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Corn planting delays
Days Supply: as USDA has released its first official 2008/09 World
Agriculture Supply and Demand Outlook on Friday, the report confirmed our
estimates from our January 19th annual outlook conference with regards to
the days supplies of wheat, corn and rice after use is taken from supply.
The days supplies of wheat and rice are projected to increase with corn now
on a four year slide downward. You can view the chart within our "Of
Interest" page. The days of these world starches find an increase from
2007/08 to 2008/09 of 64 to 70 for wheat, 67 to 71 for rice and decrease in
corn from 51 to 46. The 46 day supply is the smallest # of days, dating
back to 1999/2000 which then registered 104 days. More specifically the
days of corn is a great deal more thin at only 22 days. Dating back to
1999/2000 US corn supplies have never been less than a month. 2003-04 at
least had 34 days and was the tightest before Friday's USDA projections
were unveiled. 2007/08 days supply of corn is 39 days suggesting the # of
days of supply may experience a reduction of 17 days which is slightly less
than the 18 day drop from 2001-02 to 2002-03. End users are advised to have
a greater percentage of annual needs covered given this latest data.
Planting Pace: not since 1993 (the Great Midwest Flood) have corn planting
delays have anticipated May 11th 2008 been as far behind. Allendale suggest
corn planting progress to be 49% complete by May 11th vs a five year
average of 77%. This 28% lag in plantings suggest yield may have declined
by 12.8% from a trend of 155.28 bu per acre to a level of 135.3 bu per acre
yield. Dating back to 1990, every year which was behind its five year
average by May 11th had less yield than what its trend should have been,
most recently 2007, 2003 and 2002. It appears 2008 is likely to be added to
this list of under performing yields.
Corn USDA WASDE Highlights: Allendale suggest the biggest surprise was to
have world stocks of corn for 2008/09 to be sub 100 MMT at its projected
level of 99 million metric tonnes. Compared to final end stocks it
represents the second lowest level dating back to 1980 when in 1983 world
end stocks of corn were 89 million tonnes. No other year dating back to
1980 had less than 100 MMT of corn stocks, placing 2008 in extremely unique
Fundamentals: Planting delays are first and foremost on the trades mind and
supportive to futures.
Domestic Stocks and Stocks to Use: 2007/08 presently estimated at 1.383 bil
bu vs April's 1.238 billion bushels vs 2006's 1.304 billion and 1st
projection for 2008/09 of 763 million bu. 2007/08 Stocks to use of 10.6% vs
9.8% last month vs last years 11.6% and 2005's 17.5%. USDA's 1st 2008/09
estimate for end stocks to use is 6% with 1995 the lowest at 5%.
World Stocks and Stocks to Use: 2007/08 world stocks of 110 million tonnes
vs last months 103 million tonnes vs last years 108 million tonnes. USDA
1st official projection at 99 million tonnes for 2008/09 is the second
lowest dating back to 1980 with 1983 at 89 million tonnes. 2007/08 End
stocks to use at 12.5% vs 11.8% last month vs USDA's 2008/09 projection of
11.2% a record low dating back to 1980.
Season Average Farm Price: USDA's 2007/08 April estimate of $4.30 per
bushel was adjusted to $4.40 for the May WASDE. USDA estimates the 2008/09
SAFP at $5.50/bushel. The SAFP for 2006/07 at $3.04/bu.
New Crop Marketing: The total amount hedged as a percent of anticipated
2008 production is 25%. 6020 vs the Dec 2008 is key support, 5920 a trader
momentum shift point. The immediate technical trend is neutral-bullish.
Immediate resistance is the 5/08 life of contract high of 6492. We will
monitor and alert when to resume hedges.
Trade Posture: Long term Allendale remains bullish to old and new crop
corn. USDA did help to confirm our fundamental outlook by projecting a 45%
decrease in domestic stocks from old crop to new crop. Less than desirable
pace of plantings suggest another revision lower may be required to new
crop stocks in the June WASDE. See our Grain Trading Strategies page for
updates. We remain long the old crop July 590 call and have raised our risk
to protect gains earned.
Observation: only wheat and soybean weekly export sales were enough to met
the minimum amount needed on a per week basis to stay on pace to reach
USDA's 2007/08 marketing year target. There is the strong possibility
Brazil is actively competing as it exports its new corn harvest.
