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Soybeans Remain Pressured

08/29/2014 @ 3:58pm

A mixed session was seen to finish the week’s trade as the September contract closed higher while the new-crop beans were under pressure and came within 1¼ cents of the contract low. We did see some last-minute buying that brought the market off the lows of the day.

It seemed most of the session was dominated by traders positioning for the three-day Labor Day weekend. Weather continues to press the new crop lower as the warm, wet forecast will allow for the bean plants to add pods and fill them out to the max. In overnight export business, the USDA announced the sale of 123,000 soybeans to an unknown destination.

For first notice day for September contracts, there were no tenders posted for soybeans or soymeal (as expected), while soyoil saw 264 contracts tendered vs. the 200 to 2,000 that were expected.

For the month of August, the November contract lost 57¾ cents. Allendale continues to look for beans to fall to the $9.50 area when the fall low is scored and would recommend not chasing rallies and for producers to sell into a price rally if it were to occur. If the weather forecast Monday night is the same as it is today (warm and wet), we would look for the market to open lower.

 

Lean Hog Commentary

Higher trade was expected today, but it is likely few were discussing limit up action. From the low in futures, posted on the 21st, October has rallied almost $5. Note that October and December futures at this time are typically only trying to figure out how low prices will be for their separate expiration dates. The latest Lean Hog Index, the measure of cash hog prices that futures are settled against, is 97.56. Today’s October futures settlement is almost $1 higher than that.


Part of the exaggerated price decline in cash hog prices was due to this lower holiday kill period up ahead. Now that this issue is here, we can look ahead to the period after. Next week we suggest a minor rebound will be seen for cash hogs. This week's kill was 1.979 million head, which comes to a 10% yr/yr reduction. With the weight problem we are running pork production only 4% lower than last year. This all leads the conversation back to price. On the day of the AgLeaders Summer Outlook Conference, the October contract settled at $112.70. We forecast a downside target of $104. Prices not only met that downside target but exceeded it as demand faltered. With this lower-than-expected demand factored in, we can figure something in the $99 to $101 range now. We have been supportive to this market in the past couple of weeks. If this continues by mid-September, we will likely be suggesting that futures are back to overvalued.

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Rich Nelson 

Allendale Inc. 

815-578-6161

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