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Technical Buying Fuels Rally in Grains

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Good Morning! From Allendale, Inc. with the early morning commentary for January 31, 2018.

Grain markets are being influenced by money flow and technical short covering. We must remember global supplies of grains and soybeans are plentiful. US stock indices fell 1.5% on Tuesday while the US Dollar index floats near 3-year lows.

Allendale Ag Leaders Presentations will be in the following location:

February 6, 7:00 -- 9:00 pm, Highland IL. Sponsor: First Mid-Illinois Bank & Trust

March 8, 10:00 3:30 pm, Riverside IA. Sponsor: Hills Bank and Trust Company

Weather conditions in Argentina are providing the uncertainty to cause short covering by funds and speculators. Allendale believes producers should be working closely with their Allendale representatives to look for the opportunity to take advantage of the rally in corn and soybeans.

Lack of moisture in the southern plains has wheat crop conditions dropping sharply in the G/E categories. Forecasters are not providing a lot of hope for moisture in the near-term outlook. This could spur further short covering in the hard-red winter and soft-red winter wheat contracts at CME.

Technical picture triggers continued short covering after closing above the 100-day moving average in March corn on Monday. The 200-day average crosses at 3.76 today. March soybeans are now using the 100-day moving average as support and will likely find some strong head winds between 10.10 and 10.20.

Funds were estimated net buyers of 12,000 corn contracts, 11,000 soybeans, 6,500 wheat, 5,500 soymeal and 3,000 soyoil contracts.

Growth in China drops to 51.3 PMI which was below the trade estimate of 51.5 and 51.6 in December.

Two Brazilian companies plan to build ethanol producing facilities using corn as raw material, they said on Tuesday, aiming to take advantage of ample supplies of the cereal in the country's center-west region. (Reuters)

Ethanol production will be reported by EIA at 9:30 this morning. Last week they reported a daily production of 1,062,000 barrels per day. EIA will also provide weekly stocks for crude oil, gasoline and distillate inventory.

U.S. grain merchant Bunge Ltd bought two corn flour mills to expand its food and ingredients business, the company said on Tuesday. The move comes after a bid to takeover Bunge by rival Archer Daniels Midland Co that would consolidate the agribusiness sector. (Reuters)

FOMC meeting will conclude today, trade will be watching for any further adjustments to interests before the new Fed Chairman takes office.

Cattle Inventory report will be released today at 2:00 pm CST. The trade average estimate has total cattle and calves increasing by 1.3% over last year. Beef cows expected at 101.8% and beef cow replacements at 96.2% of 2017.

Packers were out buying cattle on Tuesday at 126. This should be supportive for nearby futures with the February contract at a discount. Product values remain strong as retailer stock shelves for 1st of month featuring.

Fed Cattle Exchange has a total of 717 head being offered at todays auction, which begins at 10:00 am CST.

February live cattle futures filled the gap left on the price charts yesterday. Uptrend remains intact with resistance at 126.75 and support at 122.22.

At this point, the latest NAFTA negotiation has concluded with no resolution. The next dates are February 26 - March 6 in Mexico City.

February lean hogs tested the uptrend channel support on Wednesday and were able to bounce. Technical support today crosses at 71.52 with resistance at contract highs or 74.25.

Dressed beef values were higher with choice up .58 and select up .24. The CME Feeder Index is 147.66. Pork cutout value is down .25.

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Allendale Inc. was established in 1984 in a country grain elevator located in Crystal Lake, Illinois. The first-hand experience with agricultural and financial markets has worked with Allendale’s combined foresight, ingenuity and expertise to make it the successful firm that it is today. Allendale’s goal is to provide its customers the expertise and service they need to grow their agricultural businesses. Allendale’s staff is called on to provide their commentary for TV, radio and newswires on a daily basis.

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