The USDA has announced it will release a corrected October Crop Production and an abbreviated WASDE report at 7:30 a.m. central time Tuesday morning.
Corn commentary: Corn futures continue to exhibit signs of its attachment to outside influences such as the Dow Jones, crude oil and the U.S. dollar.
Weather for the major Midwest harvest is expected to be much more conducive this week than last.
Weather for South America corn planting is expected to be favorable for this week however weakening cash forward prices may temper enthusiasm.
There are no new big-ticket import tenders for U.S. corn within the most recent 24 hours.
Weekly corn inspections (reported Monday morning) of 39.8 million bushels for the week ended Oct. 23 are 332,000 more than needed on a per week basis in order to reach USDA's export target of 2 billion bushels.
Export sales of U.S. corn have met 32% of USDA's 2008/09 target of 2 billion bushels. However given the most recent sales pace over the most recent 4 weeks suggest if maintained would only manufacture total sales of 1.596 billion bushels.
After the side-by-side session close and before the Monday evening electronic trade opening, the National Agriculture Statistics Service estimates the corn harvest to be 39% complete. The trade was anticipating a level of 40% complete. Allendale views NASS results as neutral to futures.
Corn Technical Commentary: Dec. corn futures remain in a downtrend. Monday's lower low and lower high, helps to confirm the trend remains down. Immediate resistance is 3960. Key resistance is 4270.
Vital Technical Indicator: the next projected major turn day is forecasted for November 11.
Trade Idea(s): Stand Aside.
Option Strategy(s): Bought 1 370 call @ 31 .Risk to 17. Objective 60.
Soybean Commentary: S Korea was a weekend buyer of 21 K tonnes of non-GMO optional origin soybeans and Taiwan announced it has launched a tender for 60 K tonnes of soybeans.
China announced September imports of soybeans at 4.13 million tonnes are 119% higher than Sept 2007 imports.
Weather in South America remains conducive for planting of new crop, this week as well as next week.
Weekly soybean inspections (reported Monday morning) of 41.326 million bushels for the week ended Oct. 23 are 20.613 million bushels more than needed on a per week basis in order to reach USDA's export target of 1.05 billion bushels.
Export sales of U.S. soybeans have met 45% of USDA's 2008/09 target of 1.05 billion. Given the most recent sales pace over the most recent four weeks suggest if maintained would manufacture total sales of 1.09 billion bushels.
After the side-by-side session close and before the Monday evening electronic trade opening, the National Agriculture Statistics Service estimates the soybean harvest to be 76% complete. The trade was anticipating a level of 75% complete. Allendale views NASS results as neutral to futures.
Soybean's like corn still are influenced by outside markets but may be ready to set a harvest low as the crop is more than three quarters harvested and demand is apparent.
Soybean Technical Commentary: Nov. soybean futures remain in a downtrend.
Vital Technical Indicator: the next projected major turn day in store for soybeans is Nov. 3, soybean meal Nov. 11 and Nov. 6 for soybean oil.
Trade Idea(s): there are no new futures only trade recommendations.
Option Strategy(s): Bought 1 940 call @ 36. Risk to 19. Objective 80.
Wheat Commentary: Australia has announced it continues to lower 2008 wheat production. It latest estimate is closer to 19 million tonnes vs. last months estimate of 20 million tonnes. How dry weather is to blame for the continued lower estimates.
Rains in Argentina, although conducive for corn and soybean planting is expected to interrupt harvest this week.
Syria has doubled its original wheat tender from 100 K tonnes to a new level of 200 K tonnes.
Winter wheat plantings have reached 84% complete vs. 88% for a five-year average and are viewed as neutral to futures.
Weekly wheat inspections (reported Monday morning) of 21.891 million bushels for the week ended Oct. 23 are 6.503 million bushels more than needed on a per week basis in order to reach USDA's export target of 1 billion bushels.
