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Longterm bullishness for corn

Historical Price Trends: best odds for the week of August 11, according to
our HPT page is for CBOT October Live Cattle suggesting 80% odds of higher
trade by the end of next week, vs where futures closed on Friday Aug 8. The
average gain has been 76 points.

For The Week: for the week of August 4th, September corn futures value
decreased 12%, September soybean futures value decreased 13% and Sept CBOT
SRWW value decreased by 4%.

Technicals: For the short term trader, Allendale uses its own unique custom
Moving Averages to monitor price momentum, define key support and
resistance levels as well as advise where key pivot points are located when
bulls may turn bearish and bears to turn bulls. We also include last weeks
closing price for the weekly chartist as we draw closer to the end of the
week to anticipate the possibility for futures to have a positive weekly
close or if weakness is ensuing.

Corn: Allendale has released its production and stocks estimates, added the
trade's average and range of estimates and are found on our Midsession
Comments page. Bearish to corn is free falling Energy and Ag soft commodity
futures as well as grain futures and the strengthening of the US dollar.
Also bearish to corn futures is the perception of increasing crop
conditions which is expected to translate into greater production. Bullish
to corn is the falling cash prices beginning to translate into increased
profit margins to again walk corn off the farm vs trucked off the farm.
Also bullish to corn is stronger than usual export demand. Allendale
suggest the bearish slant to continue into USDA report day on August 12th
and then the potential for futures to consolidate and focus on the
potential for even with an average frost/freeze of damage to corn for
grain. Given the fact the EPA denied the TX Gov's request to cut the US
ethanol mandate in half and several weeks ago the USDA refused to allow the
early release of CRP acres without penalty, suggest 2008/09 end stocks to
remain relatively tight in nature. Friday's commitment of traders report
suggest funds lightened its combined futures and options weekly position by
27,158 contracts. However commercials added 34,298 contracts which is
viewed as support to corn futures.

Trade Posture: Fundamentally, Allendale remains long term bullish to corn on
tight stocks to use for specifically corn and total world grain stocks to
use. Technically Allendale is bearish to futures and suggest futures
rallies to be sold and probe a potential bottom with long calls. View our
latest trade recommendations within our Grain Trading Strategies page

Wheat: Demand for US wheat, remains impressive vs year earlier levels both
for export sales and inspections. Re newed concern is building regarding
less than beneficial weather for spring wheat. Saskatchewan, Canada's wheat
crop continues to lag normal maturity by two weeks and could be vulnerable
to a frost/freeze. The pressure on wheat futures is mainly from spill over
pressure from the neighboring corn and soybean pits.

Trade Posture: Technicals are mixed. Declining Spring wheat conditions is
supportive to Sept MGEX futures. Despite record world wheat production, the
days supply of all grains has shrunk from 59 this year to 58 days for 2009
vs 115 days in 1999/2000 and 2000/01. Allendale would recommend building a
bullish base via at the money or slightly out of the money long calls or
bull call spreads and then add to the long position with futures when its
respective key pivot point are penetrated above.

Conclusion: there remains four weeks in the 2007/08 marketing year and
soybean export sales are 16 million bushels over target and may require
USDA to increase its target. Based on Allendale's research, five year ave
suggest wheat sales were expected to be 25 million bushels for this
particular time of year and sure enough actual weekly sales came in at
25.;1 million bushels suggesting continued strong demand.

Exports: corn exports account for 19% of the total 2007/08 use from annual
production. With 4 weeks remaining in the marketing year, cumulative sales
of 2.419 billion bushels to all nations are 9% higher than year earlier
levels and 9% higher than the five year average (weakening). Based on the
past 4 weeks ave weekly sales the US is on pace to sell 2.368 bil bu vs
USDA target of 2.45 bil bu. Shipments of 2.195 billion bushels are 13%
higher than year earlier levels and 71% below the five year average
(weakening).

