Commodity Kickstart - July 2, 2009
CBOT Grain Futures Calls:
- December corn called 3 to 7 lower.
- November soybeans called 15 to 20 lower.
- September CBOT wheat called 3 to 5 lower.
US dollar is up 39 points at 80.26. August crude is down $1.28 at $68.03. Dow futures are down 33 points.
Economic Information:
- Unemployment for June is set to hit 9.6% from May's 9.4% figure. Non-farm payrolls for June expected to show a 363,000 loss.
- Factory orders for the month of May are expected to have rose .8% from the .7% figure for April.
- Yesterday's weekly energy inventory report showed a 3.7 million bushel drawdown for crude oil. That was considered positive.
Weather:
- Forecast shows dry weather through most of Saturday. Rains will fall south of I-80 bringing .35 to 1.00 inch. No rains north of I-80 for this system. Next shot is widespread .30 to 1.00 inch next weekend. Moderate temps will remain through early next week.
Grain Market Influences:
Deliveries against July positions are 4,793 soybean oil contracts for positions through July 1 and 4,842 wheat contracts for positions through July 1.
Don't forget, night trade is now extended to 715 am from the previous 6 am stop.
Weekly export sales are viewed as bullish corn, soybeans, and soyoil and neutral soymeal and wheat.
Corn summary... The shock of yesterday's acreage report has had a day to roll around. Today's action was more focused on the stronger soybeans than any new corn fundamentals. In the short term, this market remains focused on good weather for growing crops and ample old crop supplies. On the weather side, there has been talk of a "ridge of high pressure" here or there for later next week but so far the models have not been conclusive. This afternoon's one week and two week forecasts do show above normal temps but they are also countered by above normal precip. That sounds like good corn growing weather.
Overnight South Korea purchased 55,000 tonnes of US corn.
Soybean summary...There is nothing wrong with soybeans posting a good short term rebound here. China's purchase of old crop soybeans yesterday reminded the market they still may toss an order or two our way. In the long term, can we make any bullish argument for soybeans that is not yield related? The answer is no. USDA's old crop stocks estimate is 110 million bushels and the stocks/use number is 3.6%. That stocks/use number is the tightest of modern history (last 40 years). That shows clearly why old crop soybean prices are over $10. We are projecting new crop stocks will push to 285 million bushels and stocks to use will run up to 9.2%. That is the largest stocks/use in three years. We are still using $8 as a downside target for November soybeans.
Brazil exported a record 6.17 million tonnes of soybeans in June. That broke the previous record of 4.68 mmt in May.
Wheat summary... It was telling today that corn was able to rally by piggy backing on soybean strength but wheat was not. The interest in deliveries, better yields showing in Kansas, and simply too much wheat left over from last year are some key problems wheat prices are facing. For pricing we are looking for chances to sell September Chicago above 550. The next stop, based on longer term fundamentals, appears 500.
Overnight Japan purchased 108,000 tonnes of wheat. 87,000 tonnes will be supplied by the US while 21,000 will come from Australia. Also out, Taiwan purchased 82,350 tonnes of US wheat. Reported during the day session yesterday, Egypt purchased 90,000 tonnes with 60,000 being supplied by the US and 30,000 from France.
A report suggests cool and wet weather in May and June have helped Germany's grain crop. One grain company forecasts their grain crop from 46.5 to 47.5 million tonnes, just under last year's 50 million metric tonnes.
Livestock Comments:
- Wholesale beef closes down $1.18 for choice and down $.63 for select.
- Pork carcass cutout closes down $.28.
- Cash hogs are called steady.
Livestock Futures:
August Lean Hogs are called 15 to 30 higher.
- Chart support 57.50 and resistance 64.00.
August Live Cattle futures 20 to 40 lower.
- Chart support 83.50 and resistance 85.85.
August Feeder Cattle futures are called 10 to 20 lower.
- Chart support 99.80 and resistance 103.95.
Livestock Market Influences:
Lean hogs summary... A moderate rebound in futures was seen this morning on word Russia eased their partial bans on US pork. This is good news. There are a few more states Russia needs to work on. Next we have to see China and the list of other countries do the same before we can argue for a return to ‘true pricing'.
Live cattle summary... One question that has not been answered yet is if we have a bottom in for futures, as ‘outside money' is suggesting, then why hasn't cash beef followed suit? It is still trading mixed. Through today's final beef report, choice beef is down 74 cents while select is up 18 cents. Does that sound like the major bullish paradigm shift that traders are assuming has happened? If Monday's bullish rally was made on ideas of lower cattle supplies up ahead you would expect some of those fears to start to show on the wholesale beef end. So far that has not happened. It still leads us to believe this market has been shaken by ‘outside money' buying rather than beef-only fundamentals. For cash cattle trading, we only have one more day to work on negotiations. Bids are $81 while asking prices are $84 to $86. Last week's trade was $82. You would expect the higher futures this week to lead into higher cash cattle prices this week. However, with lower beef, will that happen? We will hold from new trading orders until this dispute is solved.
______________________________
Email research@allendale-inc.com or call toll free 800 551 4626 for opening calls 5 minutes before opening bell for the freshest calls.
If you have any questions regarding this report or would like to get more information about Allendale and our research products, please contact us at 800-262-7538. Check our website at http://allendale-inc.com/
Allendale is registered with the NFA and CFTC and is also a member of the NIBA.
