Special Note: The U.S. Government's Department of Agriculture was closed on Monday in observance of Columbus Day. Therefore the weekly grain inspections and weekly crop progress and condition report are delayed until Tuesday.
Corn Commentary: With the U.S. dollar down, crude oil and Dow Jones recovering, the combination provided the catalyst for grain futures to recover on Monday.
The corn futures trade may want to focus first on a period of consolidation within the Dow Jones before suggesting a low has developed.
This week look for fundamental support to come from less than ideal harvest conditions in the west cornbelt for the first half of this week.
On the day it is estimated funds bought 4,000 contracts of corn.
Weather reports from #3 world corn exporter Brazil has continued dry weather stress in the north and extremely heavy rains in the deep south as Brazil is planting.
Corn Technical Commentary: Dec corn is in a downtrend. Monday's lower low and lower high is a bearish signal despite the higher close.
Vital Technical Indicator: The next projected major turn day is forecasted for Tuesday October 21.
Trade Idea(s): Stand Aside.
Option Strategy(s): Buy 1 370 call @ 27. Risk to 15. Objective 52
Soybean Commentary: Lower soybean oil, soybean and soybean meal futures overnight at the China Dalian Exchange, slightly higher Malaysian Palm oil futures overnight and very impressive futures action for soybean oil at the CBOT but soybean and soybean meal futures were anemic by comparison.
The trade is aware of potential harvest delays for the west soybean belt for the first half of this week. Demand for U.S.A soybeans is capturing attention as China trade data suggest soybean imports for the first nine months of 2008 is up 32.3% vs. year earlier levels. China has suggested in late August its September imports to be cut by 25%, such is not the case.
The soybean trade is becoming more aware of dry weather in Brazil's north region, which presently is planting.
Tuesday morning the National Oilseed Processors Association will release is month of Sept soybean crush report. Pre release estimates are looking for an average of 122 million bushels, with a range of 121 to 123.5 million bushels. Sept of 2007, NOPA estimated the soybean crush of 140 million bushels. A report of less than 121 million bushels is likely to be viewed as bearish. You would have to venture back to 2004/05 to find a Sept soybean crush less than 115 million bushels. However one could reason, such a light crush could be because of the lag in soybean harvest and tight old crop stocks. The higher than usual basis levels for Sept could support such a case.
On the day it is estimated funds bought 3,000 contracts of soybeans, and 2,000 soybean oil.
Soybean Technical Commentary: November soybean futures remain in a downtrend. Monday's lower low and lower high is a negative for the daily chartist.
Vital Technical Indicator: The next projected major turn day in store for soybeans is October 16, soybean meal Oct 23 and Oct 22 for soybean oil.
Trade Idea(s): there are no new futures only trade recommendations.
Option Strategy(s): Buy 1 940 call @ 46. Risk to 34. Objective 88
Special Report: Post USDA World Ag Supply Demand Estimates Oct 10, 2008
World Grain Stocks to Use: World grains are composed of wheat, coarse grains (Corn, sorghum, barley, oats, rye, millet and mixed grains and milled rice.
It may provide a more complete picture of the all grains in general the world demand has access to use and various combinations of feed and food alternatives rather than an individual line item. Allendale's research finds present end stocks to use of total world grains at 20%, which is the fifth lowest dating back to 1990. The record low was 16% in 2007, with the record level high in 1998 and 1999 at 32%. The most recent five-year average level has been 18%.
Corn Domestic Stocks and Stocks to Use: 2007/08 presently estimated at 1.624 billion bushels vs. September's 1.576 billion bushels vs. 2006's 1.304 billion. For 2008/09 end stocks are projected at 1.154 billion bushels vs. September's USDA estimate of 1.018 billion bushels. 2007/08 Stocks to use for October estimate is 12.7% vs. 12.3% last month vs. 2006's 11.6% and 2005's
17.5%. USDA's 2008/09 estimate for end stocks to use is 9.1% (second tightest dating back to 1980) vs. September's estimated 8.1% with 1995 the lowest at 5% dating back to 1980.
