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Crop estimates eyed

Beans saw volatile trade Friday, as jobs numbers were released and outside research agencies announced their South American production estimates. On Friday, the Bureau of Labor statistics released their January jobs number which saw an addition of 243,000 new jobs. This helped bounce the stock market and the dollar early, but we later saw the dollar back off. Informa also came out with their South American bean production estimates. The Argentine estimate came in at 46.5 million tonnes compared to 51 in January.  The Brazilian number came in at 70 mt compared to 72 mt in January. These two numbers were within the range of other South American sources. Allendale has Argentine production at 49 mt and Brazil production 72 mt. After we saw the release of these numbers, the bean market found good support for the rest of the day and finished the session at 1232 1/2 up 15 1/2 for the session. The trade’s focus is going to start moving towards the USDA supply and demand numbers which will be out Thursday morning. Average analyst estimates for this report have not been compiled yet, but should be out early this week. Allendale is expecting US ending stocks to fall to 271 from the 275 million bushels from the January report. Allendale is expecting world ending stocks to be at 63.77 mt compared to last month’s 64.54 mt. Funds bought 6,000 soybean contracts, 2,000 meal contracts and 3,000 bean oil contracts. It appears the funds are seeing the spread between corn and beans as enough to continue to support this market, as they will need a good rally for farmers to plant additional acres.

South America: The trade was a little surprised at Informa’s 46.5 mt estimate Friday. That is near the lower end of the estimate posted in recent days. This was surprising as this firm is typically on the high end of analyst numbers. The real question though is whether this will influence USDA to raise US export estimates. We were having trouble meeting USDA’s current 1.275 billion bushel estimate in the first place. 

Trade Recommendation:

(01/19) Sold March Beans 1220, risk 1250, objective 1200 1/2. Closed 1232 1/2.

Pork packers took action and lowered the kill 30,000 head from last week. The hogs are there. Negative processing margins are an issue right now. As you can see by the chart, we will have stable hog numbers into first half March. Once we roll into April, this market is faced with declining supplies, outdoor grilling demand, and the prospect of chicken stocks dwindling. The measure of cash hogs that futures are settled against, the lean hog index, is around $88. We still feel comfortable suggesting the February contract may be a little overpriced right now…Rich Nelson

Working Trade:

(1/26) Sold 1 Apr 86 put/sold 1 Apr 95 call 2.75, move risk to 3.75, objective 0. Closed 2.30.



Rich Nelson 

Director of Research 

Allendale Inc. 

4506 Prime Parkway 

McHenry, IL 60050 


Hypothetical performance results have many inherent limitations, some of which are described below.  No representation is being made that any account will achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.  One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight.  In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading.  For example, the ability to withstand losses or adhere to a particular trading program in spite of trading losses are material points which can adversely affect actual trading results.  There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.

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