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A recovery for corn futures

Technicals: Old and New crop corn and soybeans and new crop wheat. For the
short term trader, Allendale uses its own unique custom Moving Averages to
monitor price momentum, define key support and resistance levels as well as
advise where key pivot points are located when bulls may turn bearish and
bears to turn bulls. We also include last weeks closing price for the
weekly chartist as we draw closer to the end of the week to anticipate the
possibility for futures to have a positive weekly close or if weakness is

Observation: a lower weekly close for all the above with the exception of
CBOT soft red winter wheat. Technically viewed as bearish. However even the
CBOT wheat is not without some minor problem as Friday's close did settle
under the key #1 and #2 Moving Averages which could be viewed as immediate
resistance. Even after the wide range of trade on Thursday, MGEX wheat
futures are able to maintain long term trendline support.

Observation: old crop corn cancellations with Japan responsible for
canceling 2006-07 but rolling into a new crop year. Do not rule out more old
crop cancellations for corn and soybeans with only 3 weeks remaining in the
2006-07 marketing year and futures falling. Wheat export sales are very,
very strong. Wheat sales of 43.6 mil bu are better than the 5 week ave of
24.2 mil bu and 16.1 mil bu 10 week average. Soybean shipments could miss
USDA target of 1.1 bil bu by 40 mil and if so we roll into the carry in
stocks for the 2007-08 marketing year.

Wheat Price Projections: Those with access within our website, Dec wheat
price projections show how recent values have exceeded our maximum target
of 7000. You can see how the seasonal tendency change in momentum are
running about 30-40 days advanced. Given the present state of affairs with
regards to the stock and financial market instability, we may look to the
seasonals and be prepared for a price break without much if any notice.

Fundamentals: Remain very strong with the most obvious evidence of the
start to the export sector with actual sales running 99% greater than the
five year average. Those with access to our Wheat Export sales graph within
our website, look at how strong wheat sales are vs year ago and five year
averages Both the EU-27 and Australia trimmed production estimates on
Thursday adding solid fundamental support to USA wheat futures and cash
prices. With regards to dry Queensland and New South Wales, beneficial
rains are forecasted this weekend and mid to late next week Bearish to
wheat is the technical picture which could suggest if another big round of
commodity liquidation occurs in soybeans and other soft ag commodities,
stops could be triggered and computer trade create significant damage.
Thursday the resolve of the fundamentals were tested on the initial few
hours of trade but remember, world starch stocks are at their lows and not
likely to be repaired overnight.

How Much More?: How much USA wheat has Egypt purchased this marketing year
and just how much more could they secure? As of Aug 2 of the 2007-08
marketing year, Egypt has purchased 1.32 million tonnes of USA wheat with
only 2001-01 larger at 1.869 million tonnes. The 1.32 MT represents a 184%
year on year increase. Include Tuesday's purchase and the estimated amount
of USA wheat purchased by Egypt is 1.735 million tonnes (63.8 mil bu).

Dating back to 2000-01, of the total amount of world wheat purchased by
Egypt, the smallest percentage purchased from the USA has been 15 in
2003-04 (big futures rally year for corn, beans and wheat) with the largest
amount of 45 in 2000-01. The most recent five year ave level of USA
wheat purchased by Egypt has been 26%. If this five year level is to be
maintained, Egypt's total USA purchases for the 2007-08 marketing year
would project to 5.035 MT, leaving a balance to be purchased of 3.3 million
tonnes (121 mil bu). However if Allendale were to pick more recent average
levels established in 2004-05 and 2005-06 of 35%, then projected total US
purchases could be dialed in at 3.791, less immediate purchases of 1.735
million tonnes, the balance remaining could be 2.056 million tonnes or 75.5
mil bu. Thus the range of remaining US purchased wheat by Egypt could be
held in a range of 75.5 mil bu to as much as 121 mil bu. In any case it
looks as though purchases of USA wheat by Egypt could relatively common
place until at least Australia and Argentina come on the global supply line
in late Sept-early October and Nov-Jan respectively.

