we would assume cash trading would wait until the COF report on Friday, we would guess some action would have to go a little early. Packers may need to get business done before the end of the week as they are running close to the knife. In other news there may be some interest regarding USDA's Cattle on Feed report coming out Friday at 2p.m.
Did feedlots restart the placement pace in July as corn prices were falling? For now, we like the short strangle option position for speculative trading. For hedging, we are not advising any new sales on 2009 marketable cattle. They are following corn and corn may be a value at current prices. Back on the corn end, the action hedgers should be taking right now is locking in feed costs.
Joe Victor and Rich Nelson
www.allendale-inc.com
research@allendale-inc.com
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