Export sales of U.S. wheat have met 68% of USDA's 2008/09 target of 1 billion bushels. Given the most recent sales pace over the most recent 4 weeks suggest if maintained would manufacture total sales of 1.06 billion bushels.
Wheat futures remain easily influenced by corn and soybean futures action.
After the close of the side by side session and before the Monday evening electronic trade session the National Ag Statistics Service released its first crop condition report for the 2008/09 marketing year with 65% of the crop to be of good to excellent quality vs. 55% a year earlier. This condition report is viewed as bearish to July 2009 wheat futures.
Wheat Technical Commentary: the technical trend remains down. Immediate resistance for CBOT Dec. wheat is 5470.
Vital Technical Indicator: the next schedule projected major turn day in store for wheat is November 12.
Trade Idea(s): Dec. CBOT Wheat: (10/24) Sell 1 @ 5540. Risk 5700. Objective 5080
Dec. KCBT Wheat: (10/24) Sell 1 @ 5870. Risk 6030. Objective 5320
Dec. Minnesota Wheat :(10/28) Sell 1 @ 6420. Risk 6570. Objective 5940
Option Strategy(s): there are no new options only trade recommendations at this time.
~ Joe Victor
The Dow Jones Industrial Average closed 203 points lower at 8175. The market traded on both sides of unchanged today before selling off about 350 points in the last ten minutes of the session. There doesn't appear to be any substantial reason for the poor close beyond the lingering fears of an extended economic downturn.
Energies: Crude oil traded on both sides of unchanged today, keeping pace with the equity markets most of the session. The big picture in energies is most likely correlated closer to the performance of equities than the output reduction announced by OPEC. It seems that the equity market is being used as a gauge of global demand potential for commodities in general. December Crude Oil settled $0.93 lower at $63.22, an 18-month low.
Fundamental Commentary: Allendale has kept a close eye on the Natural Gas market basis the December contract. We have seen the price of Natural Gas come down from a contract high of $14.280 to a current price of $6. 340. Our research also suggests that Anhydrous/Ammonia prices have about a six-month lag where we wouldn't expect input prices to come down until after most of next years needs have already been purchased. From a producer standpoint, we feel it is more beneficial to buy Natural Gas on the board rather than wait for cash prices to come down. The Natural Gas chart has much more risk to the upside than downside potential at this point, so odds say that convergence between Natural Gas and input prices will occur as the price of
Natural Gas increases rather than the cost of Anhydrous Ammonia coming down. To put it simply, Natural Gas is cheap and Anhydrous is expensive. If we're going to buy, let's buy what has the odds of moving to a higher price rather than buying something now that has odds of coming down in price. One E-Mini Natural Gas contract will meet Nitrogen needs for 816 acres of corn at 150 units of Nitrogen per acre.
Technical Commentary: Crude Oil made a new low for the move again today and closed into an 18-month low. The next levels of support are today’s low of $61.30 and $60.70. Further support can be found at $57 and $52, and it looks more and more likely that these levels will be tested. Resistance can be found near $66, $72, $74.50, $76, and $80. Just below $84 seems to be the biggest technical ceiling within short-term range. Technically, the market is still in a downtrend and rallies are to be sold.
Hedge Recommendation(s): Buy 1 December Mini Natural Gas (per 800-825 acres of corn production) @ current levels. Continue to scale-down buy every .25 from entry to cover your NH3 needs. Lift hedges as you commit to purchasing cash NH3.
Trade Recommendation(s): Sell 1 December Mini Crude @ $67.30. Risk to $70.30 with an objective of $60.30.
Metals: December Gold settled $12.60 higher at $742.90 while December Silver was $0.100 lower at $9.195. It is hard to say at any given time why Gold is trading higher or lower. Buying may be explained one day as "safe haven" buying because of worries in equities, and then in a day like today buyers found support from firm equities. This is the single reason why trading the metals in volatile times like this can be so difficult. Buy it one day for some reason, but sell the next day for the same reason? There does appear to be some significant sell pressure near $750. A few closes over that price may give us reason to look for a bounce to $800.
