Corn Commentary: a nearly 17¢ rally in corn futures nearly erased Friday's losses in the March futures. For March corn futures to close in the upper third of its daily price range is optimistic but be reminded, the trade is working with an abbreviated trade this week given the Thanksgiving Holiday on Thursday.
Bearish to corn is news a feed group in North Carolina has announced it is in fact importing feed-wheat cargos from Europe and Brazil. The range of estimates are calling for volume of 2.8 to 6 million bushels. Bearish to corn is poor export inspections pace at 38% less year on year.
After the side-by-side Monday close and before the Monday evening electronic trade session USDA did announce 89% of the nation’s corn crop is harvested, slightly above pre release estimates calling for 84% to 88%. However, the crop is running 8% behind its five-year average with continued serious delays for NE, SD and ND. As we venture deeper into the snow season, these delays place volume of harvest at risk.
Corn Price Projections: based on $60/barrel crude oil, Allendale's price range projection for corn is $3.40 to $4.40. Based on $40/barrel crude oil, Allendale's price range projection for corn is $2.75 to $3.75.
Corn Technical Commentary: March corn futures remain in a downtrend and require a close above 3860 to turn away from negative momentum. Vital Technical Indicator: The next projected major turn day is forecasted for December 10.
Trade Idea(s): Stand Aside.
Option Strategy(s): (11/13) Bought 1 380 call @ 34. Risk to 21. Objective: 60
Soybean Commentary: Weekly soybean inspections remain positive as China remains the dominate receiver of US soybeans.
Big change for Argentina, the overwhelming consensus by weather forecasters is a much wetter forecast for Argentina this week. There is a growing consensus trend, which suggest fewer corn acres and additional soybean acres given the new moisture during the planting season.
Look for a major financial news publication to suggest a growing credit crisis within Brazil may crimp ideas of a robust 2008/09 crop.
Soybean Price Projections: based on $60/barrel crude oil, Allendale's price range projection for soybean is $8.00-$11.00. Based on $40/barrel crude oil, Allendale's price range projection for soybean is $6.50-$9.50.
Soybean Technical Commentary: Jan soybean futures need to close above 8972 in order to turn downward momentum to up.
Vital Technical Indicator: the next projected major turn day in store for soybeans is December 11, soybean meal Dec 11 and Dec 1 for soybean oil.
Trade Idea(s): there are no new futures only trade recommendations.
Option Strategy(s): (11/24) Buy 1 870 call @ 24. Risk to 12. Objective: 40
Wheat Commentary: the combination of stronger crude oil futures and DJIA and weaker US dollar provided the strength for corn and soybeans, which spilled over into the neighboring wheat trade. Very evident on Monday was the unwinding of the Dec wheat-Dec corn spreads at the level of $1.90 prem the wheat. First support is $1.60. Russia has resurfaced as an export competitor as its milling wheat prices have stabilized and have actually added a small premium after awarded two major sales late last week After the close of the side by side session and before the electronic Monday evening session, USDA announced the good to excellent wheat conditions fell 1%. No surprise as wheat heads into dormancy.
As detailed within our winter wheat crop condition graphic within our special reports section, both last year and the five-year average condition has slipped as it enters dormancy.
Wheat Technical Commentary: technical support is 5152 vs. March CBOT wheat futures and resistance of 5932.
Vital Technical Indicator: the next schedule projected major turn day in store for wheat is December 12.
Trade Idea(s): Dec CBOT Wheat :(11/24) Sold 1 5260. Risk 5420 triggered 11/24 for -$800
Mar CBOT Wheat: (11/25) Sell 1 5490 stop. Risk 5650. Objective: 5180
Dec KCBT Wheat: (11/24) Sold 1 5630. Risk 5790. Triggered 11/24 for -$800
Mar KCBT Wheat: (11/25) Sell 1 5790 stop. Risk 5950. Objective: 5480
Dec Minn Wheat: (11/24) Sold 1 6220. Risk 6380. Objective: 5580. Closed @ 6156
~Joe Victor
Energies: Crude Oil finished the session $4.57 higher today, settling at $54.50 basis the January contract. Today’s strength appears to be part of a broader reaction to today’s weakness in the Dollar Index and a rally in equities led by a government rescue of Citigroup. The idea that OPEC will agree to cut production further in their next meeting is also supportive.
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 6.888. 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 another new low for the move last Friday. Today’s rally tested the 10-day moving average before setting back.
Support is found at $50 with Friday’s low of $48.25 as further support.
Resistance is basically $55 and $60. Technically, the market is still in a downtrend and rallies are to be sold.
Trade Recommendation(s): Sell 1 January Mini Crude @ $59.15. Risk to $63.15 with an objective of $51.15.
Hedge Recommendation(s): Buy 1 April 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.
~Brian J. Splitt
Lean Hog Commentary: A sharply lower US dollar helped give February futures its highest close in over a month.
Cash hog prices were steady if not a little higher today.
Wholesale pork closed down 42 cents.
We are shifting to a supportive outlook (especially for those early 2009 contracts. We believe the drop in pork production set to happen will offset any drop in pork exports. That is different from USDA's guess.
Lean Hog Technical Commentary: The short-term trend is now steady to higher. We are also looking at a possible Head and Shoulders bottom now, which would suggest higher prices.
Vital Technical Indicator: Next projected major turn day for lean hogs is December 5.
Trade Idea(s): Stand aside.
Option Strategy(s): Sell 1 February 63 put at $2.35, risk to $3.20, objective: zero.
Sold 1 December $72 call at $2.20. Settlement is cabinet (essentially 0).
Live Cattle: February live cattle are now almost $4 off their lows.
Friday's Cattle on Feed report indicated November 1 feedlot supplies are the tightest in six years! We have had bullish supply news before (the October COF report) but this time the stock market and US dollar were working in concert.
If this market ever realizes beef demand will likely not fall near as much as futures are implying a sizeable $5 to $10 futures rally could be seen. We do not believe this market will hit that realization for weeks however.
For hedgers we will hold those February puts for now. For speculators we will stand aside.
Live Cattle Technical Commentary: The long-term trend is down. There is a gap made today from 8660 to 8695 on the February which may need to be filled.
Vital Technical Indicator: Next projected major turn day is December 3.
Trade Idea(s): Sell 1 February 8950. Risk 9110. Objective 8500.
Option Strategy(s): Stand aside.
~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
