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SA weather eyed

Beans finished the week on a strong note. The funds bought another 5,000 contracts and were buyers four out of the five days this week. Beans were able to rally 29 ¼ cents this week. The weekly chart looks good but needs to take out 1174 ¼ next week to change the trend. Fundamental news will remain light next week as well but we will most likely start to see the trade shift its focus to South America. The recent dry weather pattern is building concern. If this continues, the bulls could lean on this and drive prices higher due to tight global supplies. We are showing a chart of the rainfall in the last three months. You will be able to see that the main growing areas of Argentina and Brazil are becoming a concern. Drew Lerner is President and founder of World Weather Inc. and is highly respected in the industry. He is not concerned about this yet but feels we need to keep an eye on this situation. He will also be at our conference again this year in January and has done a great job giving a seasonal overview for what to expect next year. With fundamental news as quiet as it has been South American weather could be the next big focus. It seems like the outside markets have settled down for now but look for them to give direction for Sunday nights trade.

Mixed News: The slight dry period last month in South America may be enough to help the trade stabilize prices for the short term. However, don’t expect a big bull rally yet. Bearish US fundamentals may be realized next week as USDA lowers demand on Friday’s report. Allendale looks for USDA to raise stocks from 190 million bushels up to 230.

Cash cattle traded $1 higher today at $124. Action has been sporadic this afternoon and final trades may not finish until later today. The two factors for this was the good news on employment and fears of Saturday's snows in portions of Plains. On the first front we cannot argue the good news. We don’t have to see rapid job growth to be bullish consumer beef demand. We will be happy to simply see time put between the recession. 

Keep in mind there is economic growth, not contraction, going on. It is simply slow growth. On the second case, while snows are a bullish issue, we do not want to jump the gun here. Feedlots will have much of Saturday and all day Sunday to clean things up assuming snows are manageable. Also, wholesale beef lost $4.52 and $3.58 this week for choice and select. We look for lower prices later this month...Rich Nelson

 

Working Trade:

(09/07) Sold 2 April 118 puts 2.57 each, risk to 3.00, objective 0. Closed 1.20.

(11/23) Sold 1 February 118 put 1.60, risk to 2.72, objective 0. Closed 1.12.

(11/23) Sold 1 April 122 put 2.67, risk to 4.20, objective 0. Closed 2.22.

 

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Written by Rich Nelson 

Director of Research 

Allendale Inc. 

4506 Prime Parkway 

McHenry, IL 60050 

815-578-6161

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Hypothetical performance results have many inherent limitations, some of which are described below.  No representation is being made that any account will achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.  One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight.  In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading.  For example, the ability to withstand losses or adhere to a particular trading program in spite of trading losses are material points which can adversely affect actual trading results.  There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.

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