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Short covering and Seasonality Supports Soybeans

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

Grain markets are oversold on the leading technical indicator triggering some short covering. The end of harvest and farmers trying to find a home for grain is still the reality and headwind to any rallies.

Soybean futures have a strong seasonal according to Moore Research suggesting a rally in soybeans has happened from mid-November to early December. Call your Allendale Representative to get the full details.

COFCO believes China will import as much as 100 million tonnes of soybeans this year when USDA says 97 million tonnes.

USDA weekly export sales report will be released this morning at 7:30 CT. Trade is expecting aggressive corn and soybean sales. Estimates are wheat 350,000 to 550,000 tonnes, corn 1,200,000 to 1,700,000 tonnes, soybeans 1,100,000 to 1,500,000 tonnes, soymeal 125,000 to 350,000 tonnes and soyoil 14,000 to 40,000 tonnes. Cumulative soybean inspections through Nov. 9 are down 12 percent from last year's levels and bookings through Nov. 2 are down 15 percent.

China sells 60,817 tonnes of 2012 wheat at auction of state reserves, which represents 10.52 percent of the entire 577,804 tonnes of wheat available at auction.

Ethanol production was 1.054 million barrels per day last week. That was just under the 1.057 barrels per day from the week prior. This production level is 3.6% over last year and this year to date pace is 3.4% year over year. It was interesting to see USDA raise corn feed/residual and exports on Thursday due to the larger production but not touch corn for ethanol. USDAs corn for ethanol goal is for a 0.7% year/year increase.

Funds were estimated to have been net buyers of 3,000 corn contracts and 7,000 bean contracts. They were net sellers of 5,500 wheat contratcs.

October domestic crush among NOPA members, 94% of all production, ran 164.242 million bushels. That was right next to the 164.5 trade estimate.

U.S. Oct retail sales rose +0.2%, better than expectations of unchanged, but retail sales ex autos rose +0.1%, weaker than expectations of +0.2%.

U.S. Oct core CPI rose +1.8% y/y, stronger than expectations of +1.7% y/y and the fastest pace of increase in 6 months.

Cash cattle trade improved after the Fed Cattle Exchange auction. By late yesterday majors were bidding and buying cattle at 120.50.

Beef product values continue to slip and tightening packer profit margins. However packers seem to be short of supply to fill their meat demand.

December cattle futures contract bounced on Wednesday putting in an inside day on the charts. Key support is 118.77, a close below that level could active significant selling pressure.

Cash hog trade is in a down trend as packers will have a lite production week ahead. Product business is likely done until post-Thanksgiving.

February lean hogs futures may have exhausted near-term selling with yesterday's large trading range and firm close. Key chart support is 66.20.

Dressed beef values were lower with choice down .54 and select down 2.88. The CME Feeder Index is 159.27. Pork cutout value is down 1.18.

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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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