New Crop Sales-Corn: The old crop marketing year officially ends on August
31. We have sold 266 million bushels of new crop corn to date vs 314 mil bu
a year earlier and 167 million bu for a three year ave.

Exports: soybean exports account for 38% of the total 2007/08 use from
annual production. With 4 weeks remaining in the marketing year, cumulative
sales of 1.162 billion bushels to all nations are 2% better than year
earlier levels and 21% higher than the five year average. Based on the past
4 weeks ave weekly sales the US is on pace to sell 1.164 bil bu vs USDA
target of 1.145 bil bu. Shipments of 1.080 billion bushels are 1% better
than year earlier levels and 28% above the five year average.

New Crop Sales-Soybeans: The old crop marketing year officially ends on
August 31. We have sold 241 million bushels of new crop to date vs 182 mil
bu a year earlier and 122 million bu for a three year ave.

Exports: wheat exports account for 41% of the total 2008/09 use. With 43
weeks remaining in the marketing year, cumulative wheat sales of 464
million bushels to all nations are 3% lower than year earlier levels and
12% higher than the five year average. USDA's export sales target is 1
billion bushels. Shipments of 188 million bushels are 22% higher vs year
earlier levels and 37% above the five year average.

Summer Price Decline: For Dec corn, Allendale discovered, dating back to
1988, an average summer time sell off is 21%. The minimum average sell off
is 10% and 2008 represents a new record of a maximum sell off of 36% vs the
previous record level sell offs of 32% for 2005 and 32% for 2000. The only
other summer sell off which reached a sell off of 30% was 2004. You may
view the present sell off as a continued record in the making or when
compared to other similar years the sell off may be nearing completion. Two
of the three major sell offs occurred between late July and mid August with
the third not finding a bottom until late November.

For Nov soybeans, Allendale discovered, dating back to 1988, an
average summer time sell off is 18%. The minimum sell off has been 8% in
2001 with a maximum sell off of 30% in 2004. 2008 represents a sell off of
28%. The summer sell off which reached a maximum of 30% ended Aug 11th, the
day before the Aug 12, 2004 USDA crop reports. 15 of the 20 years within
the research study found the summer sell off ending late July to mid
August.

For Dec Wheat futures, Allendale discovered, dating back to 1988, an
average summer time sell off is 15%. The minimum sell off has been 9% in
1993 with a maximum sell off of 22% in 1998 and the present 2008 Dec wheat
futures. The summer sell off which reached a maximum of 22% in 1998 ended
Sept 1. 4 of the 20 years within the research study found the summer sell
off ending August, 5 in the month of September, 4 in the month of July as
more frequent ending months for a sell off.

What are your thoughts as we gradually close in on USDA's August 12th
WASDE? Is there sufficient reasoning to believe the present sell off near
complete? 800 551 4626.

Preparing for August 12th: Allendale has included the historical July to
August soybean yield adjustment to its corn findings. Since 1998 USDA has
shown a 70% tendency to decrease soybean yield from the July to August crop
production report. The maximum amount USDA has decreased soybean yield has
been 3.2 bu per acre which was in 2002 and its smallest reduction was .3 bu
per acre in 2003. Both in 2007 and in 1998 USDA left yield unchanged
leaving only 2000 with a yield increase of .7 bushels per acre. In the
seven years when USDA did lower yield it was by an ave of 1.17 bu per acre.
Presently USDA is using a soybean yield of 41.6. If USDA is to use the ave
reduction of 1.17 bu per acre it suggest yield in the August 2008 crop
production report of 40.43 bu per acre.

