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Long-term soybean bearishness

The bean market ended the week on a negative note as last week’s sell-off continued. For the week, the new-crop beans ended 24¾ lower and 37¼ cents off the week's high. The July soybeans settled the week 23¼ cents lower. 

With the warmer and drier week we have just seen and a warm, dry forecast in the works, it is thought that producers were able to play catch-up by getting the rest of the beans planted. We would look for bean plantings to reach the 95% level for Monday’s report. We would also look for the good to excellent ratings to bump up 1 to 2 points Monday. 

The U.S. dollar continued to rally today, and that added to today’s pressure. Next Friday, the USDA will release its updated acreage estimated. The average trade guess for bean acreage is 77.933 million acres. This would be up 735,000 acres from the March survey. The high end of the trade's guess is 79.240 million acres, while the low end is 77.100 million acres. Allendale is estimated bean acres at 79.240 million acres. 

As for the quarterly grain stocks, the trade is estimating them to come in at 442 million bushels down from a year last year’s June report stocks estimate of 667 million bushels. Allendale is looking for quarterly stocks to be 422 million bushels. With the weather outlook improving and potentially seeing more bean acres than anticipated, Allendale has a long-term bearish view for the new-crop beans and is currently looking for a fall low at the $10.54 level. Next week’s price direction will be dictated by Sunday night’s weather forecast and positioning for next week’s report.   --Jim McCormick

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

It is at these turning points in seasonal prices that trading becomes just a little harder. While the seasonal low in cash cattle trading typically occurs in later July, we must remind ourselves that August and October futures are trying to price in where cash will be at the end of August and the end of October. We have this sticky situation where cash cattle can continue to break for a few more weeks, but futures traders are already looking ahead at the period when prices are back on the upswing. At the time of this writing to we do not have any cash cattle trading to report. 

Bids in the South are still a very low $117. Last week’s trade was $120 in those areas. Cattle feeders, seeing today’s futures gains, are so far resisting this very negative effort. We must also point out that this week’s wholesale beef is up. Choice grade gained 1 cent while select was up $2.62. Cattle feeders can also point out that these big slaughters running through the plants have helped widen the live cattle/wholesale beef spread. Packers do have a strong margin right now. This week has been populated with rumors of two of the major packers asking for quick delivery. 

The 2 p.m. Cattle on Feed report can be called slightly negative. Placements of 98.3% of last year were larger than the 95.0% average guess (Allendale 99.3%). So placements were a little larger than expected, and it must be noted this was compared against a very large May of 2012 number (both bearish points). Marketings of 96.6% were smaller than the 97.5% average guess (Allendale 97.5%). Offsetting the negative COF numbers, the Cold Storage report showed that stocks of beef in May fell by 32 million pounds. Normally they only decline by 2 million pounds. Either we found more export demand or more consumer demand last month. 

Either way, both of those reports balance each other out. Bottom line here is this market is still fishing around for the seasonal cash cattle low. Futures though, are already looking Northward. We are long the October contract.   --Rich Nelson

Working Trade:

  • (5/13) Sold August 124 call 1.12, risk to 1.92. objective 0. Closed 0.75.
  • (6/20) Bought October cattle 123.80, risk to 122.00, objective 126.90. Closed 125.12.

 

 

Rich Nelson 

Allendale Inc. 

815-578-6161

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