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Choppy wheat outlook
Broker Perspective: The wheat market was under pressure today as the results of the big Russian grain meeting ended as expected, with no limiting of exports. After drought slashed the Russian wheat crop, the trade was thinking that Russia would halt exports to keep it from selling all of its reserves. In 2010, Russia suspended wheat exports due to drought losses. The crop back then was only 41.5 mt The USDA currently is estimating Russia’s crop at 43 million tonnes. analysis firm, SovEcon, lowered its view of wheat production from 39 million tonnes to 38 this past week. Russia Deputy Prime Minister, Arkady Dvorkovich, stated Russia will not limit grain exports even if exportable supplies are exhausted. When Russia suspended exports back in 2010 their reputation as a reliable source of a grain took a hit. It looks like they are doing everything that they can to be a viable wheat trading partner. Russia has exported close to 8 million tonnes of wheat so far this year. They have stated that they were willing to export 10 to 14 million tonnes this marketing year. If the current export pace does not slow they would be out of anticipated exportable supplies by November. Some traders anticipated the exportable surplus could fall to 9-10 mt due to the poor crop. If this happen Russia might have to intervene to slow the export pace even if they don’t want to. In other supply news, dryness in Australia continues to hamper their wheat crop outlook. Estimates of the size of the crop are falling. The USDA last estimated the crop at 26 mt there is talk now that they crop could shrink to 22 to 22.5 mt. As we wrap up the month, it should be noted that the Chicago December contract ended the month 13 cents lower from its July 31st settlement price. Chart support comes in at $8.72 (50 day MA) and then at $8.57 π. Resistance will be at the 914 1/2 level then at 937. Allendale anticipates the wheat market will continue to chop in a sideways pattern over the near term. This shrinking corn crop should be supportive as more wheat is needed to be fed to offset the corn production losses. Rallies will be limited due to the fact that the US is currently selling wheat higher than the rest of the world but this premium is shrinking. The grain market will be closed Sunday night and Monday in observance of Labor Day. They will open back up Monday Night at 7:00 p.m. central time. Have a safe three day weekend.
Who is Next: The trade will be lowering its estimate of both Australia and Russia wheat exports now. These are the top #2 and #4 exporters in the world market…Rich Nelson
(8/31) Buy Dec Chicago wheat 872, risk to 552, objective 932.
Lean Hogs Commentary
Without needing to check our records we would assume this week is a record one for this time. Hog slaughter, using a good Saturday kill of 136,000 head, will be 6.8% larger than last year. Pork production, because weights are still larger than last year, will be 7.2% larger than last year. This week represents week number five in this pattern of early hog marketings. The last time producers panicked and went on a wave of early marketings it was a six week long ordeal. That would imply next week will be a big one again while the remainder of September will see a shortfall. Over the next few weeks keep in mind futures are not trying to price in today or tomorrow’s hog prices. They are pricing in their thoughts as to where cash hogs will be on October 14. There is a pretty deep discount in October futures to current cash hogs.
(8/28) Bought October 73.20, risk 69.70, objective 77. Closed 74.17.