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Corn market waits for Report to pass

Corn traders have now had the entire week to get positioned where they want to be going into Monday’s report. And the trade today suggested that they are happy right here. 

More light profit-taking buying was seen, but it was quickly offset with new sellers seeing continued strong yield reports. It is possible that traders will leave the price right here, with some shorts willing to ride through any bounce on Monday, knowing that the long-term move of this corn market is still lower due to yield reports. Trading volume was once again very light today with December coming in at just 82,567. 

Harvest progress looks like it might be slowed with light rains this weekend and early next week. But, then another five-day clearing should bring harvest pace back to normal. Corn has been spending an entire week sideways waiting for Monday’s report where things should certainly change. 

Just to recap the numbers, the analysts’ estimate for corn stocks on Monday is 681 million bushels. That is a slight increase over the September carryout number of 661, which likely comes from a small amount of feed-use reduction with a small amount of early harvest bushels added in. Given that estimate, there isn’t much reason to see much short covering Monday morning. It now looks like Monday will be generally calm, the stocks report will guide this market for an hour, then new yield reports will guide this market long-term.

Lean Hog Commentary

The trade may be a little disappointed with USDA’s quarterly Hogs and Pigs report. The hog herd was counted to be 0.3% higher than last year when the trade was expecting a 1.6% decrease. Of the hogs currently alive that will be slaughtered over the next six months, Kept for Marketing, USDA counted them at 0.3% larger than last year (expectations of -1.9%). Of that breakdown, the hogs over 180 pounds, which make up slaughters from September 1 through the first half of October, they did recognize tight supplies at 3.5% smaller than last year. That was right on the 3.7% lower expectation the trade was expecting. 

What will surprise the trade is that no significant PED impact was found. The next three weight categories, the hogs that will be slaughtered from mid-October through February will run 1% higher than last year (+1.5%, +1.1%, +0.9%). Repeating that again the weight group that would be killed in December and January where PED should have been felt, was 1.1% higher than last year. 

The trade guess for that period was a 1.4% decrease. 

For the breeding herd, classified as Kept for Breeding, USDA found that to be only 0.4% higher than last year (expectations of a 1.5% increase). Jun/Aug farrowings ran 0.1% smaller than last year, a new record pigs per litter of 10.33 (+2.0%) was recorded, which resulted in a pig crop of 1.9% higher. 

Speaking plainly here, if there was a PED impact, it would have been in the pigs/litter number right there. Analysts have two ways of estimating that Dec/Feb kill period the 50- to 119-pound category in the Kept for Marketings (+1.1%) or the Jun/Aug pig crop we just reported (+1.9%). Again, no PED impact. 

For the spring and early summer kills, we see the Sep/Nov and Dec/Feb farrowing intentions at 0.4% and 0.9% higher than last year. To those who are skeptical with this report, which would be 90% of our hog producer clients, this seems like a slap in the face. It seems almost everyone “has a neighbor” or “knows a vet” who has directly seen this problem. 

While we are not backing up USDA we must point out this fits completely in with the pattern of the two previous virus/disease scares (PRRS and circovirus). In each of those instances there was never a full recognition on the Hogs and Pigs report or a lasting hole in weekly hog slaughter numbers. Also keep in mind this is a survey of hog producers. It would have included those producers who have it. 

As it stands right now, most of the trade will call this report worthy of a full $1 to $2 lower open. If the numbers are valid, then that is just a start. It would reopen the idea of an $82 to $84 December hog downside target. We are not sure the trade is going to believe it on Monday, though. We will trade lower and close lower on Monday. It may not be as bad as those numbers, however.

Trade Recommendation:

(9/25) Stand aside


Rich Nelson 

Allendale Inc. 



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