World Stocks and Stocks to Use: 2007/08 world stocks of 123 million tonnes vs. last months 123 million tonnes vs. the previous year’s 109 million tonnes. USDA 2008/09 September end stocks are estimated at 108 million tonnes vs. its September estimate of 110 million tonnes. 108 million tonnes of world end stocks would represent the fourth tightest dating back to 1980. Record high world stocks was 1986's 205 million tonnes. Record low-end stocks for the world was 1983's 89 MMT. 2007/08 End stocks to use at 14.1% vs. 14.2% last month and compares to USDA's 2008/09 October estimate of 12.2% vs.
September's estimate of 12.5%. At 12.2% end stocks to use, it represents the lowest on record dating back to 1980 with the second tightest in 2006 of 13.2%.
Season Average Farm Price: USDA estimates the October 2008/09 Season Average Farm price at $4.70/bushel vs. its September estimate of $5.50 bushel. The SAFP for 2007/08 is $4.20 and 2006/07 was $3.04/bu.
Wheat Domestic Stocks and Stocks to Use: 2008/09 end stocks are projected at 601 mil bushels via the October WASDE vs. 574 million bushels estimates in the September WASDE. 2008/09 end stocks to use projections are 26% for the October WASDE report vs. 25% for the September WASDE and up 100% year on year, as 2007/08 is estimated at 13% end stocks to use and compares to the most recent five-year average of 21.86%.
World Stocks and Stocks to Use: 2008/09 world end stocks are projected at 144 million tonnes vs. the September WASDE estimate of 140 million tonnes, up 24 MMT yr on yr. 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 October is estimated at 18.5% vs. 18% estimated in the month of September vs. 16.3% for the 2007/08 marketing year. At 18.5% end stocks to use, it represents the third tightest level dating back to 1980. The most recent five-year average of world end stocks to use is 18.7%.
Season Average Farm Price: The SAFP for 2008/09 at $7.00 per bushel for the October estimate vs. September's estimate of $7.25 per bushel.
Soybean Domestic Stocks and Stocks to Use: 2007/08 presently estimated at 205 million bushels vs. 140 million bushels last month vs. 574 million the previous year. 2008/09 October end stocks are estimated at 220 million bushels vs. the September estimate of 135 million bushels. The 220 million bushels compare to most recent five-year average of 319 million bushels. 2007/08 Stocks to use as of the October WASDE are 6.7% vs. September estimate of 4.6%. 2008/09 end stocks to use for October are projected at 7.4% vs. a September estimate of 4.6%.
World Stocks and Stocks to Use: 2007/08 world stocks of 53 million tonnes vs. last month’s 50 million tonnes vs. last years 63 million tonnes. 53 million tonnes compare to a five-year average of 51 million tonnes. End stocks to use at 17.1% vs. 16.2% last month. The five-year average has been 18.1%. 2006 end stocks to use for world soybeans was 21.2%. USDA's world 2008/09 end stocks for soybeans for the month of October is estimated at 55 million tonnes vs. 51 million tonnes the previous month. 2008/09 end stocks to use are estimated at 17.6% vs. September's 16.3%.
Season Average Farm Price: USDA's projected 2008/09 SAFP for October is projected at $10.35 per bushel vs. its Sept estimate of $12.35 per bushel.
Wheat Commentary: Has USA wheat reached economic value? One may defend such a case as Egypt for its second consecutive purchase has bought both U.S. and Russia wheat vs. a previous string of three purchases of exclusive Russia wheat. Working against wheat is the mass media's perception of a world record wheat crop. Media is less than willing to mention the world record demand. Argentina did receive beneficial weekend rains but Australia remains in a net drying pattern in its key Western Australia production state.
On the day it is estimated funds bought 2,000 contracts of wheat.
Wheat Technical Commentary: the technical trend remains down. Positive at all three exchanges is Monday's higher high and higher low. However all three exchanges left chart gaps below Monday's trade action.
Vital Technical Indicator: the next schedule projected major turn day in store for wheat is Monday, October 27.
Trade Idea(s): Dec CBOT Wheat: (10/13) Sell 1 @ 6180. Risk 6320. Objective 5480
Dec KCBT Wheat: (10/13) Sell 1 @ 6460. Risk 6620. Objective 5780
Dec Minn. Wheat: (10/13) Sell 1 @ 6830. Risk 6970. Objective 6180
Option Strategy(s): there are no new options only trade recommendations at this time.
