The Allendale 19th annual farmer driven crop-yield survey results will be released at 7:30 am central time on Sept. 5, with USDA releasing its results on Sept. 12. www.allendale-inc.com
Corn Commentary: Tuesday's trade, Hurricane Gustav, with less than anticipated force, missed the big target of New Orleans, Louisiana, and did not do near the damage expected to refineries or oil rigs, sending crude oil futures spiraling lower, taking with it many of the grains, oilseeds and other agriculture soft markets. Weekly corn inspections came in at 33 million, well within prerelease expectations. After the side-by-side trade and before the Tuesday evening electronic trade the National Ag Statistic Service reports the good-to-excellent conditions 3% weaker than last week’s 64%, while the trade was anticipating a worst case scenario of only 2% lower. At 61% good-to-excellent, bears will have to argue with the bulls, corn conditions are 2% better than year-earlier levels. No early warning signals of a frost-freeze for at least the next 10 to 14 days. Dryness in the east cornbelt offers support but may find relief late this week. What corn futures won't find of relief is the perception of a rising U.S. dollar, weakening export potential.
Corn Technical Commentary: December corn did close below Allendale's custom key pivot point value of 5770 and was used as key resistance on Tuesday. Tuesday's futures trade did leave a chart gap from 5812 to 5772.
Vital Technical Indicator: Tthe next projected major turn day is forecasted for Sept. 4.
Trade Idea(s): Stand Aside
Option Strategy(s): December Corn, Bought 1 620 call @ 28. Risk 18. Obj 52.
Soybean Commentary: a private analytical group from Brazil estimates the country's next soybean crop production at 64.2 million tonnes vs. USDA's present estimate of 62 million tonnes, shedding some ideas of a smaller 2008/09 production vs. the 61 million harvested in 2008. Weaker crude oil futures, the stronger dollar and less than expected damage from Hurricane Gustav, all contributed to Tuesday's soybeans, soybean meal and soybean oil futures weakness.
After the side-by-side session close on Tuesday, but before the Tuesday evening electronic trade, NASS dropped the good-to-excellent crop conditions by 4% vs. pre release estimates of only 2% lower. This could help support soybean futures for the Tuesday evening electronic trade. Support may also develop from ideas of delayed harvest in the Deep South from persistent rains as well as too much dryness in the east soybean belt.
Soybean Technical Commentary: November soybean futures broke down through its technical uptrend, which began on 8/11/08. Overhear resistance is 13160 with underlying technical support of 12550. November futures closed 43¢ off its lows and 7¢ off its high for Tuesday suggesting the chart gap from 13166 to 13050 may be filled as early as Wednesday.
Vital Technical Indicator: the next projected major turn day in store for soybeans is Sept. 9, soybean meal Sept. 11 and Sept. 23 for soybean oil.
Trade Idea(s): There are no new futures only trade recommendations.
Option Strategy(s): Bought 12.80 call at 69¢. Risk to 54¢. Obj $1.30
Wheat Commentary: Beneficial rains fell west to east in Australia over the three-day weekend. Egypt suggests it has signed a deal to import 1 million tonnes of Kazakhstan wheat, but has also launched a tender for 55,000 to 60,000 tonnes of wheat for Oct. 1-15 shipment after Tuesday's side-by-side session. Deliveries against the Sept. futures continue to weigh on wheat as well as weakness in corn, soybeans and crude oil and stronger U.S. dollar. Wheat vs. corn spread traders make note psychological support of $2 premium the wheat held today. If it fails, look for the next level of support at $1.91. Direction for Wednesday is most likely influenced by forecast for Argentina, Australia and the southern Plains, which now is suggesting a wetter bias than dry and thus viewed as bearish to futures. Look for short covering rallies to be sold.
Wheat Technical Commentary: The December wheat futures reached levels last experienced December 2007. With Tuesday's weak trade well below key moving averages, look for bears to sell CBOT against resistance of 7980.
Vital Technical Indicator: the next schedule projected major turn day in store for wheat is Sept. 10.
Trade Idea(s): Dec CBOT Wheat:(09/03) Sell 1 @ 7880. Risk and reverse 8080. Obj 7310
Dec KCBT Wheat: (09/03) Sell 1 @ 8320. Risk and reverse 8460 Obj 7980
Dec Minn Wheat:(09/03) Sell 1 @ 8600. Risk and reverse 8760 Obj 8190
Option Strategy(s): there are no new options only trade recommendations at this time.
Lean Hog Commentary: Though deferreds started out on a lower note this morning, as expected due to lower corn, it was interesting to see most contracts close in positive territory. There is talk the big price decline in cash hog and pork markets will begin to slow in a few days. So far, there is no sign of that though. Cash hogs were weaker and this afternoon's wholesale pork trade was down $1.60. Even if/when cash hogs stabilize for a few days we do not see it lasting too long. With that in mind, we would have a target of $65 on the December. We remain bearish and will not pick a bottom.
Lean Hog Technical Commentary: The trend is down. If July's low of 6840 is taken out, we have a gap from 6560 to 6790 left from April to fill. There are ten¢ left on the upside to fill the October gap to 7050.
Vital Technical Indicator: Next projected major turn day for lean hogs is September 9.
Trade Idea(s): Bear Spread - Bought the Feb/Sold the Oct at 650 on the open. Settled at 745.
Option Strategy(s): No new recommendations.
Live Cattle Commentary: Most cattle futures traded the corn weakness today. Though we are hearing good news about smaller than expected feedlot supplies ready for early September marketings, it is not filtering into the psychology yet. This afternoon's wholesale beef trade was down for both choice and select. While we are bullish based on long-term fundamentals of lower supplies into fall/winter this market is simply not ready to start that up trend.
Live Cattle Technical Commentary: The trend is down.
Vital Technical Indicator: Next projected major turn day is September 4 for live cattle.
Trade Idea(s): When technicals improve, we would like to buy. Stand aside.
Option Strategy(s): Stand aside.
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 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.
