Alendale: Grain, Hog Outlook
Beans closed out the week on a slightly higher note, with the front month contract closing up 4. Talks of strong soybean imports by China and lower futures margins at the CME provided support early.
Other news had Brazilian government agency, Conab, raising its soybean production estimate from 95.8 million tonnes to now 95.9. While this is certainly not supportive to to US beans, it was not bearish enough to scare off the bulls. We would have to think that until we actually starting seeing good yields out of South America, most in the trade will continue looking in the demand column, rather than supplies, as China continues it’s aggressive buying.
As we cautioned yesterday, however, while U.S. soybean exports look strong, they are actually behind last year’s pace, which saw sales drop off about this same time last year – weekly export sales reports will be very important to keep an eye on for price direction.
Of course, the most immediate concern for the bean trade, like most other Ag commodities will be Monday’s slew of USDA reports. For those reports, bean production is seen revised down from November’s 3.958 billion estimate to 3.956. Harvested acres are seen lowered from 83.403 million down to 83.044. While yield is seen increasing from 47.5 in November to 47.6. Ending stocks are seen falling from 410 million in December to 393.
While production changes have gotten a lot of attention from trade the last few weeks, the first number we’ll look to is plain old ending stocks. While we still have “economic value” at $9.35 for soybeans, Monday’s reports will be very important in any price outlook updates which we will release at out 27th annual Ag Leaders Outlook Conference. Hope you can join us…Jim McCormick
Lean Hog Commentary
This week’s slaughter disruption will be a problem that we will just have to deal with. Today’s kill from USDA’s estimate totals only 372,000 head! Yesterday’s kill was revised down from 424,000 to 387,000. Even with packer plans for a 142,000 head kill on Saturday, up from the initial talk of 100,000 early this week, we are going to miss the mark. Allendale estimates this week’s kill will fall short by about 75,000 hogs. This comes on top of the slight backlog we ended the holidays with.
There is actually a strong bearish seasonal for the February contract that lasts until Monday. After that point there is a moderate rebound. The seasonal for April is mixed for the future. For the June we are typically in the middle of a bull move that lasts for another month.
We also cannot forget this week’s trade data release for November. At that time pork exports were a full 20% under last year for the same month. For big picture pricing issues we certainly can see a cash hog bottom here. We have thrown some pretty bearish news at this market over the past three weeks and are likely at “peak bearishness”. Having said that it is hard suggesting a sharp rally of any sort in deferred futures right now. Expansion will start to be felt in spring and really by summer…Rich Nelson
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