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Harvest delays threaten crop quality

Corn Fundamentals: Over the past five days, sales of 271 K tonnes of USA corn
to unknown destinations will be included into next weeks weekly export
sales and shipments. Harvest delays continue in the east and quality could
become an issue. Private weather forecasters suggest the first big snow
storm of the year is planned for Nov 18th. With projected end stocks
expected to constrict form nearly 2 billion in 2005-06 to less than a
billion for 2006-07, the last thing this present harvest needs is to lose
yield under snow.

Dept of Energy: The DOE released ethanol production for the month of August
and closes the book on corn use for the 2005-06 marketing year. August
ethanol production of 10.2 million barrels suggest total corn use for
2005-06 at 1.615 billion bushels or 15 mil more than USDA presently is
estimating. USDA will need to increase use and decrease end stocks based on
this research. August 2006 production was the first mth to breech 10 mil
barrels. Also recorded for the mth of August was record end stocks of
ethanol of 9.2 million barrels, better than the old record of 9.1 million
barrels in the month of April. Stocks are now 90% of monthly production vs
year ago levels of 64%.

Weekly Export Sales: Cumulative 2006/07 marketing year sales have reached
738 mil bu, 47% higher than yr ago levels and compare to the three yr ave
of 543 mil bu.

2007 Corn Hedge Advice: Allendale was successful in hedging 10% more new
crop corn at a level of 3320 early this week. New orders have been written
and are contained within our Hedge Advice page on where to hedge the next
10% of the 2007 corn production.

2007 Corn Acres: Based on an Allendale Research study, 5.3 million more
corn acres may be planted in 2007 over 2006. This is based on a 30%
increase in projected season average farm price. What if the season ave
farm price were to increase to $2.80 per bushel? Our research suggest corn
acres added over 2006's level by 8.6.7 mil acres.

Acres for Ethanol: USDA is presently using 2.15 bil bu of corn use for
ethanol in 2006/07. Allendale suggest the level needed is closer to 2.35
bil bu. Allendale research suggest the USA will need 12 million acres of
corn to be planted just to satisfy ethanol needs. By the year 2012, acres
dedicated to ethanol could peak at 19 million.

July Corn Futures: An update to advise the low end of Allendale's July corn
futures price projection of 3400 has officially been met as of Monday's
trade. The high side of the range remains 3600, with an extreme of 4000.
Wednesday's trade missed the high side target by 4 cents. The price
objective was unveiled well before the August WASDE report. The July 2007
futures corn price projection suggest before the end of the first quarter
of 2007 futures could correct to 2800.
Six to Ten Day and Two Week Forecast: tonights 6 to 10 and two week
forecast call for below ave precip and are viewed as bearish to corn and
soybean futures.

Five Year Ave Cash Price: The five year ave cash price for corn for the
month of month of Oct $2.05, month of Dec $2.11. Fall delivered corn price
for this year, this evening is quoted at an ave of $3.08.

DDG vs Soybean Meal: The very latest feed ingredient price list has the
cost per pound of protein slightly in favor of feeding distillers dried
grain over 48% soybean meal. The cost differential is half a cent per pound
in favor of 25% protein DDG.

Cash Corn: The Dec Mar corn spread is at 12 cents carry. At $3.08 spot cash
prices, the cost of carry is 3.9 cts per bu per mth or 11.8 cents from Dec
to March. Anything less than 11.8 cents is a warning flag to move cash
corn. As you work through your harvest, you might have a much better idea
if there is sufficient storage on farm. If not, we would strongly advise to
sell surplus bushels into the cash market when the spread strengthens to
11.7 or more.

We would certainly recommend to place corn under the nine
month loan and make use of low interest money to secure working capital.
Realize of course with the absence of LDP this year, when you declare you
want to take the loan, then the FSA will begin the lien search. The process
is slow this year as it is a very popular marketing tool. In years past
when LDP was available, nearly 90% of a years crop had the LDP taken and
the balance placed under loan. This year the two options may be turn 180
degrees. We fully anticipate futures and cash to work higher into the
March-April time frame.

