Farmers getting new crop in ground

April 22, 2014 04:40 AM
Fundamental ag report

Corn (CBOT:CK14)

Fundamental Support: As should be expected, planters starting moving over the long three day weekend and the first trading day results in selling. This is something that many could see coming, if there is any surprise, it is how much selling was seen today. Analysts spent the day session expecting to see a 9% planting pace number today but it is likely that sellers were looking for more around 14 – 15%. Actual planting progress was a disappointing 6%. Funds were quiet once again which allows for moderate size selling to result in a decent size move lower. Funds have now been quiet for over 2 weeks….Ryan Ettner

Old crop traders:

  • July corn(CBOT:CN14) uptrend line crossing at 495 1/4 was taken out today
  • Corn shipments reported today were a marketing year high
  • Next July corn support is 480 1/4

New crop traders:

  • The forecast suggests a continued active planting pace for most of the Midwest
  • Analysts’ estimate was for a planting pace of 9% today compared to 14% five-year average
  • Traders likely sold looking for more around 14% to 15% any lower could be seen as disappointing
  • December corn(CBOT:CZ14) fell right to the uptrend line support crossing today at 487

Bulls:

  • Look to buy today’s break in the overnight market looking for a turnaround Tuesday
  • Consider trading December where the uptrend line held

Bears:

  • If the forecast suggests planters will keep moving sell all bounces for now
  • A turnaround Tuesday bounce could offer a quick opportunity to be short again

Trade Recommendations:

  • (4/21) Sell December corn 499, risk to 510, objective 482
  • (4/21) Bought December corn 493 1/2, risk 483, objective 499


Soybean
(CBOT:SK14)

Fundamental Support: Soybean bulls tried to push the market higher Sunday night coming out of the three day weekend and were successful early in the session.  By the morning, market bears had gained the upper hand and pushed the market lower. Once the pit opened, the selling accelerated and pushed the market 28 lower at one time.  By mid-session the market recouped some of the day’s losses as it looked like some in the trade were buying into ‘turnaround Tuesday early” New news to trade was limited so their just was much to feed the bull and that no doubt lead to some profit taking.

The biggest story out there was news that Barclays was exiting the commodity business. Unnamed sources tell Reuters newswire it would exit or sell much of its energy, metal, and agriculture business arms. This follows similar moves from Deutsche Bank, Morgan Stanley, and Bank of America. Some of today’s pressure could have derived from them liquidating positions or at least from traders trying to get in front of them liquidating. Volume was lower than normal due to many world traders were absent today for the Easter holiday. Today’s weekly export inspections came in at the low end of the expected range which was 135,000 to 350,000 tonnes. Exports came in at 138,777 tonnes. Last week’s exports came in at 267,939 tonnes.  Even with today’s selloff the trend in the market continues to be up. A close below $14.44 basis the July contract would have to be taken out to take out the long term up trend line and turn the chart negative…Jim McCormick

  • Stand Aside

Wheat (CBOT:WK14)

Fundamental Support: Wheat finished sharply lower today as we saw rain move through the Western Plains over the weekend and though the coverage was patchy it was enough to see some longs liquidate their positions. Export inspections were within trade expectations. A major player in the commodities markets, Barclays, has decided to liquidate their commodity trading arms which could pull money out of the market and could have been the cause of some liquidation. The situation in the Ukraine doesn’t appear to be getting any better but the lack of trade in parts of Europe due to the Easter Monday holiday could have subdued rumors and speculation about the Ukraine and Russian standoff. We would expect wheat to touch the recent lows and if we close into new lows we could see additional liquidation. We need to keep a close on long term forecast to see if any additional rain will alleviate the dryness in the western plains and continue to watch for any escalation in between Ukraine and Russia.

  • Export inspections trade expecting between 500-700,000 tonnes and 683,544 was reported
  • Wheat ratings are expected to decrease 1% to 33% GTE
  • Egypt signs deal to buy 4.25 million tonnes of locally grown wheat a 25% increase from last year

Trade Recommendations:

  • (4/17) Buy July Chicago wheat(CBOT:WN14) 663 1/2, Risk 643 1/2, Objective 704.

Lean Hog(CME:LHM14) Fundamental Support: Part of today’s sharp drop in futures may have been attributed to the news on Friday that USDA will now be requiring reporting of PED cases. Perhaps USDA’s involvement with this issue, and the $5 million research investment, will lead the market to believe the days of PED’s influence will be ending. With 10 pork plants down in observance of Easter the day’s kill fell to 273,000 head. That was even less than the three analysts who submit estimates. Their average guess was 282,000. This news helped trump the higher prices reported for cash hogs today. While the “right now” situation is still a little negative for cash hogs it won’t be long before we are back involved with full kill weeks and a larger packer appetite. Additionally, we could throw on warm weather buying and concerns about the May PED slaughter issue looming. We still estimate $130 for summer futures.

Working Trades:

  • (1/3) Sold 2 June 96.00 puts 1.95, risk to 1.97, objective 0. Closed 0.02.
  • (1/24) Sold 1 June 98.00 put 2.02, risk to 2.10, objective 0. Closed 0.02.
  • (4/21) Sold 2 June 120.00 puts 2.20, risk 1.05 from entry, objective 0. Closed 1.92.
     

Live Cattle (CME:LCM14)

Fundamental Support: On the positive end we have seen cash beef prices pick up over the last week. That continued again today as well. End users are stepping up their procurement now that we have a little warmer weather kicking in. The other supportive issue directly ahead is our expectation for tomorrow’s monthly Cold Storage report. We see beef stocks falling by 9 million lbs from the previous month when normally there is a 2 million increase. March held small beef production levels and a stocks drawdown helped cushion the supply deficit. This time of year is a little tricky to trade at times though. This is a demand pull for beef. On the other hand we have a supply increase for live cattle. This afternoon’s showlist reported a 13,000 head increase over last week (more in the North and less in the South). A demand pull at the same time as a supply push means we may see cash trade steady this week. We do remain clearly bearish these markets but don’t expect futures to get hit hard until mid-May.

Working Trade:

  • (03/21) Bought December/sold August 5.30, risk to 3.00, objective 9.20. Closed 6.75.
  • (03/31) Bought December/sold August 5.77, risk to 3.00, objective 9.20. Closed 6.75.
  • (04/08) Sold August 133.20, risk 134.75, objective 126.00. Closed 132.92.
  • (04/21) Sold August 132.72, risk 136.45, objective 128.02. Closed 132.92.
About the Author

Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Steve Georgy is a Sr. Broker/Manager at Allendale, Inc. Jim McCormick is Senior Broker/Manager at Allendale, Inc. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com