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Corn exports big, short covering holds up soybeans
Allendale is registered with the CFTC and NFA and is a member of the NIBA.
The bottom line is we are a regulated firm which can be extremely important
in this day and age.
Corn Fundamentals: weekly export sales were huge when data was released
this morning. Our five yr ave history suggest this time of year, weekly
sales results are typically 35 to 40 mil bushels. This mornings report came
in at nearly 85 mil bu, with Japan accounting for over a third of the
purchases. A combination of cheap ocean freight, more than fair economic
value of the corn, drop in the USA dollar, investment fund seasonals
building and stock building because of a potential La Nina are likely to
have all contributed to the heavy purchases.
Export Sales: Allendale's research suggest the present marketing year pace
is now 1.850 to 1.89 bil bu vs USDA target of 1.85. Year to date purchases
are now 1.024 bil bu vs year ago levels of 1.012 bil and 1.117 billion in
2003/04. Sales as related to the percent of USDA's target filled are now
running 2% above the 5 yr ave pace.
Historical Price Trends: please take a moment to glean our Allendale HPT
page. Specifically we want you to focus on the week of Feb 13-17. Notice
how corn, beans, and soybean meal futures have responded in the reward to
risk category. Add in the information below regarding the week of
Feb 11, 2005 and you may realize the funds impact on futures. If there is a
bear for next week, we would likely give the nod to CBOT wheat, which has
had a tendency to carry on for the 4 week cumulative.
Corn Used for Ethanol: finally data from the EIA has been released for
ethanol production and stocks for the month of November have been released.
Subscribers to our website product may view the ethanol production and
stocks graphs in the Special Reports area. Nov prod at 8.329 mil barrels is
the second highest on record. That number was also 19% higher than last
Nov. It is already factored in however. USDA is currently suggesting old
crop corn used for ethanol will total 1.575 billion bushels. That is 19%
higher the last year. Main point here is we are right on pace. Ethanol
stocks at 5.720 million barrels are low. It is the lowest stock level for
November since 2001. Production is soaring and stocks are still very low.
Hedgers/Marketing: Allendale sold its remaining balance of 2005 corn prod
to the cash markets when futures hit 2180 vs March futures on Wednesday.
Based on our July corn price projections released last Saturday, we set a
target of 2180 vs the March futures or 2350 vs the July for Feb delivery as
the cash market does offer us 3 cents to wait one week and a day rather
than deliver in the month of Jan. Our basis data does suggest a notable
drop before planters hit the field. New crop hedges are 50% complete with
complete explanation for further hedges and option plans explained within
our "Hedge Advice" page of the Allendale Advisory Report. We do suggest
adding at the money new crop calls to the hedges placed when we have two
successive closes above 2540.
Corn Blend of 13 Technical Indicators: for the week, March corn futures
closed up thirteen and three quarter cents higher or 6.6%. CBOT Mar corn
futures close of 2186 finished above last Friday's weekly chart close of
2050. March futures did close above our custom Moving Average values of
212.211 and 213, now to be used as support. The blend of 13 short, medium
and long term tech indicators suggest a futures buy signal of 64% vs the
previous nights 56% buy level, strengthening.
Corn Position: our long March corn futures objective of 2200 was reached.
We are long the Minneapolis national corn index with risk raised to protect
The Week of Feb 11, 2005: It was nearly a year ago when funds made its
presence felt the week of 2/11/05 and corn futures prices were hovering
near 1950 before launching to a high of 2310 the week of 3/18/05. At that
time fundamentals were working with no serious threat to the Argentina crop
One year ago the Feb world stocks of soybeans were estimated at 61.35
MMT vs the previous months 60.80 MMT. The week of the WASDE report soybean
futures were at 5004 and hit its peak of 6914 the week of 3/18/05. And it
is important to know the drought in Brazil was not yet then a issue.
Soybean Fundamentals: Adequate S America rains, neutral bearish US Census
Bureau soybean oil crush and poor weekly export sales were the heavy anchor
attached to soybean futures in early trade but short covering was a feature
late Thursday and did follow through on Friday.
US Census Bureau Crush: for the month of Dec, crush at 148 mil bu is 1.4%
less than yr ago levels. Provided the present pace, USDA could drop crush
usage off the demand side by 10 mil bu. Within our special reports section
you can see first hand how we have now had two months of below what is
needed to meet USDA's soybean used for crush of 1.73 bil bu.
Soybean Exports: thus far this year, soybean export sales total 633 mil bu
vs 829 the year before and 811 mil bu. Thus far this marketing year, the
present sales pace implies a potential export target of 880 mil bu vs
USDA's target of 880 mil bu. China has picked up some ground but the
transition of imports from the USA over to S America is about 2 months
away. Allendale suggest barring any unforeseen fundamental problems there
simply may not be enough calendar left for China to pick up all the slack.
