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Wheat stuck between the bears and bulls

Wheat: There was some actual bullish news for wheat this morning. One US firm released an estimate that all wheat production would go down to 2154 mmt down from USDA’s last estimate of 2184 mmt. They also put out an estimate that projected plantings would be 41.63 million acres which is down from the 43.44 mmt planted last year. So now that wheat was finally given a bullish piece of news how did it react? It was just slightly higher for most of the day but as soon as corn broke its support wheat ended the day being nearly 5 lower Chicago. Right now we will keep the lookout for bullish news in case we should find it but not yet getting our hopes up.

Direction: Right now wheat has to move down to 450 to break out to new recent lows and continue moving lower. It needs to trade above 446 to break a long term down trend line from the 725 high before we can start to get too bullish. For the moment, it can be said that wheat is stuck between a bearish and bullish level but we will choose to side with the trend until shown otherwise…Ryan Ettner

  • Chicago Wheat: (09/14) Bought Dec 460, risk 446, objective 484. Closed 457 1/4.
  • KCBT Wheat: (09/03) Stand aside.
  • MN Wheat: (09/14) Bought Dec 501, risk 492, objective 514. Closed 496 3/4.

Option Strategy(s):

  • (09/10) Sold Dec Chi 500 call 11 3/4, risk to 15, objective 0. Closed 9 1/4.

***Disclaimer*** The commentary and trades below are derived from technical indicators provided in our Allendale Advanced Charts pages and may not correspond with the fundamental commentary above.

Wheat Technical Commentary: Spring wheat traded in a very small range today, but held just above the 10 day MA. This market has refrained from posting a new contract low all week. We cannot confirm a bottom though until the downtrend gets taken out.

Vital Technical Indicator: the next schedule projected major turn day in store for wheat is September 25.

Live Cattle: USDA counted 2.4% more cattle going into feedlots during August than last year. That was just above the .9% higher estimate from the average guess but under our 4.5% higher expectations. We cannot argue with this number. Placements were higher because corn is low priced, deferred live cattle futures were projecting breakeven are a small profit, and also because 2008 placements were limited in the fall. Keep in mind from August through December 2008, its placements ranged from 3% to 11% lower than the previous year. The leaves a pretty good chance of 2009 placements showing higher than last year numbers all fall.

Placements In-Depth: One of the confusing things to new traders monitoring these reports is the fact placements do not quite match up with marketings an exact four, five, or six months down the road. Each month we have quite a variation in the size and type of cattle going into feedlots. There is a mix of anything from freshly weaned 450 lb heifer calves to 925 lb feeder steers. Additionally, cattle that are feeding during the winter months take longer to get to a target weight than numbers fed in more mild temperatures. To give you an idea of the mix laid out here, cattle placed on feed in August will finish out anywhere from late December through April.

Marketings In August: USDA said the number of cattle leaving feedlots last month was down 3.9% from last year levels. We do not have problem with that. We have a smaller number of market ready cattle right now from those low placements back in spring.

Cattle On Feed on September 1: With more placements and few marketings than last year during the month of August, the number of cattle on feed grew. We would expect slaughter of cattle out of feedlots, which makes up 80% of US beef production, to be lower than last year through November and likely most of December. 1st quarter 2010 beef production will show a slight bump up.

Price Direction: To be honest, we do not look for much pricing changes here based on supply numbers that get thrown around. Cash already broke this week, partially on expectations for today’s report. We feel demand remains the key issue right now. Based on current supplies, our models suggest cattle prices are depressed by $10 to $15 more than they need to be. Economic reports have shown improvement since June. Unexpectedly, beef demand has not shown a similar gain. For trading this last leg down has been a surprise and we were stopped out of positions. We must make note, this is a key reason why stops are used on all positions. If we did not have a risk in place on this move we would not be able to show up to the game the next day so to speak....Rich Nelson

  • (09/17) Sold Dec 85.35, risk 86.50, objective 84.00. Closed 84.90.

Option Strategy(s):

  • (08/13) Sold Dec 86 put 2.00, risk 2.75 filled 09/18 for -$300.

***Disclaimer*** The commentary and trades below are derived from technical indicators provided in our Allendale Advanced Charts pages and may not correspond with the fundamental commentary above.

Cattle Technical Commentary: Cattle slid further today and made no attempt to recover any of yesterday's sharp losses. This was a bit disappointing for the bulls. One positive was today's close, which was off the lows of the session.

Vital Technical Indicator: Next projected major turn day for live cattle is September 23 and for feeders is September 21.

Wheat: There was some actual bullish news for wheat this morning. One US firm released an estimate that all wheat production would go down to 2154 mmt down from USDA’s last estimate of 2184 mmt. They also put out an estimate that projected plantings would be 41.63 million acres which is down from the 43.44 mmt planted last year. So now that wheat was finally given a bullish piece of news how did it react? It was just slightly higher for most of the day but as soon as corn broke its support wheat ended the day being nearly 5 lower Chicago. Right now we will keep the lookout for bullish news in case we should find it but not yet getting our hopes up.

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