Allendale Supply-Demand: Allendale's research suggest USDA is 9 million bu
too high in its end stocks as we estimate 395 mil bu and a season ave farm
price of $5.10/bu. Dating back to 1996 444 mil bu was the smallest end
stocks with the largest at 950 mil bu in 1999. Only in 1995 have end stocks
of 377 mil bu been smaller dating back to 1980.

Allendale Yield Research: from the August to Sept crop reports, for wheat
the adjustment has never been over more than 1 bu per acre. The ten year
ave has been .1 bu per acre.

Marketings: For cash marketings typically the Oct-Nov time frame when cash
wheat prices peak. We recommended to sell into the cash market in the
October time frame. However do not ignore present firm cash prices for
wheat to sell into. Check your local cash-basis markets. As an example no
carry in the cash wheat market from Aug to Oct delivery and 14 cents from
Aug to Dec. At 5800 cash value, cost of carry is 4.8 cents/bu/mth or the
need for 14.4 cents to carry from today to the first day of Dec and the
market is coming up short by less than one half of one cent to pay you full
carry. This particular cash market is sending a strong signal, it wants the
wheat now rather than have you spend more money to hold than what the
economics allow. Not all regions are the same.

New Crop 2008: a new life of contract high for July 2008 CBOT wheat futures
on Tuesday and again on Wednesday. The next level to hedge anticipated 2008
production is 6140 and listed within our Hedge Advice page. There is plenty
of bullish enthusiasm for world wheat. We recently recommended to hedge a
minimum of 15% of new crop 2008 wheat futures against anticipated
production and filled at 5760.

Trade Position: We will recognize the technical trend is still up and news
is still coming in relatively bullish. However the technicals are
indicating overbought status and due for a minor setback which we suggest
was corrected on Wednesday and Thursday. Rumors suggest India could secure
500,000 of wheat soon. Do not rule out the possibility of the US and or
Canada chosen to fill the need. Take a good long look at the tender line up
for wheat within our Export Demand. The world is hungry for good quality
milling wheat and even at present loftier than average prices, the USA
wheat exporters are ringing the dinner bell loud and clear. We entered into
short Sept futures positions at all three exchanges on Thursday for a small
corrective pull back to take some pressure out of the bull.

Soybean Price Projections: by the looks of our Nov futures Price
Projections, soybeans appear to be destined for continued downward
movement. Our raw target suggest a low of 7000 before expiring at 7750.
Take a few minutes to glean our Nov soybeans within our Allendale Advanced
Charts to see a glimmer of positive rebound on Friday. Our only small
concern is by the looks of our "Players" page, more sellers in soybeans and
today's higher close may have been attributed to the locals.

The locals
have proved on several recent occasions, buying twos and selling fours is
their key focus and not it the trade for the long haul.
Fundamentals; weaker Malaysian Palm oil, weaker soybean oil and its
relationship to crude oil in a form of biodiesel and beneficial weather for
the majority of the soybean pod fill for the Midwest. Add in the weakness
from the subprime mortgage weakness and the non starch grain was most
vulnerable for Thursday's lower trade. Price rebound on Friday but may be
safe to say a thin volume short covering dead heifer bounce most likely.
Wetter and cooler weather projected for much of the soybean belt mid this
week and again for the weekend. Another similar system for mid to late next
week could be a cold wet towel for the futures trade. As a matter of
forecast, this weekend is expected to have broader coverage with larger
amounts than the mid week rains. The soybean trade is watching Tropical
storm Erin to anticipate if rains could benefit the south Midwest and Delta
region. Allendale's projection of the Nov futures breaking out of the most
recent trade range of 8350-8950 this week, proved right on Thursday. Look
to 8420 as key resistance for the specs to sell corrective rallies and keep
the other eye on finishing the growing season for US beans and early
developments for the S American planting season to help set direction.

Crush Margins: as viewed within our Special Reports section of our website,
soybean crush margins have been and continue to trend lower and are now at
levels less than full production capacity.

Allendale Supply-Demand: Allendale's research estimates 2007-08 projected
end stocks at 259 mil bu vs yr earlier levels of 585 mil bu. This suggest a
downward adjustment of 56% in one year. At no time dating back to 1996 has
there ever been as large of a correction. Projected world end stocks are
estimated at 52 mil tonnes or 13 million less than the 2006-07 end stocks.
At no time dating back to 1980 have world end stocks dropped as much in one
year. The end stocks to use are estimated at 7.4% vs yr earlier levels of
18.8% for a drop of 11.4% domestically. At no time dating back to 1980 has
there been such a large of a correction. World end stocks to use are
estimated to correct 5.2% and you guessed it, the correction downward have
never been as hard.