~Joe Victor
The Dow Jones Industrial Average settled 936 points higher. This is the single largest intraday rally in history. Some will say after the close that today was the bottom; the chart is still in a downtrend
Energies: - Crude oil settled $3.49 higher on the day at $81.19. The strength today can be supported by efforts from Central Banks making a globally concerted effort to stabilize financial markets. The market was also supported by a weak dollar and talks that OPEC will reduce output now that demand has tapered.
Technical Commentary: December Crude Oil posted an inside day on the chart. Support is found at $80 and again at the low for the move at $77.09. Technically, the market is still in a downtrend and rallies are to be sold.
Trade recommendation(s): Sell 1 December Mini Crude @ $87.45. Risk to
$91.45 with an objective of $80.45.
Sell 1 December Mini Crude @ $76.95 stop. Risk to
$79.95 with an objective of $71.55.
Metals: - December Gold closed down $16.50 at $842.50. December Silver was up $0.190 at $10.790. As confidence enters the equity market, Gold's safe haven appeal could dwindle. With this in mind and seeing what the Dow did today, it made it very hard to watch our Gold position move from over a $3000 profit at $875 at one point in the day to a loss at settlement. The point is that these markets move fast and hard, and if you put any of the recommended trades on, use your own discretion as to when you look to take profit if it is there. Allendale is looking for reasonable longer-term trades, but the volatility in the market makes it very difficult. The bottom line is that if you have profit in a market like we saw today, work with your broker and move up stops to protect what is yours on a good trade.
Technical Commentary: Support is now found at $825 in December Gold. Further support is found near $795. Resistance is $858 and $880.Working Trade: Bought 1 December Gold (10/10) @ $843.20. Risk to $819.20 with an objective of $898.20. December Gold closed at $842.50.
Softs: - All softs settled higher on the session with the exception of Rice. Why was Rice lower? Because we bought it Friday. In all seriousness, it is hard to say what led Rice to trade lower today after trading as much as 30 cents higher. Let's look for the low end of the range to hold tomorrow, especially if commodities in general have another good day.
Technical Commentary: Rice has established a sideways trading range going back to mid June. Let's look to buy Rice at the low end of the range.
Trade Recommendation(s): Buy 1 March Sugar 13.00 call @ .65 or better.
Risk to .20 with an objective of 2.00.
Working Trade: Bought 1 December Rice (10/10) @ 16.550. Risk to 15.950 with an objective of 18.550.
~Brian J. Splitt
Lean Hog Commentary: Lean hog futures rallied very well today but were not able to hold onto the biggest part of their gains. Pork is more interesting in watching the daily changes of the U.S. dollar rather than the stock market right now. While we are more neutral to hog prices, as opposed to bearish live cattle prices for the short term, we still must say rallies are to be sold and big breaks may be lightly bought. On the charts, there was a gap from 6255 to 6270. That was filled today. The close far below that gap after it was filled confirms we are still in a sideways trend. For speculators our 6190 sell order was filled today.
Lean Hog Technical Commentary: The trend is down.
Vital Technical Indicator: Next projected major turn day for lean hogs is
October 14.
Trade Idea(s): Sold 1 Dec 6190, risk 6310, objective 6005, closed 6110.
Option Strategy(s): Sold 1 December $72 call at $2.20. Settled at $.42.
Live Cattle: Cattle posted a good rally off the stronger stock market today but was not able to hold all of the day's gains. One thing we have to note is the stock market made a good surge in the afternoon after the pit close. You would have expected the electronic contracts to reflect that later strength but they finished right where the pit closed. While the stock market is trying to call a bottom, live cattle are not. We are not saying it will not happen, but simply we cannot call an end to the downtrend yet. In other news, we are looking at cattle feeding breakevens right now. In the past few weeks, both corn and calf/feeder prices have dropped dramatically. It is now profitable to buy cash feeders, lock in the corn, and sell April live cattle futures. Breakevens on buying calves are improving and may be good if calves take another hit at the auction barn this week. For expectations on plain live cattle prices, we will get back to a bullish viewpoint when the stock market says it is ready. That could have been today.
Live Cattle Technical Commentary: The trend is down.
Vital Technical Indicator: Next projected major turn day is the 17th for live cattle.
Trade Idea(s): Stand aside.
Option Strategy(s): Stand aside.
~Rich Nelson
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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.
