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Move only enough old crop for new crop storage

Bearish corn fundamentals include export sales which are not
likely to be shipped before the end of the marketing year, larger than
usual end stocks, and South Korea's purchase of China corn for Oct arrival.

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Bullish fundamentals include solid export sales, strong feed demand from more
animal units and strong, growing demand for corn to be processed into
ethanol and tighter than 2003-04 projected global end stocks to use.
Weather for the immediate term as a result of recent National Weather
Service forecast calling for warmer dryer conditions at a time when corn
kernels need to be filled.

Export Sales: Sales have exceeded USDA target of 2.1 billion bu but with
only four weeks remaining in the marketing year, shipments pace suggest
they will not reach the target and case carry in corn stocks for 2006-07 to
increase.

Ethanol: May ethanol production and stocks report (just released). At 9.09
million barrels of ethanol produced it came in just 93,000 barrels more
than what was needed to keep pace with USDA 1.6 billion bushels of corn to
be used for 2005/06 usage. Ethanol stocks of 7.848 million barrels is 1 mil
more than yr ago levels and as predicted did follow seasonal tendencies by
dropping off it April highs. The previous month stocks were a record high
of 9.1 million barrels.

NWS: Forecasts are viewed as bullish for the 6-10 day forecast but a bearish
to futures 8-14 day forecast. Be aware private forecasters are calling for
increased rain potential for Tues-Wed of next week vs what Thursday maps
had indicated.

Quarterly Corn Stocks: June 1 Quarterly corn stocks on and off farm of
4.363 bil bu suggest Sept 1 quarterly (end of 2005-06 marketing year) corn
stocks could come in at 2.335 bil bu which would be 52% higher than the
the five yr ave based on five year historical 4th quarter usage.

2006-07 End Stocks to Use: Projected domestic end stocks to use are 9.2% vs
2005-06 18.5%. We would have to venture back to 1995 to find a tighter
amount which was 5% with a stocks level of 426 mil bu vs projected 1.077
bil bu. Projected global stocks to use is 11.4%. Since 1980 only 2003 was
nearly as tight at 14.3%.

Corn Acreage Study: Those years when corn acres increased from the March
intention report to the June planted acreage report by a min of 500,000 to
a max of 2.5 million acres implies a dec corn futures pre harvest low of
$2.42.

Dec Corn Five Year Ave: the most recent five yr historical ave suggest Dec
consolidate in Aug and then sells off by 30 cents into harvest.

Corn Marketing: only move enough old crop to make room for new crop
supplies as old crop basis is weak and expected to remain weak into the end
of the year. Our new crop hedges were rolled to the July to pay for storage
on farm and added an additional 9 cents to our storage revenue for the 2006
corn crop.

Five Year Ave Cash Price: The five year ave cash price for corn for the
month of August $2.14, month of Sept $2.13, month of Oct $2.05, month of
Dec $2.11.

Corn Technicals: Sept futures close is 2450 vs last Friday's 2372 (weekly
chart support), up 3.2%. Our key custom Moving Averages are 2410, 2410 and
2460. 50% retracement is 2520. Allendale has updated its Grain Trading
Recommendations page to add to its present short futures position and sell
up against the 50% retracement. Dec futures close is 2622 vs last Friday's
2534 (weekly chart support) up 3.5%. Our key custom Moving Averages are
2590, 2570 and 2630. 50% retracement is 2670.

Trade Position: We are short futures for the immediate term based on the
futures potential to work back to recent lows because of heavy old crop
stocks bin cleaning and impending solid 2006 corn harvest. Long term we
anticipates a very strong futures rally shortly after the 2006 corn harvest
begins.

Soybean Fundamentals: Bearish fundamentals include export sales which are
not likely to be shipped before the end of the marketing year (Aug 31st),
larger than usual end stocks, and projections for a soybean crop production
estimate to be released by USDA Aug 11th vs its July estimate. Bullish
fundamentals include S Korea's purchase of new crop soybeans from the USA
as they claim Brazil has ruin out of its 2006 export supplies. Added to
this friendly news is a strong crush margin as beans are turned into soyoil
for bio diesel production. Weather for the immediate term as a result of
recent National Weather Service forecast calling for warmer dryer
conditions at a time when soybean pods need to be filled.

Export Sales: Sales have exceeded USDA target of 905 million bu for the
2005-06 marketing year but with only four weeks remaining in the marketing
year, shipments pace suggest they will not reach the target and case carry
in stocks for 2006-07 to increase.

