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Sellers Attitude Reigns Ahead of USDA Report

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Good Morning! From Allendale, Inc. with the early morning commentary for July 11, 2018.

Grain markets are under pressure as CME raises margin requirement on corn and soybean contracts. Presidents staff has released a new product list which will be charged a 10% tariff, heating up the trade war. Trade also is anticipating increases in ending stocks for corn and soybeans from the June report.

Average estimates for tomorrows USDA Supply and Demand report have analysts looking for an increase in corn production from the June estimate. Increased acreage and by raising yield to 174.9 puts total corn production at 14.269 billion bushels. Soybean production is estimated at 4.314 billion bushels due to increased acreage and yield estimate of 48.6. All wheat production is estimated at 1.858 billion bushels.

CONAB puts Brazils corn production at 82.9 mmt versus 85.0 mmt last month. USDA last projection was 85.0 mmt. They project Brazils soybean production at 118.9 mmt compared to 118.1 mmt previously. USDA's last estimate was 119.0 mmt.

Last trading day for the July grain contract is Friday, July 13.

Funds were estimated net sellers of 14,500 corn contracts, 6,000 soybeans and 8,000 wheat contracts. They were net buyers of 2,500 soymeal and 2,500 soyoil.

The U.S. Department of Agriculture (USDA) announced new procedures for the release of market-affecting crop and livestock reports from the National Agricultural Statistics Service (NASS) and World Agricultural Outlook Board (WAOB) to ensure that all members of the public have access to the information at the same time. Under current Lockup procedures, information is released to the public at 12:00 p.m. (Eastern), though the news media are allowed access approximately 90 minutes early, with their reports embargoed until the noon release time. Prompted by inquiries from the public, USDA examined the procedures and determined that technological advancements have afforded recipients of customized media reports a market advantage not enjoyed by members of the general public. The USDA also sought analytical assistance from the Commodity Futures Trading Commission to help inform a policy update to the lockup procedures. As a result, beginning August 1, 2018, USDA will provide media the same access to the NASS and WAOB reports as the public, with the information becoming available to all at 12:00 p.m. on days the reports are released.

The Trump administration raised the stakes in its trade war with China on Tuesday, saying it would slap 10 percent tariffs on an extra $200 billion worth of Chinese imports. The administration released a wide-ranging list of Chinese goods it proposes be hit with tariffs, including hundreds of food products as well as tobacco, coal, chemicals and tires, dog and cat food, and consumer electronics including television components. (Reuters)

Feed cattle exchange is offering only 250 head at todays electronic auction. Country auctions have had a good run of market ready cattle which were selling at $4.00 to $5.00 lower on a graded basis. The feedlot trade is quite with asking prices around 114.

August live cattle futures struggle on rallies as traders worry about the front-end cattle supply being larger than the demand can handle. However, the discount of futures to cash is providing support and bargain hunters to set in and buy. The august cattle contract has chart support at the 105.05 level.

August lean hog futures has seen heavy selling in the past few sessions due to larger market ready hog supply, tariffs of US pork by importing countries, seasonal and technically selling pressure and the Goldman Roll. The August contract has posted new contract lows on Tuesday. Long-term technical support comes in around 65.25. Lean hog futures will have a $4.50 limit today.

Dressed beef values were mixed with choice up .40 and select down .23. The CME Feeder Index is 146.75. Pork cutout value is down 1.29.

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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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