Exports: corn exports account for 19% of the total 2007/08 use. with 17
weeks remaining in the marketing year, cumulative sales of 2.225 billion
bushels to all nations are 21% higher than year earlier levels and 28%
higher than the five year average. Based on the past 4 weeks ave weekly
sales the US is on pace to sell 2.464 bil bu vs USDA target of 2.5 bil bu.
Shipments of 1.696 billion bushels are 16% higher than year earlier levels
and 62% below the five year average.
New Crop Sales-Corn: The old crop marketing year officially ends on August
31. We have sold 93.7 million bushels of new crop corn to date vs 65 mil bu
a year earlier and 30.3 million bu for a three year ave.
Exports: soybean exports account for 42% of the total 2007/08 use. with 17
weeks remaining in the marketing year, cumulative sales of 1.061 billion
bushels to all nations are 3% better than year earlier levels and 15%
higher than the five year average. Based on the past 4 weeks ave weekly
sales the US is on pace to sell 1.234 bil bu vs USDA target of 1.09 bil bu.
Shipments of 918 million bushels are 3% lower than year earlier levels and
16% above the five year average.
New Crop Sales-Soybeans: The old crop marketing year officially ends on
August 31. We have sold 55.8 million bushels of new crop corn to date vs 35
mil bu a year earlier and 53 million bu for a three year ave.
Meal and Oil: with 40% of the marketing year remaining, Cumulative export
sales of soybean meal have met 76% of its marketing year target, 10% below
yr ago levels and 6% below its five year average. Cumulative export sales
of soybean oil have reached 77% of its target vs 62% year on year and are
1% less than its five year average.
Exports: wheat exports account for 62% of the total 2007/08 use of
production. It must be noted, typically exports account for 49% of annual
total use. With 4 weeks remaining in the marketing year, cumulative wheat
sales of 1.249 billion bushels to all nations are 42% higher than year
earlier levels and 27% higher than the five year average. Based on the past
4 weeks ave weekly sales the US is on pace to sell 1.291 bil bu vs USDA
target of 1.28 bil bu. Shipments of 1.122 billion bushels are 49% higher
than year earlier levels and 89% above the five year average.
New Crop Sales-Wheat: The old crop marketing year officially ends on May 30
which is at the end of the present month. We have sold 145 million bushels
of new crop wheat to date vs 34 mil bu a year earlier and a three year
average of 5.1 mil bu.
Soybean USDA Highlights: the single most biggest surprise of the Friday
WASDE report is for 2008/09 US soybean production to increase by 520
million bushels and yet projected end stocks to only increase by 40 million
bu to a level of 185 million bu. The Cliff Note version is it appears USDA
underestimated the size of the 2007 soybean crop by 77 million bushels as
they estimated "residual" at 2 million bu (far from a more normal
70-90 mil bu residual) and USDA maybe suggesting March quarterly stocks
were indicating strong use via monthly weekly and monthly usage reports
(FAS Export data and US Census Bureau Crush) had to balance closer to
projected end stocks. In the Jan annual report USDA reduced 2007/08 end
stocks by 10 million bu from its previous month estimate of 185 million bu.
Within the next seven days, July futures had sold off by more than $1/bu.
If USDA had adjusted end stocks by 77 million bu lower, end stocks could
have been reported at 98 million bu and US soybean prices most likely would
have experienced an epic rally.
Fundamentals: Argentine farmers are back on strike through May 15th and
will sell no grain for export and yet will allow food trucks through its
blockades. This present action is bullish to old crop futures. Consider the
possibility the Argentina government may not yield one inch on the sliding
tax scale for soybean exports. The main reason is the gov't wants its
farmers to produce more food items for its citizens vs exporting its
natural resources, in the form of soybeans, soymeal and soybean oil. The
world trade is anticipating exports to ultimately resume and apply pressure
to the cash value. What if those Argentina soybean exports do not resume to
trend levels, and continues to support a greater market share of US and
Brazil beans? The Argentine government just may be showing the early signs
of the hand writing on the wall, control its domestic food inflation and
give up its number three world soybean exporter ranking. Planting delays
for US corn could ultimately be bearish the new crop futures.
Domestic Stocks and Stocks to Use: 2007/08 presently estimated at 145
million bushels vs 160 million bushels last month vs 574 million last year.