Precious metals will most likely continue to trade with a high level of volatility as the market decides between safe haven buying, long term buying as a hedge against inflation, margin call selling, and profit taking to invest in other relatively low-priced commodities.
Technical Commentary: Support is found at $723 and $695 with $684 as baseline support. Resistance is $750, $767, and $795.
Trade Recommendation(s): Sell 1 December Gold @ $787. Risk to $807 with an objective of $737.
Softs: FCOJ, Cocoa, Lumber, and Coffee could not take advantage of the firm tone today as they all closed lower. Sugar, Cotton, and Rice all rallied back from trading lower on the session to settling higher.
Trade Recommendation(s): Sell 1 December Cotton 46 put for 2.00 or better.
Risk to 3.00 with an objective of zero.
Working Trade: Bought 1 March Sugar 13.00 call (10/14) @ .62. Risk to .20 with an objective of 2.00. The call settled at .33 on the day.
~ Brian J. Splitt
Lean Hog Commentary: On Friday we noted there were some interesting developments, which were helping to turning this market from a sell into a sideways trade. We noted how the Commitment of Traders is now showing Index Funds and Commodity Funds are no longer selling in tandem. On the U.S. dollar front the idea is the rising U.S. dollar, which was up sharply again today, would further hinder pork exports. For the last few weeks the daily ups in the U.S. dollar meant lower trade in lean hog futures. We can note lean hog futures have not been following the dollar for a few days now. We are now treating hogs as a sideways market from $56 to $59 on the December. This afternoon USDA indicated wholesale pork was down 91¢ on the afternoon report. That could pressure tomorrow's trade.
For price direction perhaps this market is ready to start to listen to reason. Though pork exports have fallen sharply we see no reason to think the economic problem is hurting domestic pork demand. We are now suggesting futures may trade sideways. For hedgers we are out of the hedges covering nearby marketings but are still holding moderate hedges for spring and summer 2009 marketings. For speculative trading, we will lightly buy dips.
Lean Hog Technical Commentary: The trend is sideways.
Vital Technical Indicator: Next projected major turn day for lean hogs is Oct. 31.
Trade Idea(s): Buy 1 Dec. 5705, risk 5590, objective 5925.
Option Strategy(s): Sold 1 December $72 call at $2.20. Settled at $.10.
Meat exports: We have a rising dollar, which the trade perceives as hurting exports of chicken, pork, and beef. Last week we noted Sanderson Foods, one of the top chicken producers, noted their exports were falling due to credit issues. In order to secure purchases foreign buyers may have their banks draft a letter of credit. It is simply a document saying the company's money is good and their money will be cleared. It seems some domestic banks are not accepting letters of credit from foreign banks. So, we have the U.S. dollar rising and problems with credit being frozen. On the other hand, we have to state clearly that freight rates have dropped like a rock. We have not computed it out on a per tonne basis but would assume dropping freight rates has taken much of the sting out from the rising U.S. dollar. IF chicken, pork, and beef all have worse than expected problems with exports then it could keep the product in the U.S. and further lower prices.
Live cattle: The trade is beginning to wonder how large this week's kill will be, or more clearly: where are packers getting their cattle? Two weeks ago, the total U.S. kill was 7% lower than last year at 632 million head. Last week it was 4% lower than last year (but higher than last week at 647 million head. How could the kill increase when supplies should tighten on a week-to-week basis? When you consider those numbers are inflated due to the huge cow kill and just look at feedlot based numbers it tightens even more. We still contend the numbers are not out there and packers will see fat cattle prices stabilize or even rally. Also, as we noted in the afternoon research meeting we could be seeing the first signs live cattle are beginning to divorce themselves from the stock market. We will hold our hedges and simply not touch speculative trades yet. Live Cattle Technical Commentary: The trend is down.
Vital Technical Indicator: Next projected major turn day is Nov. 4.
Trade Idea(s): Stand aside.
Option Strategy(s): Stand aside.
~ Rich Nelson
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