The trade's awareness of the forth coming USDA crop production report
is growing. Much of last week and beginning of this week is spent with
loose handed corn yield estimates discussed within the corn pit. Range of
guesstimates are from a low of 151 bu per acre to as much as 160 bpa.
Allendale clients asked what has been the history of yield adjustment from
the July to August crop production reports? The following is Allendale's

research findings: of the past ten years July to August corn yield
adjustments, 5 years when yield was increased an ave of 2.98 bu per acre,
largest increase 4.9 bpa in 2000, smallest increase .4 bpa in 1998.
5 years when yield was decreased an ave of 4.68 bu per acre, largest
decrease 10.6 bpa in 2002, smallest decrease 1.1 bpa in 1999.

USDA is presently using corn yield of 148.4 bu per acre. With an ave
increase of 2.98 would be 151.38, largest increase may be 153.3, smallest
increase may be 148.8. With an ave decrease of 4.68 would be 143.72,
largest decrease may be 137.8, smallest decrease may be 147.3 bpa.

Conclusion: odds have been 50/50 for an increase-decrease for corn and
Allendale would suggest despite increasing good to excellent crop
conditions of 4% since the July report, we do not anticipate a significant
increase in yield. Allendale needs to remind of the much less than
desirable emergence and its potential impact on yield. Allendale does
respect the fact USDA's World Outlook Board may have restraint placed on it
to keep ideas/perception of food price inflation control. With respect to
soybean yield, odds favor a decrease in yield for the August soybean crop
production report. Allendale plans to release its official production and
yield estimates this week in anticipation of the August 12th report.

Soybeans: Bearish to soybeans is similar to the bearish factors described
for corn but need to add slowing China imports on rising China production,
as well as anticipating record 2008/09 production for Argentina and Brazil.
Bullish for soybeans are historically tight old and projected new crop
soybean stocks. Allendale estimates new crop 2008/09 end stocks at 109
million bushels vs the record low of 112 million in 2003. Strength for new
crop soybeans are existing new crop export sales which are 32% greater than
year earlier levels and 97% above the most recent three year average.

Trade Posture: Allendale remains long term bullish to soybeans as 2008/09
ending stocks are estimated at 109 million bushels and has a projected end
stocks to use of 4% vs old crop stocks to use of a record low 4.1%. However
the immediate technical trend is down with outside fundamentals mostly
bearish. Allendale will sell short covering rallies until the technical
climate begins to prove a neutral/bullish bias.

Lean Hogs: The mighty near term rally continued all this week. Cash hogs
and cash pork hit new highs for this up trend. We do not look for that to
change until Tuesday or see. Though this market is beyond crazy right now
realistically this will not go one forever. We are transitioning from the
lowest supply time of the year into the heaviest in the coming weeks.
As to the reason for this big jump we have to guess exports right now. We
also have another question regarding how long these exports will last. Keep
in mind the biggest reason non-China exports are jumping is the low US
dollar. You may note today the dollar is moving significantly higher. As to
the China issue it is unlikely they will continue their strong summer
buying pace past this month. The Olympic demand will no longer be the issue
after this month. Also keep in mind their hog herd rebuilding phase is
seeing fruition. In 2009 they will not be self-sufficient completely but
any growth in US based purchases will be limited.

Live Cattle: At the time of this writing we are not hearing of any solid
cash cattle sales. Last week's trade averaged $97. Bids around midday were
$98. At the time of this writing there was no widespread Kansas through
Texas based trading occuring yet. It seems the only question right now is
whether $99 or $100 will be seen. Overall our viewpoint on nearby's remain
unchanged. October is priced correctly and should be a good vehicle to use
that short strangle option position we have been recommending on. For the
deferreds we have some concerns. While it is true lower corn prices will
likely respark some interest in placements we wonder just how agressive
placements will be though. The other issue here is if corn does turn
around it is likely this pressure on deferreds will be alleviated. While we
are hesitant to add hedges on 2009 contracts we are much more interested in
feed hedges. Here's something to consider.

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

Historical Price Trends: best odds for the week of August 11, according to our HPT page is for CBOT October Live Cattle suggesting 80% odds of higher trade by the end of next week, vs where futures closed on Friday Aug 8. The average gain has been 76 points.

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