Allendale Yield Research: Over the last ten years, odds suggest 40% of the
time, USDA increases soybean yield from the Aug to Sept by an ave of 1.2 bu
per acre with the single largest increase of 2.2 bu per acre in 2006. Add
1.2 bpa to the present Allendale yield estimate and production is raised to
2.728 bil bu and end stocks raised by nearly 70 mil bu to a level of 329
mil bu.

Old Crop Soybeans: The Sept-Nov soybean spread is offering 15.2 cents carry
for two months to store. Not indicative of short supplies. With a cash ave
of $7.40, the cost to carry the crop for the time period needs to be 11.6
cents. If you still hold old crop inventory your most significant dilemma
may be needed storage space on farm to hold the 2007 harvest. We strongly
advised moving old crop as soon as possible. Strong resistance of 8420 for
Sept futures could trigger firm offers left at the country elevators.

2008 Soybeans: Allendale officially hedged it first portion of 2008
anticipated production on July 5th and has written orders to add as
outlined in our Hedge Advice page. Allendale had resting orders to hedge
10% more new crop 2007 at 9200 filled Thursday, July 12.

Trade Position: we entered a long Nov soybean futures position based on
immediate technical support. However because of the immediate forecast for
the next 1 to 3 days on Wednesday, we added a reverse to a short position
if risk was triggered. It was and after a small loss on Thursday, developed
into a reward on Friday.

Corn Price Projection: similar to wheat, seasonals are running about 30 to
45 days advanced when looking at our Dec corn futures price projections
within our website. Our seasonal bottom objective has been met and
projections now suggest a recovery to the 3800 level before Dec futures

Fundamentals: Corn futures performed remarkably well as its starch cousin
was able to stave off the bears on Thursday. Old crop corn futures could
lose ground to the new crop if foreign buyers cancel more corn purchases
when reported next Thursday. Be aware, Brazil is forward selling its 2008
corn production to European demand at an unprecedented time of year. Sales
are already occurring for a S American to be planted this October. It was
slightly more than one year ago when a handful of EU countries as well as
Japan which met with Brazil to encourage additional corn plantings. Point
blank the importers of Brazil corn were not willing to compete head to head
with the demand on USA corn from the ethanol sector. Brazil responded with
a record 50 MMT corn crop in 2007 of which 7-8 million tonnes destined for
export in 2007, very early 2008. Brazil will harvest its heaviest volume
corn crop in March of 2008 with ships waiting to load for EU and likely
additional demand from Japan. Export demand is estimated to be as strong in
2008 as in 2007. Tuesday's six to ten day forecast normal to above normal
precip for the northern half of the Midwest and below normal for the
southern half. Train your eye on the technical development on wheat for the
lead for corn.

Crop Size: Allendale's research suggest if good to excellent corn
conditions stay at 56% all the way through harvest corn yields are running
146.4 bushels per acre. However, we are right in the time when conditions
typically fall through the next four weeks. Yields in the January summary
report are typically higher than here. From this week into the January
report harvest yields are typically 2.6 bushels higher so our official
yield would be 149.0 bushels.

New Crop Marketing: based on our most recent price projections, Dec corn
futures in a downward correction and estimated bottom near the 3200-3300
level. With the recent low of 3244 made on 7/23/07 Dec corn has met our
downside objective and may have found its seasonal bottom on 7/23. We do
not recommend forward contracting at present levels. Before Dec corn
expiration futures are expected to work back towards 3700-3800 level. End
users and producers, use the preceding information for your individual
marketing needs.

Old Crop Marketing: The Sept-Dec corn spread closed at 17.2 cents carry.
With the Midwest cash price of $3.10 per bushel, the cost to carry
inventory is 3.3 cents per bu per month or 9.9 cents for the time frame.
The futures market is paying you to store but the biggest problem could be
to find adequate storage for the 2007 crop. The longer you hold, the odds
could increase for subjecting inventory to weakening basis for old crop.