2008/09 end stocks are estimated at 185 million bushels. The 145 million
bushels are the least amount since 112 million in 2003. 2007/08 Stocks to
use of 4.8% the tightest dating back to 2003's 4.4% (still the record low
dating back to 1980). 2008/09 end stocks to use are projected at 6%, still
World Stocks and Stocks to Use: 2007/08 world stocks of 49 million tonnes
vs last months 49 million tonnes vs last years 63 million tonnes (down
23%). 49 million tonnes compare to a five year ave of 48.2 million tonnes.
End stocks to use at 15.9% vs 15.9% last month. The five year ave has been
17.96%. Last year end stocks to use for world soybeans was 21.3%,
representing a downward correction of 5.4%. Dating back to 1980 the 5.4%
downward correction year on year is a record.
Season Average Farm Price: USDA's April estimate of $10.25 per bushel
to USDA's May est of $10.00 SAFP. USDA's projected 2008/09 SAFP is
projected at $11.25 per bushel.
New Crop Marketing: We will hold hedges of new crop at 40% of anticipated
2008 production and alert when to resume. A move to 13150 may warrant
additional hedging. Technical chart based support is 11770. The
intermediate trend is mixed.
Trade Posture: The trade remains focused on the Argentina strike and
Midwest weather forecast and added to the list, tighter than expected new
crop soybean stocks even with prospective 2008 planted acres up 11.2
million. Old crop Stocks of USA soybeans remain tight and are expected to
tighten further as long as the Argentina strike runs. New trade
recommendations are found within our Grain Trading Strategy page.
Wheat USDA WASDE Highlights: the winter wheat production is viewed as
neutral to bearish. However we are still away from any guarantees of fatter
domestic end stocks until the harvest is underway. It should come as NO
SURPRISE world end stocks increased by 14 million tonnes with projected
world record production of 656.01 MMT vs year earlier levels of 606.4 MMT
and 2006/07's 592 MMT.
Fundamentals: The Kansas Wheat Quality Council Tour estimates the states
2008 wheat production at 379.1 million bushels of hard red winter wheat
with its second highest yield estimate since 1999 at a level of 43.3 bu per
acre. One year ago the tour projected yield at 41 bpa and production of
392.74 mil bu but ultimately the state only harvested 283.8 million bushels
because of ill weather and a state yield of 33 bpa. The present crop still
has to battle weather before the 2008 harvest. The possibility of extremes
in yield variability remain for 2008.
Domestic Stocks and Stocks to Use: 2007/08 presently estimated at 239
million bushels vs 242 million bushels last month vs 456 million last year.
At 239 million bushels, 2007/08 ending stocks are the lowest since 1946/47.
2008/09 end stocks are projected at 483 mil bu for a 102% increase. 2007/08
Stocks to use of 10.1% vs 10.2% vs the April WASDE vs year earlier levels
of 22.3%. 2008/09 end stocks to use projections are 21.5%, up 11.5% year on
year. You would have to venture back to 1995 to 1996 to find a bigger year
on year increase of 12.1%.
World Stocks and Stocks to Use: 2007/08 world stocks of 110 million tonnes
vs last months 112.5 million tonnes vs last years 125 million tonnes. 110
million tonnes are the tightest on record dating back to 1980 and compare
to a five year ave of 144.4 million tonnes. 2008/09 world end stocks are
projected at 124 million tonnes, up 14 MMT yr on yr. This compares to the
1995/96 year on year increase of 8 MMT. 2007/08 end stocks to use at 15.1%
vs 15.5% last month are record low dating back to 1980. The five year ave
has been 20.04%. 2008/09 world end stocks to use projection is 16.3% for a
1.2% increase vs a .1% increase for 1995 into 1996.
Season Average Farm Price: USDA's 2007/08 May SAFP estimated at $6.55 per
bushel vs its April estimate of $6.65 per bushel. The SAFP for 2008/09 at
$7.35 per bushel.
New Crop Marketing: Resistance is 8680, major support at 7820 vs July CBOT
soft red winter wheat. We see no reason to hedge new crop above the 65%
level we have on for now. Allendale will alert you as to when to hedge or
sell new crop to the cash markets.
