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Market Eyes Monday's Planting Progress Report

Friday's report turned out slightly bullish for old crop compared to expectations and also slightly bearish for new crop. At first, it was tough to tell which side was going to win out. But shortly after the report, it became obvious that selling would take over. While corn had a tough day of selling, both old- and new-crop contracts held their long standing uptrend lines, which showed that traders were quick to sell but they were not willing to take out important support just yet. Perhaps this market is waiting for Monday’s weather and planting progress before breaking important levels. For now, the selling used up the available chart room; we will see if next week decides to make an important move lower or finds reason to bounce back at least to recent resistance.



Old-crop traders:

  • Analysts are looking for old-crop stocks of 1.314 and saw an actual number of 1.146.
  • Old-crop carryout suggests exports have been supportive; yesterday’s did not paint a great picture going forward.
  • July held the long standing uptrend line, which crossed today at 505.

New-crop traders:

  • Analysts were looking for new crop carryout of 1.672 and saw 1.726.
  • Slower planting pace did not result in lower estimated yield than trend line.
  • December hit the long-standing uptrend line of 497 1/4 but did not break it yet.
  • Planting pace could pass 50% on Monday afternoon, that could be what aggressive sellers are waiting for.

Bulls:

  • Today’s pullback to the trend lines in old/new crop corn suggested at least a short-term buy.
  • Bulls might want to focus on the July/Dec spread if planting pace comes in over 50% Monday.

Bears:

  • Short-term sellers should look to take profits near the uptrend lines.
  • What longer term sellers want to see is the corn planting pace pass 50%.
  • Old-crop sellers need to see next week show a second week of poor exports on Thursday.

Trade recommendations:

  • (4/28) Sell December corn 520, risk to 530, objective 505
  • (5/8) Buy December corn 495, risk to 485, objective 510

 

 

Cattle Commentary

Posted 05/09/14

USDA did not change too much on its 2014 beef balance sheet. Production was lowered a small 14 million pounds from the previous month’s guess. That brought this year’s production decline from a 4.4% drop to now a 4.6% decline. 

With a moderate change in exports, the amount of beef offered to the U.S. consumer will run 4.3% lower than 2013. This month’s report also gave first estimates for 2015. USDA sees production falling 1.0% from this year. The amount of beef that will hit the U.S. consumer, after exports and changes to storage levels, was seen 1.5% lower than 2015. 

Today’s report was not a major price mover in anyone’s mind. We have incredibly tight beef supplies this year, and it will get tighter next year. These are issues for the long-term. In the short-term, we are preparing for the summer oversupply. Wholesale beef lost $4 this week. Cash cattle traded in the southern Plains at $146 today. That was steady with this week’s numbers. Nebraska sold at $148 to  $149. That was within last week’s $147-to-$150 range. 

Packers may have been a little concerned about the change to this weekend’s forecast. We had two days earlier this week of hot temps. Another two days of heat will be seen this weekend. On a seasonal basis, summer futures have this moderate rebound lasting until May 11. Keep in mind summer futures are simply trying to guess how low cash cattle will fall into summer. Cash cattle is in a downtrend since March. Summer futures are now pricing in $138 using normal basis applied. That is a 5% to 6% decline from this week’s cash. 

As noted this week, we have a 13% increase in supply coming from now until the peak week in June. While futures traders are still trying to decide if this big discount in June futures to cash is warranted, we are still suggesting it is not enough.



Trade Recommendation:

  • (04/30) Stand aside

 

 

Rich Nelson
 

Allendale Inc. 

815-578-6161

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