Allendale Supply-Demand: Allendale's research is not as optimistic
regarding 2007 corn production as the USDA but in a few cases we are more
optimistic on demand. Allendale suggest end stocks for the 2007-08
marketing year at 1.151 bl bu, only slightly more than our estimate for the
2006-07 marketing year of 1.051 billion bushels. Dating back to 1980.
Projected 2007-08 world end stocks of 102 million tonnes are the third
smallest with last year at 100 mil tonnes and 1983's 89 million tonnes.

Allendale Yield: from the Aug to Sept USDA crop report, USDA has lowered
yield as many times as they have increased yield over the most recent ten
years. When USDA does increase yield it has been by an ave of 2 bpa and
when lowered it is by an ave of .9 bpa. Over the most recent ten years the
single largest increase was by 4 bpa in 2005. If USDA were to increase
yield by the 2 bpa in the Sept crop report, it could increase corn
production to 13.223 bil bu vs USDA's present level of 13.054 bil bu.

Trade Position: Our long Dec corn futures position was reversed to a short
based on Thursday's initial weak technical play. If wheat breaks key
support, corn may not be far behind in the same direction. Projected new
crop demand remains fundamentally strong based on positive profit margins
for ethanol production but at less than peak capacity. Old crop futures are
up against the clock each passing day the new crop draws closer to harvest.
New crop corn export sales have reached 201.6 mil bu vs one yr ago levels
of 42.4 mil bu. Foreign demands short term memory is very good as they
remember the contra seasonal rally last fall when anticipating harvest
pressure. We suggest recent futures and cash prices are only accelerating
demand domestically and globally.

Lean Hogs: After yesterday's sharp price decline then comeback near the
close the trade was happy to see only moderate action today. Kill levels
have been large recently. The previous three weeks saw a 4% to 6% larger
kill than last year. This week's ended 1.5% higher. Though actual slaughter
levels will rise, as they always do from summer to fall, the drop in the
percentage increase is the key the trade will look for.

Packers will also
note their margins have improved quite a bit this week. Cash hog prices
declined from $3 to $4 while wholesale pork prices rose $1.01. That could
make packers only bid steady to 50 cents lower early next week then
possibly steady by mid week. Keep in mind this is only a short term
phenomenon. Cash hog prices will continue to fall into December with waves
higher then lower. The real question right now is whether the October and
December contracts have finally priced the incoming lower cash hog prices
in. We had projected $69 for October and that has been reached. It is also
close to the $65.15 price the October 2006 contract expired against. The
October contract is back to reality and right where it needs to be. We
exited half the hedges today and will look to take the remainder off in a
few days depending on price action. Our December downside was $65 which is
still above the $61.07 expiration price from the December 2006 contract.
Keep in mind our downside objective did leave a little room for potential
Chinese pork exports. For everything we know right now the China story has
been a complete bust. It will be even more so now that China has suspended
imports from eight US plants. Yes, we will certainly agree exports to China
are up a large amount from last year. That large amount is certainly not
overcoming the declines in our other (larger) trading partners. This
morning we took off half the hedges and monitor price changes in the coming
days to see if the other half can come off or not.

Cattle Short Term: In the short term this week's cash cattle trading was
done mostly at $90.50 and $142 dressed out. The Federal Reserve action
today may hopefully stabilize the financials and let the cattle market get
back to trading cattle fundamentals. For price direction we are supportive
and would expect cash cattle and CME futures to only have a couple more
weeks of mixed price action. Further price breaks could be used to start a
longer term buying program for the February 2008 contract.

Allendale is registered with the CFTC and NFA and is a member of the NIBA.
The bottom line is we are a regulated firm which can be extremely important
in this day and age.

Technicals: Old and New crop corn and soybeans and new crop wheat. For the short term trader, Allendale uses its own unique custom Moving Averages to monitor price momentum, define key support and resistance levels as well as advise where key pivot points are located when bulls may turn bearish and bears to turn bulls. We also include last weeks closing price for the weekly chartist as we draw closer to the end of the week to anticipate the possibility for futures to have a positive weekly close or if weakness is ensuing.

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