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All eyes on USDA data

The bean market put in a volatile round on trading Friday. What looked like fund liquidation pressed the market sharply lower early in the session. When the fund liquidation ended, the market was able to recover most of the day’s losses. 

For the week, the market settle 14 ½ higher. 


Next week will be a short trading week due to the markets being closed for Good Friday. The much anticipated quarterly grain stocks and planting report will be released on Thursday at 11:00 Chicago time.


Allendale is anticipating soybean plantings at new record of 78.324 million acres. Last year the U.S. planted 77.198 million acres.  Quarterly soybean stocks on March 1 imply a 1.058 billion-bushel second quarter usage. That would be largest usage in three years for that quarter. What this means is we have to slow soybean usage to a grind very soon in order to have enough stocks at the end of the year. First half soybean usage was 18% over last year.


To meet USDA’s end of year ending stocks target of 125 million bushels, second half usage most drop 35% bellows last year’s second half consumption. Bloomberg’s average guess for the quarter stocks is 948 million bushels. The range of estimates is from 900 to 1059. Bloomberg’s average guess for planted acres is 78.351 million acres with the range at 77.0 to 80.0 million acres.


Even though yesterday’s exports were not the best, we are creeping ever closer to the USDA target. USDA has a goal of 1.345 billion exported soybeans. On average, 34 million of what is sold is cancelled and converted to a new crop sale. That means our sales target is 1.379 billion. We have already sold 1.308 of that. No, we have not met USDA’s goal. However, from now until the end of August, we only need to sell an additional 71 million bushels. That should be pretty easy since it is only 32% of normal.  

The first official Brazilian soybean crop estimate, from the Agriculture Ministry, was 51.3 million tonnes. This is right at USDA’s latest 51.5 mt reading. 80% of the early planted crop is rated good to excellent. 74% of the later planted crop is seen in the same category. Next week’s report and spring weather will determine the markets next major directional move…Jim McCormick

Working Trades:

  • 3/18 Buy May Soybeans at $14.06, risk $13.85 objective, $14.30.

Cattle Commentary

The afternoon Cattle on Feed report can be called supportive. Due to continued problems with feedlot profitability, February placements were surveyed at 86.5%  (-13.5% from last year). of last year. This was right on Allendale’s 86.6% estimate but below the average guess of 91.0%. This is supportive for the August and October contracts. The placement number was the lowest February since USDA started this data series in 1996! The number of fat cattle leaving feedlots, marketings, was surveyed at 93.3% (-6.7% from last year). Keep in mind about 3.5% of this decline was due to February 2013 having one less weekday than February 2012. USDA’s number was higher than Allendale’s 92.5% and the average guess of 92.9% and is therefore slightly supportive. The number of cattle in feedlots fell in March. The February 1 estimate was 93.8%, and today’s March 1 number was 93.0%. That was right on Allendale’s 92.9% but lower than the average guess of 93.0%. The net message of today’s report is that the feedlot supply continues to tighten.

Allendale estimates the front end supply of cattle, those on feed for over 120 days, at 4.193 million head. This is a very large 575,000 head smaller front end supply than last year at this time. The last time we saw this big of a year over year supply drop was 2009′s 457,000 head drop. 2009 was one of those years with a late spring rally. In 2009 there was a $5 cash catlte rally from now until the third week of April. Will we see a late spring resurgence in cash cattle this year (into April)?

Also at 2 pm USDA released the monthly Cold Storage report. At the end of February total beef stocks were counted at 490.313 million pounds. Almost every February in history is a drawdown month for stocks. In the past five years the month of February dropped 16 million pounds. This year we increased stocks by 6 million. This is a little bearish. That makes it three months in a row of troubling beef stock reports.

The message at the end of this week is that market-ready cattle numbers continue to drop. This supply problem is occurring exactly like expected. The problem is that is market remain fixated on on demand. While we truly expect a small rebound in both cash cattle, and April futures, we just cannot suggest rebound past the March high of $128 cash. This week was mostly at $125. The smallest front end supply of cattle should be giving us cash cattle at around $142 right now. With this major demand problem we have to suggest the next rebound is a last chance for hedges on the summer contracts. A normal decline off a $128 cash cattle spring high would be $113 cash cattle in the summer…Rich Nelson

Trade Recommendation:

  • (3/13) Stand aside.


Rich Nelson 

Allendale Inc. 


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