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Updated WASDE numbers coming

As we wrap up the holiday shortened trading week, the bean market keeps the general theme that we saw all week.

The July contracts traded in the positive all session, Friday, on a strong cash market, while the new crop continued to see pressure due to optimal weather forecast. There were 7,349 contracts left open in the July contract coming into Friday’s trade, while the July soymeal has 6,667 left contracts left. The last trading day for the July contracts is next Friday.  

The weekly export sales came in at 120.6 thousand metric tonnes for old crop and 249.1 thousand metric tonnes for new crop. The old-crop number was above trade estimates, while the new crop sales were within the expected range. Strong demand for meal is keeping soy crushes profitable and bidding up for old-crop supplies.

With ending stocks anticipated to be at the bottom of the barrel by the end of the marketing year, end-users are finding it increasingly harder to purchase beans. Reports are that some crushers have only a two-week supply of beans left in supply.

An optimal mix of sun and rain without any major heat outbreaks has the bears in control of the new crop Friday. Traders need to remember that beans are made or broken in August. So, the critical period for the crop is still ahead of us and that could make the new-crop beans trade volatile, as we get closer to August.

The U.S. dollar was sharply higher Friday, as a positive jobs number and negative news out of Europe had the trade aggressively buying the U.S. currency. The higher dollar did have a negative effect on commodities.

This week, the USDA will be releasing an updated WASDE report on Thursday. They will plug in last moth's Acreage estimates and stocks numbers, as well as making adjustment to yield and demand to come up with a new ending stocks number. Allendale is looking for soybean production to come in at 3.423 billion bushels. We are projecting endings stocks at 306 million bushels, up from 265 million bushels last month.

World soybean ending stocks are forecast to come in 150.24 mmt. Old-crop beans stocks adjustments reflect strong March – May usage.

Our internal working numbers are 77.728 planted acres; 76.718 harvested acres; a trend yield of 43.35 bushels; ending up with a 3.326 production number. The tight situation in the old-crop beans should continue to provide support for the old-crop beans and bulls spreads, as it looks like we still have some rationing to do to make sure we literally do not run out of beans.

As for new-crop beans, Allendale has a long-term bearish view of the new-crop beans and is currently looking for a “fall low” of $10.54. We continue to recommend producers use rallies to market new-crop beans.

Trades Recommendations:

6-11-2013  Bought 1 unit of November $11.00 bean puts for 10 cents,  Risk value of option will hold until anticipated  “fall break”.

Cattle Commentary

Cattle futures did a good job Friday in holding their ground. Cash trading on Wednesday, at $119, was a disappointment. However, Friday’s monthly employment report did provide early support. At first glance, the past three months of job gains looks good. It helps support the idea of rising beef demand in the coming months. Some financial economists provided a warning, though, after a second look at the data. The June job gains were made on big increases in part-time work and an actual net decline in full-time work. We will add some warning here as beef particularly needs confident consumer and business spending. Part-time working consumers are buying hamburgers, not visiting white-tablecloth restaurants. As a whole, we are still telling our subscribers that it is getting very hard to make demand projections right now. Though most changes in pricing from year to year are based on supply changes, which are easy to project, this does leave a little uncertainty. For now, that is just fine since we have some big-picture trades to be a part of. We are near the seasonal low for the year in cash cattle, the lows for futures have already been made, and we can project a sizable deficit in production for Q4 and Q1 where production is low to begin with. Our February futures target is $134 to $136.

Working Trade:

  • (5/13) Sold August 124 call 1.12, risk to 1.92. objective 0. Closed 0.50.
  • (6/20) Bought October cattle 123.80, risk 123.50, objective 126.90. Closed 126.25.
  • (6/28) Bought February cattle at 128.70, risk 127.10, objective 136.00. Closed 128.95.

Written by Rich Nelson
Allendale Inc.
815-578-6161

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