Trade Posture: even though present US winter wheat crop conditions are less
than average, globally the crop is doing well and headed towards larger
production than year ago levels. World wheat stocks are expected to
increase 14 million tonnes however even though world end stocks to use are
expected to increase year on year, it remains well below the five year
average. Within the past seven trade days, the 200 day Moving Average has
been able to hold. At this juncture Allendale is willing to buy wheat but
on a stop to crack overhead resistance. New orders are found within our
Grain Trading Strategies page.
Lean Hogs: While summer lean hog futures may be pushing a little further
than our price forecasts we really cannot argue with recent gains. There is
at least some economic justification. In recent weeks the kill was up over
10% from 2007 levels. We all know exports have been, and will continue to
be, fantastic this year. That will continue through summer. We estimate
exports will take up 40% of all the extra pork produced this year. That is
amazing. The other 60% is being taken up by a group not talked about as
much...the US consumer. With the economy we are seeing signs consumers are
switching from beef into pork. This has been a very big benefit and is one
of the reasons why we are not trading cash hogs much lower. It would appear
the wholesale meat market is betting consumers will switch into a little
more pork for Memorial Day. We are estimating US consumer demand for pork
will pick up a large 5% this year at the expense of beef. Believe it or not
there are some indications pork may even be picking up a little from
chicken. Chicken breast prices started the year at a premium to 2007
levels. The average boneless chicken breast price in April was actually 17%
lower than 2007! We do not expect that to last much longer but at least for
now pork is picking up beef and the high end of chicken. With both the
export market and domestic market doing far better than anyone dreamed we
cannot argue with summer prices making gains and holding a little premium
over true value. Our real concern here still remains the October and
December contracts which hold significant premiums to value. On the charts
resistance on the June is $77.10. We will note there are now two open gaps
at lower levels which could be used as downside targets if bears retake
control. The first one is from $75.40 to $76. For now, bulls have retaken
control. We are being conservative with speculative trading and recommended
short $80 July calls for over $1.50.
Live Cattle: The tail wagging the dog? That is about the best way to
explain the long side trading interest in futures bringing up the cash
cattle trade this week. Through most of this week wholesale beef prices
changed little. The beef trade has a good handle on the remaining portion
of Memorial Day buying needs and knows supplies are rising. There is no
panic for beef in the wholesale trade. However, persistent buying on the
futures end encouraged feedlots to hold out for stronger cash. Normally
cash cattle during this week holds a $3.21 premium to June futures. Instead
futures are the ones holding a 50 cent premium to this week's cash. June
futures are now implying cash cattle will rise to $95/$96 at the end of
June. 1) Making it clear here we still suggest fundamental factors will run
the show when it comes time for June futures to near expiration. That means
lower demand hit with high supplies. Our $88 price target for June futures
holds. We have no problem holding hedges on summer fed cattle marketings.
Our longer term forecast is very supportive and we therefore will continue
to hold from applying any marketings after summer. 2) Being realistic we
certainly know the fundamentals are thrown out the window for periods of
time. This is one of them. The best thing we can do during this time is to
watch how the market trades (price action) and monitor the market's
strength (volume and open interest). For price action today was important
in that June closed above its resistance point from April. All contracts
closed to new levels for the current up trend. We will also note the recent
volume figures showing +50,000 contracts on these big days are important to
note. With that in mind we have to point out the recent up trend has
favored far deferred contracts. The December/June spread for speculators we
recommended last week closed at $13.05. It is getting close to our $15
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.
Days Supply: as USDA has released its first official 2008/09 World Agriculture Supply and Demand Outlook on Friday, the report confirmed our estimates from our January 19th annual outlook conference with regards to the days supplies of wheat, corn and rice after use is taken from supply. The days supplies of wheat and rice are projected to increase with corn now on a four year slide downward. You can view the chart within our "Of Interest" page. The days of these world starches find an increase from 2007/08 to 2008/09 of 64 to 70 for wheat, 67 to 71 for rice and decrease in corn from 51 to 46. The 46 day supply is the smallest # of days, dating back to 1999/2000 which then registered 104 days. More specifically the days of corn is a great deal more thin at only 22 days. Dating back to 1999/2000 US corn supplies have never been less than a month. 2003-04 at least had 34 days and was the tightest before Friday's USDA projections were unveiled. 2007/08 days supply of corn is 39 days suggesting the # of days of supply may experience a reduction of 17 days which is slightly less than the 18 day drop from 2001-02 to 2002-03. End users are advised to have a greater percentage of annual needs covered given this latest data.