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THE ALLENDALE ADVISORY REPORT
Prepared by Allendale, Inc.
Commodity Wrap-Up For November 7, 1997
Meal, Meal, Wheat, Corn And Then Meal
That was the order for each day this week as to how the floor trade concentrated on the futures. On Monday and Tuesday the trade was thoroughly impressed with news how China was buying U.S. meal over India and the U.S.'s inability to produce enough meal. Between the two days there was more discussion as why China was, was not buying from the U.S.A., not the U.S.A. This much is known for now. The U.S. exporters are leaning towards India selling meal to China on a steady basis the past two weeks. The main reason they are so certain is India meal is discounted to price versus the U.S.A. and the fact the supply is much more readily available than the brand new U.S.A. crop. On Tuesday, the other big news was a well-known commercial crusher was said to have sold all of the meal they would produce at one of their facilities. Well on Wednesday, the word was this commercial had other facilities in the same boat and further news that there were other commercials in the same predicament. Allendale customers called in and talked of 4-hour waits to load up with meal to take home, as the domestic need for meal is real. On Wednesday, the sad news was the wheat as it broke through some critical support. The trade really did not have any new fundamental news to push other than China leaving the U.S. after a week-long visit and did not buy 1 kernel of U.S.A. grain even though they said they would. The world is still burdened with large quantities of wheat, as well as feedwheat. On Thursday, weekly export corn sales were 250,000 tonnes better than the high end of trade estimates with wheat sales down right pathetic. Friday started out with caution regarding the Asian currencies and the U.S.A. stock market. However, two pieces of news sent beans, meal and oil soaring higher after the open. The National Oilseed Processors Association announced Friday morning a weekly bean crush of 32.37 million bushels, which was on the high end of trade expectations, and meal exports of 308,973 tons versus last week's 180,949 tons. The other piece of supportive fundamental news was the slow planting progress in southern Brazil. Hot, dry weather in the north region, with too much rain in the south, has some locations in Brazil dashing any hopes of plantings early variety beans. Some locations are as much as 40% behind a year ago's pace. There is still a lot of time to plant full-season beans in Brazil. But we need to focus on the trend in weather patterns of Brazil. As long as the trend stays the same, rain forest or no rain forest, they will need at least 4 to 5 days to dry out before the planters can roll once again.
Sure Looks Like 1994/95
By golly, you are right. The actual performance report for the corn and bean sales show corn sales have met 26% of their USDA export-sales objective of 2.025 billion bushels for the 1997/98 marketings year. Guess what? In the 1994/95 marketing year the sales pace was exactly the same. That was the year we had a 10.102 billion bushel corn crop and had end stocks of 426 million bushel a year later.
What About The Beans?
Hey, we did not forget. USDA says we will sell, for export, 960 million bushel of beans for the 1997/98 marketing year. Thus far, we are 51% sold of that objective. If we look back to the 1994/95 marketing year, we find the sales were running 52% of their objective.
Well, What Did The Chart Pattern Look Like?
July 1995 corn prices from December through the beginning of March was held in a ten cent trade range from 2750 to 2850. The beans were sideways to higher. At the end of 1994, the beans were at a level of 6400 and ultimately traded up to about 6700 by the end of February.
At about the time bean harvest was at its peak, the January/March actually pushed all the way out from 8 cents carry to 3 cents. We need about 13 cents to store beans for two months. The spread finished today at 3 cents carry. This is a clear signal the market wants your cash soybeans now because demand is very strong. We are preparing to sell our hedged beans and then replace them with options and or futures from the long side. Sure wish we could say the same about the corn spread but it is slowly widening. This will be a good way to pick up some storage money this year on the corn. Good prices and a good crop,it doesn't get any better.
November 7, 1997 Joe Victor
Allendale, Inc.
4506 Prime Parkway, McHenry, Illinois
Financial Commentary | Consensus National Futures and Financial On Line Index
Copyright 1997, by Consensus Inc. All American and Pan American rights Reserved. editor@consensus-inc.com
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