Corn Commentary: The tandem of strong crude oil futures and weak U.S. dollar were cooperative enough to allow for a round of short covering in corn futures.
Fundamentally supportive for corn is reduced production expectations for South America as credit tightness likely reduced the full potential for inputs in recently planted crops.
Fundamentally bearish to corn futures is weak demand from the feed, fuel and export sector.
Profit margins for ethanol, although still positive, are thinning.
Deliveries against Dec corn futures remain large and no strong dominate stoppers suggest a sign of continued weakness.
Corn Price Projections: Based on $60/barrel crude oil, Allendale's price range projection for corn is $3.40-$4.40. Based on $40/barrel crude oil, Allendale's price range projection for corn is $2.75-$3.75.
Corn Technical Commentary: The technical trend is down, short and long term. Short covering rallies are likely to be sold against down trending resistance. Key resistance remains 3450.
Vital Technical Indicator: The next projected major turn day is forecasted for December 10.
Trade Idea(s): Stand Aside.
Option Strategy(s): (12/08) Sell 1 @ 3430. Risk 3570. Obj 2970
Soybean Commentary: The same formula corn used to propel its futures trade higher was borrowed for soybeans. The trade keyed in on the strong crude oil futures, weak U.S. dollar and reduced production ideas for Brazil and Argentina soybeans.
Weekly export inspections surpassed top end range of estimates of 40 million bushels but be very aware, 77% of the soybeans inspected were for China. Although immediately bullish, ultimately these inspections are likely to weaken for China as they begin to buy forward needs from South America. There is something to be said for the risk held by putting most all your eggs in one basket.
Bearish to soybean futures is generally cooperative S American weather for its young crop.
Immediately bullish for soybeans is Allendale's end stock estimate for sub 200 million bushels.
According to Allendale's Research, soybean crusher margins remain below full production but have recovered up from out of break-even territory.
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 remain in a downtrend. In order to break away from this immediate trend, a close above 8600 is needed.
Vital Technical Indicator: the next projected major turn day in store for soybeans is December 11, soybean meal Dec 11 and Dec 17 for soybean oil.
Trade Idea(s): there are no new futures only trade recommendations.
Option Strategy(s): (12/08) Sell 1 @ 8380. Risk 8540. Obj 7330
Wheat Commentary: It should come as little surprise Ukraine anticipates its 2009 grain production to fall more than 25% from 2008 levels as problems surface from the credit and seed industry. Allendale anticipates more names to be added to the smaller 2009 grain production than 2008 as we work into the New Year. The return on investment for $5/bushel wheat is a great deal more challenging than $9/bushel wheat.
At present, the world remains awash in recently harvested wheat. However as important as it is to be aware how world wheat production has increased 12% year on year, it is important to be aware, demand is up 6% year on year. Earliest estimates suggest northern hemisphere plantings may recede 3 to 5 percent in 2009 and thus tighten projected end stocks once more.
Wheat Price Projections: based on $60/barrel crude oil, Allendale's price range projection for wheat is $4.75-$6.75. Based on $40/barrel crude oil, Allendale's price range projection for wheat is $3.70-$5.65.
Wheat Technical Commentary: Technical support is 4680 vs. March CBOT wheat futures and resistance of 5152 with the general weaker trend.
Vital Technical Indicator: the next schedule projected major turn day in store for wheat is December 12.
Trade Idea(s): Mar CBOT Wheat: (12/05) Sell 1 5150. Risk 5310. Obj 4690
Mar KCBT Wheat: (12/08) Sell 1 5420. Obj 4680. Risk 5580
Dec Minn Wheat: (12/09) Sell 1 5510. Risk 5670. Obj 5220
~Joe Victor
Energies: January Crude Oil closed $3.16 higher on the day at $43.71.
Today’s gain erased last Friday’s losses and added a $0.04 gain. OPEC hinted at a severe production cut at their next meeting on Dec. 17. What severe really is can be anyone’s guess. Allendale feels that it will take a significant surprise from OPEC to make a meaningful and lasting change in price direction. The market has been well aware of a production cut Dec. 17, so a cut less than 1 million barrels per day may not have a lasting impact. The president of OPEC has not commented on what type of production cut they may approve, but has noted that some analysts are predicting a 2 million barrel per day cut.
Technical Commentary: Today was the first in five sessions that crude has not made a new low. Support is Fridays low of $40.50 and psychologically at $40. If we violate $40, the next major technical target looks like $32.
Resistance is $46.50, $50, $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 @ $47.45. Risk to $51.55 with an objective of $33.55.
Working Trade(s): Bought 1 February Gold $600 put (11/4) @ $12.50. Risk to $0 with an objective of $40. The put settled at $2.60 on the day.
~Brian J. Splitt
Lean Hog Commentary: Even with support from the much lower U.S. dollar, we saw December, February, and April futures start strong but close near the low end of the trading range.
Weather could be a short-term supportive factor. Snows in eastern Nebraska, southern Minnesota, Iowa, and northern Illinois today and tomorrow could delay marketings for a short period.
Friday has big volume at 46,946 contracts on the strong rebound from early morning lows. That could have provided a solid stamp on the idea last week's price decline will not carry over into this week.
We are neutral to nearby December and February and supportive to April through June contracts. We still advise to have no lean hog futures hedges on for producers. For speculators we are short a February put.
Having said the good news noted above we have to point out February and April filled the gap that was immediately overhead. AFTER filling it, the market closed back below the gap...a negative sign. While we may be supportive here, we have to recognize the market is not ready to join our bullish parade.
Lean Hog Technical Commentary: The short-term trend on the February is higher.
Vital Technical Indicator: Next projected major turn day for lean hogs is December 30.
Trade Idea(s): Stand aside.
Option Strategy(s): Sold 1 Feb 63 put 235, risk to 3.20, obj 0. Closed 212.
Sold 1 December $72 call at $2.20. Settlement is cabinet (essentially 0).
Live Cattle: Again we saw the stock market post stronger trade. The Dow index closed at the highest point since November 7. Contrary to the bad news we received on Friday regarding November employment figures, the trade is looking ahead to a Big 4 bailout and Obama's infrastructure rebuilding announcements. If the stock market is suggesting we are near the worst of it and is holding its ground, shouldn't live cattle futures be doing the same? Instead, futures are suggesting the worst of it is yet to come.
Last week's average live-based cash cattle price was $86.46. Wholesale beef today ended mixed to slightly lower. Packers dropped the kill a little last week and are rumored to be ready to drop this week's kill too. Today's kill however, at 127,000 head, was stronger than the 116,000 head kill expected.
For hedgers we will hold those February puts. We still feel these deferred futures are grossly undervalued but so far will still not take off those puts for hedgers.
Live Cattle Technical Commentary: The long-term trend is down. New contract lows were posted on Friday.
Vital Technical Indicator: Next projected major turn day is December 30.
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