NWS: Forecasts are viewed as bullish for the 6-10 day forecast but a bearish
to futures 8-14 day forecast. Be aware private forecasters are calling for
increased rain potential for Tues-Wed of next week vs what Thursday maps
had indicated.

Quarterly Soybean Stocks: June 1 Quarterly stocks on and off farm of
990 mil bu suggest Sept 1 quarterly (end of 2005-06 marketing year) stocks
could come in at 569 mil bu which would be 200% higher than the
the five yr ave based on five year historical 4th quarter usage.

2006-07 End Stocks to Use: Projected domestic end stocks to use are 18.7%
vs 2005-06 19.5%. 2003 end stocks too use were 4.4% and 8.6% in 2004.
Projected global stocks to use is 19.8% vs 19.9% the year prior and 15.3%
in 2003.

Nov Soybean Five Year Ave: The most recent five yr historical ave suggest
Nov futures begin to drive higher into the middle of Sept with an ave gain
of 20 cents. From the middle of Sept futures fall into early Oct by 15 to
20 cent.

Soybean Marketing: Only move enough old crop to make room for new crop
supplies as old crop basis is weak and expected to remain weak into the end
of the year. Our new crop hedges were rolled to the July to pay for storage
on farm. Long range projections suggest when the March 31st Planting
intentions report is released, more corn and wheat acres to be planted at
the expense of fewer soybean acres and thus friendly to futures and cash.

Five Year Ave Cash Price: The five year ave cash price for soybean for the
month of August $5.81, month of Sept $5.52, month of Oct $5.53, month of
Dec $5.61.

Soybean Technicals: Sept futures close is 5820 vs last Friday's 5840
(technically weak for the weekly charts). Our key custom Moving Averages
are 5860, 5890, and 5940. Nov futures close is 5970 vs last Friday's
(weekly chart resistance). Our key custom Moving Averages are 6030, 5990
and 5960.

Trade Position: We are short futures for the immediate term based on the
futures potential to work backwards on ideas of bigger Aug 11th production
than what USDA est in July as well as larger than usual old crop stocks
being forced to market to make room for a solid new crop.

Wheat Fundamentals: For the second consecutive week, wheat sales have been
very strong and finally trending higher. With 49% of this years wheat
production to leave the USA in the form of exports, it is paramount that
this trend continues. Australia and now Canada are reducing its crop
production potential because of dry weather problems.

Export Sales: For the second consecutive week, weekly sales have been more
than what is needed on a per week basis to meet USDA's export target of 900
million bushels. For the first time this new marketing year, the shipments
were greater than what is needed on a per week basis in order to meet that
8900 million bu target.

NWS: Forecasts are viewed as bearish for the 6-10 & two week forecast as it
allows the spring wheat harvest to proceed and the two week forecast may
pave the way for much needed moisture for #1 wheat producing state KS.

Lean Hogs: Hogs were steady in the country, and higher on the board
following the live cattle. Bull spreads worked well again near the close.
October hogs had an inside day on the charts, and technically this means
nothing more then just a day of rest until the market provides further
direction. A trade above the low or high of Thursday could create more
follow-through in that direction. We could have just seen the hog market
ride on the coat tails of the cattle and if the boxed beef is confirmed
lower this afternoon, we could see these gains erased on Monday. Weekend
weather isn't really expected to be stressful or anything like that, so no
worries of heat related stress out there. All that said it was mostly a
quiet session with the cattle the biggest focus.

Live Cattle: Well we were proven wrong. Futures opened up higher then we
expected and never looked back. The market is telling us it wants to keep
the large premium it has to the cash, and we respect that. Cash continued
to trade today at 82 dollars, and numbers moved very decent across the
North as well as in the South. Our spreads were hurt some today, but this
does nothing in our analysis of those spreads. The October contract closed
above a critical point that leaves some room to go up from here. This
could just be the classic everyone was bearish so it doesn't go down type
of deal. You heard very few people talk about the potential for this
market to go up. Do we have a cash and or futures bottom in? Our answer
to that would still be no. We still feel you will place a late low as most
cattle that moved in the south last month were heavier type of feeder
cattle that should still keep a lid on things as we move through October.
Producers did an excellent job of holding out for higher cash prices but
were given terrible prices to lift hedges. We got one thing right, the
spreads were the easier trade to handle when things got out of control.

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.

Bearish corn fundamentals include export sales which are not likely to be shipped before the end of the marketing year, larger than usual end stocks, and South Korea's purchase of China corn for Oct arrival. ,

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