wmeubank@ocp.kcmo.com
ALLENDALE, INC.
4506 Prime Parkway, McHenry, Illinois
(October 10, 1997) SOYBEANS: BEAN CROP SMALLER?–USDA lowered the bean crop to 2722 mil. bu. versus 2746 last month and a 1.4% variance from our estimate. USDA left IL, IN, OH, crop unchanged and lowered NE, IA, MN and MI crop. Based on input from a few different food/proc companies, and hundreds of actual yields reported to us by producers around the country, we completely disagree with USDA. We were not able to contact anyone in USDA's lock up this time, but a high level USDA official said even he was shocked at the lower yield. What do you think? If you think yields were better than you thought last month, then you might view this rally as an opportunity. Typically, USDA will raise the crop 1% to 2732 on the next report. We think 2760+. USDA raised exports 10 mil. bu. and lowered stocks to 270 mil. bu. from 285 last month. This is still double last year's 130 mil. bu. USDA pegged world stocks at 18.69 mmt versus 12.77 last year or a 46% jump in stocks. This is the largest 1-year increase on record, is the largest stocks since 1992 and there is now a 36-day supply versus a low 26-day supply last year. USDA pegged BZL's crop at 28 mmt and late in the day, Brazil officially announced a 29.8 mmt crop estimate. If true, world stocks could hit 20mmt! We looked at other years when futures rally in September/October. We can expect a 10% rally (max 15%) or 682 avg, 713 max in today's values followed by 7% sell off to 634 (19% max sell off) into January. Today's high was 703. If farmer selling picks up, expect the market to sell off sharply as it corrects the over bought condition and reflects the bigger stocks. We would sell on reversing technical action.
Bill Biedermann
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