Corn Technicals: Dec futures close is 3324 vs last Friday's 3126, up 6.4%
for the week and up 26.7% for the month. Our key custom Moving Averages are
3230, 3210 and uses a 2640 bull to bear pivot point. March futures close is
3444 vs last Friday's 3246. Our key custom Moving Averages are 3340, 3320
and a 2740 bull to bear pivot point.

Trade Position: World end stocks to use for corn and wheat (starch group)
are the tightest dating back to 1980. Our long range obj on July 2007 corn
futures remain unchanged from our August release of 3400-3600. Without out
any major surprises in the March 2007 time frame, we are expected to be
busy moving all 2005-2006 cash crops and hedged aggressively our
anticipated 2007 corn production. We have new orders published in our Grain
Trading Strategies page to stop into short positions for a small
fundamental and technical correction.

Soybean Fundamentals: The strength in the soybeans is mainly derived from
run away higher corn prices and traders attempt to keep the corn - bean
ratio in line. Harvest delays in the east belt are becoming a concern.
Weekly export sales were solid, soybean oil futures are rallying based on
thoughts of its use for bio diesel. The US Census Bureau released its crush data Thursday
Morning and based on our research, USDA needs to increase soybean crush use
for 2005/06 by 57 mil bu and lower end stocks for 05/06 by the same amount.

South America: Early warning signs out of Brazil suggest the present rally
in USA soybean futures may result in a production target of 56-58 MMT vs
previous estimates of 55-56 MMT. A special weather report from World
Weather Inc has placed Argentina on alert for dry top soils and very little
if any forecasted rains for the next 5 days.

Five Year Ave Cash Price: The five year ave cash price for soybean for the
month of Oct $5.53, month of Dec $5.61. Fall delivered soybeans are
presently quoted at an ave of $6.06 per bushel.

2007 Corn to Soybean Ratio: The floor trade mentality is when corn to
soybean futures price ratio (when dealing with new crop futures) is mainly
neutral to planting corn or soybeans at 2.3:1. Tonights closing ratio is
clearly in favor of planting new crop corn in the spring of 2007 at a ratio
of 2.01:1. The closer the US Midwest comes to next springs plantings if the
balance is expected to stay within a more typical 2.3:1, using today's Dec
corn futures price of 3382, Nov 2007 futures need to be 7774. And of course
at a time when S America will be harvesting crop, a very interesting
challenge.

Cash Soybeans: the Nov-Mar futures spread is 22.4 cents. With the spot cash
market at $6.08 per bu, cost of carry per mth is 6.3 cts/bu/mth or 25.2
cents Nov to March. As long as the present spread is below 25.2 cents, then
its an indicator that it cost more to store soybeans than to sell to the
cash market. Use this present rally to sell any overages which will not fit
into your on farm storage.

Weekly Export Sales: Sales thus far this year are 55% higher than yr ago
levels and at 463 mil bu compare to the three yr ave of 395 mil bu. Soybean technicals, Nov futures close is 6354 vs last Friday's 6064, up
4.7% for the week and up 59% for the month thus far. Our key custom Moving
Averages are 6050, 5980, and has bull to bear pivot point of 5990. January
futures close is 6490 vs last Friday's 6202. Our key custom MA's are 6340,
6270 and bull to bear pivot point of 6090. Watch Jan closely, early next
week to see if its ready to challenge the first key MA.

Trade Position: Fundamentally, we remain bearish to soybeans. Technically, we are more of a bullish stance as long as corn and wheat lead the way up. We
have written new speculative trade recommendations within our Grain Trading
Strategies page. We have resting orders to sell soybean futures on a break
below support, sell soybean oil up against technical resistance and buy
soybean meal on key support levels.
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Wheat Fundamentals: Iraq buys 400,000 tonnes of USA Hard Red Winter Wheat,
the Australian gov't has lowered its wheat production level below 10 MMT
and at 9.55 MMT is the smallest since 1994/95's 8.903 MMT crop. Reports of
dryness in China's main winter wheat belt surfaced globally today, well
after we alerted you on Tuesday. Egypt bought 120 K tonnes of wheat
overnight, half from the US and the other half from Russia and Ukraine
increased its grain production estimate but largely because of a bigger
than expected corn crop.

