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THE ALLENDALE ADVISORY REPORT
Prepared by Allendale, Inc.
Commodity Wrap-Up For October 17, 1997
After last weeks huge rally, farmers took advantage of high prices by selling inventory, China took advantage of it and canceled beans (rumors they canceled 500k beans), and talk of a potential U.S./Japan shipping dispute all contributed to the market topping out this week. Speculators bought most of the week while commercial selling dominated. For the week, December corn fell 6.25 cents, November beans fell 12.5 and December wheat fell 2.0 cents. China Special: China will have a purchasing delegation in the U.S. this next week as they “pave the way” for their President's scheduled visit late this month. They will buy fertilizer, auto parts, airplanes and they say they will also buy grain? USDA is not sure how big PRC corn stocks are. USDA is however, pretty sure that even China is unsure of their stocks. The decline in this year's PRC corn crop caused USDA's world corn stocks estimate to hit a near record low. But two days later, China raised their 1996 food production number 14 mmt leaving questions as to what they raised, and how much grain they really have. The North is where the larger corn producing states are and storage is tight due to big inventory. China's grain consumption, livestock and poultry production is in the south. The livestock industry and southern Provincial governments want the Central government to force the northeast corn producing states to supply them corn at below export market prices. But the north Provincial governments tell the central government if they want China's Food Security Act to stay strong, they need to pay producers top dollar. Thus the Vice Premier of China has left strict instructions for the local governments to buy as much corn as producers are willing to sell at the present market price which is higher than the government fixed price (usually the government price is higher). As long as this grain is shipped to the south, imports will be limited. China has sold more than 3 mmt of corn with a 105 mmt crop. Last years they had a 127 mmt crop and they normally average 112. If they do import, look for 250k mt of U.S. corn, not the estimates of 1 to 2 mmt. No matter what they buy, it will be bought cheaply and if recent patterns hold true, may be canceled when prices are high.
U.S./Japan
We expect the port dispute to be resolved quickly. There is too much money at risk for both parties to let this 4 million dollar problem stop trade. They could easily pay the 4 million and work on the underlying dispute while trade continues. If it is not resolved by Monday morning, then look out! That is a signal that it will intensify which would be bearish to all trade (container and bulk!).
October 20, 1997Allendale, Inc.
4506 Prime Parkway, McHenry, Illinois
THE ALLENDALE ADVISORY REPORT |
STRATEGY FOCUS |
WEEKLY OUTLOOK
ECONOMIC PERSPECTIVE |
FED STEER PRICES GOING NOWHERE FAST
U.S. ECONOMIC AND INTEREST-RATE OUTLOOK
STICKING WITH THE U.S. TREASURY MARKET |
THE TODD MARKET TIMER
CASH AND BONDS-- THE RODNEY DANGERFIELDS OF FINANCIAL ASSETS?
MYERS ON FUTURES |
THE COPPER JOURNAL |
COMMODITY FUTURES FORECAST WEEKLY REPORT
INTEREST RATE WATCH |
NIKKO MARKET COMMENTS
Copyright 1997, by Consensus Inc. All American and Pan American rights Reserved. editor@consensus-inc.com
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