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South American Weather and NOPA Crush in Focus

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Good Morning! From Allendale, Inc. with the early morning commentary for October 16, 2017.

Grain markets look beyond USDA to the coming plantings in South America. Some familiar themes are emerging as Brazil is too dry and Argentina is too wet. Time will tell how their new crop develops. Outside markets will have a busy report week with housing data, and initial/continuing jobless claims among the most important.

La Nina is looking more and more likely in the coming months. How is this impacting the agriculture markets? What should we expect going forward? We'll discuss this and so much more with CME Group's Erik Norland, October 24th at 8:00 PM CDT.Register here to join us or to have the recording sent to you.

NOPA crush will be released today with trade looking looking for a crush number of 138.1 and oil stocks at 1.332.

Weekend weather had rainfall, "greatest from eastern Kansas and southeastern Nebraska through central and southern Iowa and northern and western Illinois to southern and central Michigan and southern Wisconsin. Rain totals of 0.75 to 2.00 inches were common, although rain totals of 3.00 to more than 5.00 inches occurred in a band from interior northeastern Illinois to southern Michigan where local flooding resulted," according to World Weather, Inc. Traders will weigh the impact of the rains on crop harvest.

Weekly export sales for the week of September 28 - Thursday, October 5 were released a day late of Friday due to last Monday's holiday. Corn sales totaled 1,608,392 metric tonnes (1,593,152 current 2017/18 crop). This was far over the 800,000 - 1,100,000 trade expectation.

Soybean sales totaled 1,747,274 tonnes (all current crop). That also beat the 900,000 - 1,200,000 trade expectation. USDA's whole year export goal is 2.250 billion bushels. That would be a new record, 4% over last year's previous record and 26% over the five year average. Year to date sales though, are only 921 million bushels. That would be 11% under last year at this time and 4% under the five year average.

Wheat export sales were reported at 174,961 tonnes (all current crop), well under the 300,000 - 500,000 trade expectation. USDA's current goal is for 975 million bushels for the whole June 1 - May 31 marketing year. That would be even with the five year average. Year to date sales come to 521 million bushels. That would be 4% below the five year average.

Managed money funds were reported net sellers of 19,736 corn contacts for the week ending October 10, 2017 according to the Commodity Futures Trading Commission. That left them net short 162, 937 contracts. They were net buyers of 3,234 soybeans to be net long 30,992, and sellers of 11,254 to be net short 67,729.

Funds were buyers again on Friday, with trader's estimating they bought 9,000 corn contracts, 10,000 soybeans, 5,000 wheat, 3,500 soymeal, and 4,500 soyoil.

Empire Manufacturing and Treasury Budget will catch the attention of macro traders today. Later this week, housing data and initial and continuing jobless claims will grab the headlines.

Spreads between the October and deferred contracts in recent weeks have widened suggesting to cattle feeders that cash prices will be much higher in the coming months. The cash cattle market currently is dealing with large meat supplies, however, packer margins remain positive.

October live cattle futures had 35 additional deliveries, 18 new, 17 retenders through September 25, 2017.

December live cattle closed .20 higher for the week after having a 2.00 trading range. Today's support crosses at 115.70 and resistance at 119.17.

Managed money funds were net buyers in live cattle and lean hogs last week as reported by the CFTC.

USDA weekly export sales report, delayed by one day due to Columbus Day, showed 15,869 metric tonnes of pork were sold. That was the lowest number in five weeks and it was also 12% under last year at-this-time. Current year to date sales are 8.5% over last year.

December lean hog futures have consolidated in recent sessions with support at 60.60 and resistance at 63.00.

Dressed beef values were higher with choice up .78 and select down up .60. The CME Feeder Index is 155.23. Pork cutout value is up .62.

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About the author

Paul Georgy serves as president/CEO of Allendale, Inc., a worldwide agricultural advisory and research firm that provides agricultural commodity price research and risk management alternatives for producers, major food companies, international corporations, foreign governments, and major news vendors.

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