USDA Marketing Assistance: based on the most recent LDP and Nine month loan
rate data via USDA, 74% of this years wheat crop neither took an LDP or is
under the nine month loan. Unless there are ideas to sell wheat into the
cash market as corn and bins take over farm storage space, it may be worth
the effort to take the loan and store until the key peak seasonal listed
below in the cash advice.

Weekly Export Sales: Sales thus far in the marketing year are now 19%
behind year ago levels. Based on sales performance thus far this year, the
pace suggest a final export mark of 804 mil bu and not the 925 mil bu which
USDA is using.

Cash Wheat: the Dec-Mar CBOT SRWW spread closed at 16.4 cents today. Cost
to carry $4.60 cent per bushel wheat is 15.4 cents for the time period and
suggest the arrow is now back to storing wheat rather than move wheat
hedges to cash as it did for the first four days of this week. Allendale
did convert 35% of its wheat to cash sales on Oct 18th. See our Hedge
Advice page for futures instructions.

Wheat Technicals: DECEMBER CBOT SRWW futures close is 5084 vs last Friday's
5050, up 14.6% for the month thus far. Our key custom Moving Averages are
5140, 5150 and 5020. DECEMBER KCBT HRWW futures close is 5306 vs last
Friday's 5310. Our key custom Moving Averages are 5350, 5330 and 5250.
DECEMBER MGEX spring wheat futures close is 5080 vs last Friday's 5096. Our
key custom Moving Averages are 5160, 5130 and 5060.

Trade Position: We remain long CBOT, and KCBT futures based on tight world
stocks of wheat, declining wheat production in Australia and the bull rally
in corn futures.

Allendale Lean Hogs: This week's 2.182 million head kill was only 31,000
head smaller than last week. There were some plant problems earlier this
week that weren't made up for. Seaboard is planning a Sunday kill to make
up for their problems. At this point, it is not clear if that will be near
their 16,000 head capacity or a half run. The main point we can note here
is we have big production levels and wholesale pork prices have not
crumbled. This has helped futures post an earlier than usual bottom. Now,
it is clear futures are on their normal up move which typically lasts until
mid November. Downside could be limited to the $61.60 to $62.20 gap on the
December contract.

Allendale Live Cattle: At the time of this writing cash cattle has yet to
start trading. Yesterday traders were expecting a full $2 higher action at
$90. This morning there was even talk of a big $3 jump to $91. We are not
sure where these market expectations came from. Our guess is $1 higher
trade will be seen at $89. Realistically, though beef packers are back to
profitability we just haven't seen the big gains in beef to justify big
gains in live cattle prices. In fact, figuring in today's wholesale beef
report and prices are actually LOWER than they were last Friday. Choice
boxed beef is down 49 cents and select is off 64 cents. What trading we can
confirm was confined to Nebraska on Thursday and Friday at $140 which was
up $3 from last week's average. We could justify Thursday's big CME gain by
pointing to the snow storm in Colorado. With generally clear skies for the
next seven days forecast for that state the trade is assuming they will
have it handled by Monday or Tuesday.

Something new we have to note today
is on the charts. The December contract could be forming a bearish Head and
Shoulders formation with today marking the right shoulder. This formation
would become a valid bearish chart formation on a close below $86.75. It
could project a downside objective somewhere around $80. Being realistic do
any of our fundamental price models suggest a severe break before the end
of the year? The answer is no. We do feel current prices are near the high
end of our price spectrum though. In other factors to note, this week's
kill was up 3.6% which is better than the recent 2.0% higher slaughters.
Bids of $86 and offers of $91 to $92 are currently seen. We are looking for
$1 higher action at $89.

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: Over the past five days, sales of 271 K tonnes of USA corn to unknown destinations will be included into next weeks weekly export sales and shipments. Harvest delays continue in the east and quality could become an issue. Private weather forecasters suggest the first big snow storm of the year is planned for Nov 18th. With projected end stocks expected to constrict form nearly 2 billion in 2005-06 to less than a billion for 2006-07, the last thing this present harvest needs is to lose yield under snow.

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