Corn Commentary: Interesting to note, China imports of corn for the month of October were up 69.9% vs. Oct 2007 for a total amount of 5,874 tonnes. Volume although not large but the sheer mention of imports is worth noting, despite China's record harvest of 156 million tonnes.
We are entering a time of year where corn export sales reach its market year peak, for the next three to five weeks according to the most recent five-year average. Of the top five importers of U.S. corn, South Korea projections remain very weak in response to its extremely weak currency. Presently South Korea is able to buy feed wheat at a $40/tonne discount to corn.
Compared to year earlier levels none of the top five U.S. corn importers are near year earlier levels. Corn export sales are 15% of the 2008/09 total use.
Weekly corn inspections viewed as normal vs. pre release estimates but 13 million bushels below what is needed to keep a positive pace towards export target of 1.9 billion bushels.
Weather forecast for the next seven days suggests a more normal pace of harvest for the U.S.
After the side-by-side session close and before the Monday evening electronic trade session, USDA's National Ag Statistic Service estimates the corn harvest at 78% complete vs. pre release estimates of near 80%. Allendale views this NASS news as neutral for Monday evening’s electronic trade opening. Most vulnerable to winter weather are SD, ND, NE, IA and WI.
Corn Technical Commentary: 3970 is immediate resistance, short-term support is 3550. According to our Allendale Advanced Charts, Dec corn remains in its long term down trend and a short-term downtrend. Since early October, Dec corn futures remain in a sideways trade range according to our Allendale Advanced Charts.
Vital Technical Indicator: the next projected major turn day is forecasted for November 19.
Trade Idea(s): Stand Aside.
Option Strategy(s): (11/13) Buy 1 380 call @ 34. Risk to 21. Objective 60
Soybean Commentary: with more than 95% of the 2008 soybean harvest complete, anticipate the trade to begin to focus on demand for U.S. soybeans and pace of planting and early growth for Brazil and Argentina.
Of the top five major importers of U.S. soybeans, China, Japan and Taiwan 2008/09 purchases are running above year earlier amounts. This is bullish to the U.S. demand phase. Export of 2008/09 soybeans is expected to be 35% of the total use vs. 33% for 2007/08.
Pace of planting in South America is running normal and with conducive weather with the exception of pockets of dryness in Argentina discussed more this week than ten days ago.
Soybean Technical Commentary: Jan soybean futures remain short term consolidated between 10050 and 8384 and in a long-term downward trend. A close above 9812 is needed to shift short-term trade attitude from mixed to bullish.
Vital Technical Indicator: the next projected major turn day in store for soybeans is November 24, soybean meal Nov 20 and Dec 1 for soybean oil.
Trade Idea(s): there are no new futures only trade recommendations.
Option Strategy(s): 11/11 Bought 1 940 call @ 33. Risk to 21. Objective 60.
Wheat Commentary: of the total use for 2008/09 wheat, 43% is projected to be for exports vs. 49% for 2007/08. Of the top five importers of U.S. wheat
In 2007/08, three (Nigeria, Mexico and Japan have bought more thus far in 2008/09.
After the close of the side by side day session but before the Monday evening electronic trade session, USDA's NASS planting progress reports suggest no serious delays but did reduce the good to excellent crop condition ratings by 2% to a level of 66% vs. 45% good to excellent a year ago and five yr average of 56% good to excellent.
Anticipate Egypt to tender for wheat this week with France, Russia and the U.S. as having the best opportunity to make the sale. Wheat sales thus far this marketing year to Egypt are down 41%.
The global community is well aware world wheat production is 11.7% higher than the 2007/08 level. Finally, increasing attention is given to the fact; world consumption is projected to be 6.1% higher in 2008/09 vs. 2007/08 and leaves no room for production "hiccups" in 2009.
Wheat Technical Commentary: technical support is the 5052 double bottom vs. Dec CBOT wheat futures and resistance of 5706.
Vital Technical Indicator: the next schedule projected major turn day in store for wheat is November 21.
Trade Idea(s): Dec CBOT Wheat:(11/14) Sell 1 5710. Risk 5860. Objective 5340
Dec KCBT Wheat:(11/17) Sell 1 6110. Risk 6270. Objective 5730.
Dec Minn Wheat:(11/18) Sell 1 6480. Risk 6640. Objective 6030
~Joe Victor
Crude Oil Commentary: crude oil managed to bounce during the day's trade session on news of a Saudi Oil tanker pirated by Somalia, and better than anticipated U.S. industrial production data and colder weather forecast.
However, in general the trade is still very much tied to projections of weaker demand from a weak global economy. Another major world economic powerhouse, Japan announced it has slid into a recession, its first since 2001. Dec crude futures slipped $3.66/barrel to finish the day at $54.95/barrel, it lowest level since Jan 29, 2007.
Anticipate this week’s agency reports such as Tuesday's producer price index, Wednesday's consumer price index and housing starts and Thursday's leading economic indicators report to provide a more complete look at the nation's economic health.
Crude Oil Technical Commentary: Dec crude oil futures remain in a short and long-term downtrend. A close above $60.30/barrel is needed to revert to sideways trend.
Vital Technical Indicator: the next projected major turn day in store for crude oil is November 18.
Trade Idea(s): there are no new futures only trade recommendations.
Option Strategy(s): there are no new futures only trade recommendations.
~Joe Victor
Lean Hog Commentary: Nearby's are still moving around a bit but deferreds are hunkering down and holding their ground. This is the exact time when cash hog prices bottomed last year.
Cash hogs are still holding a premium to last year prices. December futures however are trading at last year expiration levels. Are December futures too low?
While we may have a bottom in cash hogs forming is there any reason to buy futures?
Russia confirmed their target reduction in pork imports to be 200,000 tonnes. Poultry imports are expected to be down 300,000 tonnes.
The gap noted below was filled today.
For trading, we are following the bear trend and have a June/February spread on until we can confirm a bottom, which may be happening now.
Lean Hog Technical Commentary: The overall trend is down. The 5530 to 5540 gap on the December was filled and the market closed right at it.
Vital Technical Indicator: Next projected major turn day for lean hogs is Dec. 5.
Trade Idea(s): Bought 1 Jun/Sold 1 Feb at 1775. Risk to 1600. Objective 2000.
Closed 1760.
Option Strategy(s): Sold 1 December $72 call at $2.20. Settlement is cabinet (essentially 0).
Live Cattle: As the Dow appears ready to retest its lows it is pulling live cattle futures down to retest their lows.
Job cuts continue to pressure ideas of beef demand.
Canada confirmed its 15th case of BSE. This should have been of no importance to the market.
If pork and poultry have trouble exporting to Russia that meat will be kept at home competing here in the U.S.
Showlist counts may come out lower than last week confirming supplies are still tight.
Speculative Trade...We are advising to take advantage of big option premiums by selling both a February live cattle call and a put.
Live Cattle Technical Commentary: The long-term trend is down. The recent trend is sideways. December lows of 8710 and February lows of 8797 are considered support. You may hear some talk of a "Double Bottom" if this retest holds. Today a small gap from 9045 to 9060 was left on the February.
Vital Technical Indicator: Next projected major turn day is tomorrow.
Trade Idea(s): Stand aside.
Option Strategy(s): Sold 1 Feb 90 put/Sold 1 Feb 96 call at 4.80. Risk to 700. Objective 0. Settled at 492.
~Rich Nelson
Allendale Research
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
