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Will USDA Surprise or Confirm Large Stocks?

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Good Morning! From Allendale, Inc. with the early morning commentary for February 8, 2018.

Grain markets are consolidating ahead of todays USDA report. The US Dollar index has rallied nearly 2.00 points from the low. Will congress shutdown the government for the second time this year? Traders have a few key issues to deal with when deciding to liquidated or stay the course.

USDA will release the February Supply and Demand report today at 11:00 am CST. Trade estimates for US Ending Stocks have minimal changes for corn and wheat with an increase of 16 million bushel in soybeans. In South American corn production, trade is expecting a decline from last months USDA forecast. In South American soybean production, trade is forecasting a wash, with Brazils crop getting bigger and Argentinas crop dropping a bit.

Weekly export sales report will be released at 7:30 today. Trade is expecting good corn sales of 1,300,000 to 1,800,000 tonnes. Soybean sales of 400,000 to 700 000 tonnes, soymeal 150,000 to 450,000 tonnes, soyoil 8,000 35,000 tonnes and wheat 200,000 to 500,000 tonnes.

CONAB, Brazils Agriculture ministry, will be releasing their February production data this morning. Trade average is projecting a 112.57 mmt soybean crop. While many are thinking it could be larger than last years 114.08 mmt.

Ethanol production last week was 1.057 million barrels per day, or 0.2% over last year. Our year to date pace is +2.8%. Officially, we are still running ahead of USDAs +1.6% increase they project for corn going to produce ethanol.

Technical patterns in the corn and wheat are encouraging as July corn futures close at the highest level since early in November 2017. March wheat contract closed on Wednesday at the highest price since October 6, 2017. Trade will be watching closely the managed money funds position which will be released tomorrow afternoon.

US Congress has a big day today as they decide whether to keep the government running or shut it down again.

US stock indices have retraced about 50% of recent selloff, expect some consolidation as traders prepare for the next run.

Weekly EIA crude oil stocks rise by 1.90 million barrels, a little higher than trade was expecting. Product stock increased sharply while trade was looking for a steady to decline.

Fed Cattle Exchange had one pen of cattle sell at Wednesdays auction. They were a 148 head of heifers weighing 1250 brining 126.00. The balance of the 829 head went unsold.

Cattle traders are still optimistic as shown by the bull spread activity of buying Feb and selling April. However, the April did lose value to the June on Wednesday.

Product values have been firm, early this week helping support the packer margin and the potential for steady to higher cash prices this week.

April live cattle futures have been able to hold the uptrend channel, however, 123.50 is an important support level. Resistance crosses at 127.20.

Lean hog futures have been attacked by technical selling. The weak close on Tuesday triggered more selling pressure in April futures contract. To find chart support we must go back to September of 2017 at 67.62. Resistance is found at 72.00 level.

Dressed beef values were higher with choice up .94 and select up .41. The CME Feeder Index is 148.10. Pork cutout value is down .89.

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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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