More on China: China continues to spin a tale of weak bean imports because
of bird flu is the main reason for poor crusher margins and slack demand
for USA soybeans. Evidence is growing China could be the force behind
pushing palm oil demand higher internationally than soybean oil. Economics
suggest palm oil is the way to go if you are not extremely particular about
the flavor difference between it and soybean oil.
Soybean Hedgers and Marketers: We are 60% hedged of anticipated 2006
production at a average level of 6310. If you are not hedged our just
released Nov futures price projections suggest rally opportunity may arise
near the 6500 level.
We Sold the Balance of 2005 soybean production: hedged in the March as well
as the 20% of 2005 prod which was not hedged market on open 1/19/06, for
immediate delivery. We re owned the 2005 production with 5700 March calls.
Our objective for these calls was triggered today and the ten cent gain was
added to our 6002 ave. The new average is now 6102. If you are still
holding soybeans a futures price projection near 6500 vs the July has been
released by Allendale. We urge you to move cash before foreign buyers
switch from obtaining 2005 crop from the USA to buying 2006 supplies from
S America, end of March, beginning of April and basis sags.
Position: with seasonals suggesting we may be approaching a time when
futures rally, we bought soybeans via the E CBOT Monday morning. We also
entered longs for meal and bean oil.
Wheat Fundamentals: Traders are hopeful the US may supply some of the wheat
Iraq is looking for. In a tender, with results expected on the 28th, Iraq
is seeking 1 MMT of wheat (37 mil bu). Longer range forecast suggest the
drought in TX and OK may have the ability to push west into the heart of #1
wheat producer Kansas. Technical purchase indicators appear to be the main
force behind this immediate rally.
Wheat: Blend of 13 Technical Indicators: CBOT March SRWW futures close of
3434 did finish well above last Friday's weekly close of 3264. Futures
closed above key MA's of 341.333 and 334. The blend of 13 short, medium and
long term tech indicators suggest a futures buy signal of 72% vs the
previous nights 72% buy signal. March HRWW futures close of 3936 did close
above last Friday's weekly close of 3840. Futures closed above key MA's
of 391.385 and 383. The blend of 13 short, medium and long term tech
indicators suggest a futures buy signal of 96% vs the previous nights 96%
buy level. MGEX March futures close of 3996 did close above last Friday's
weekly close of 3896. Futures closed above the key M A's of 391.389 and 390
(new key support level). The blend of 13 short, medium and long term tech
indicators suggest a futures buy signal of 100% vs the previous nights 96%
Wheat Position: objectives in our long KCBT wheat were filled this week
with new entry orders contained in our Grain Trading Strategies page, for
both the KCBT and MGEX. We raised our risk on our long CBOT to protect
gains earned. New hedges were added in the July 2006 new crop month and we
hold here at a 3664 ave...........Joe Victor
Lean Hogs: Back month hogs continued their correction higher. The front
four months had a hard time following along however. Cattle futures
posting triple digit losses didn't help matters, but cash hogs and product
values were also lower. Funds continue to liquidate, and until they stop,
or the cash finds support, this could be a poor end to the month. We are
concerned with the markets lame approach at a rally, but still feel this is
a time frame where cash hogs try and find some sort of a bottom. Colder
weather may also be needed to slow the aggressive gain we are seeing across
the Midwest. There are chances for a light cold snap to occur during the
first two weeks of February. Cash hogs for Monday are called steady.
Live Cattle: Cash cattle got off to a quick start today as buyers and
sellers in the North came to agreement. $150 was the price that was paid
early, but bids soon backed down to $149 and $148 as the board posted
triple digit losses and the packers continue to bleed red ink. We thought
it would be tough for the packers to break the cattle feeder, but with help
from the board, nervousness set in and feeders who passed 97 last week were
soon wondering what exactly they were thinking. Light numbers were also
traded in the south at 95 and then buyers backed bids down to levels where
producers were no longer willing sellers. Another news item this afternoon
was the cattle inventory report. Results can be found at the bottom of our
mid session comments page. Bottom line with the report is that it showed
very little surprise. We fully anticipate this industry to be in the
cowherd rebuilding phase and that's exactly what we got. You could argue
these numbers were a little higher then most analysts pre-report guess, and
that is true, but more importantly, the technical breakdown in todays
futures trade to us is more important. We expect no major moves Monday
directly due to the report, but point out the market is in technical
trouble. One note is the Feb/April spread gained ground today closing at
2.12. We still expect this spread to go to 3-4 premium. Everyone have
great weekend.....Adam Frick....1-866-354-9453
Allendale is registered with the CFTC and NFA and is a member of the NIBA. The bottom line is we are a regulated firm which can be extremely important in this day and age.