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USDA Supply & Demand Report Surprises Traders

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Good Morning from Allendale, Inc. with the early morning commentary for October 12, 2018!

Grain Markets look for follow-through after unexpectedly rallying higher off of friendly news on the October USDA report. Forecasts in the major harvest regions will be watched closely this weekend as significant rains/snows have slowed harvest throughout. Outside markets look to see if equities can recover after this week's selloff.

USDA October Supply/Demand Report was released yesterday with corn ending stocks at 1.813 billion bushels (1.774 billion bushels in September, 2.140 billion bushels last year), soybean ending stocks at 0.885 billion bushels (0.845 billion bushels in September, 0.438 last year) and wheat ending stocks at 0.956 billion bushels (0.935 billion bushels in September, 1.099 last year). The potential for a surprise is more likely in yield numbers, however. USDA had 2018-19 corn yield at 1807.7 bushels/acre (181.3 in September, 176.6 last year). Soybean 2018-19 yield at 53.1 bushels/acre (52.8 in September, 49.3 last year).

Weekly export sales will be released this morning due to Monday's federal holiday. Traders are looking for wheat sales of 300,000 to 600,000 tonnes and corn sales of 1,000,000 to 1,500,000. On the soy side, traders expect bean sales of 800,000 to 1,300,000 tonnes, meal 150,000 to 450,000, and oil 5,000 to 26,000.

Russia is taking a closer look at grain loading at ports due to complaints from major buyers about falling crop standards according to the head of agriculture safety, Rosselkhoznadzor. The agriculture safety agency has been stepping up pressure on traders to pay more attention to the quality of grain in their supplies.

Rosario Grains Exchange slashed its forecast for the 2018-19 season from 19.7 million tonnes to 19.0 million tonnes due to frost and lack of rain in Argentina.

Brazilian Farmers are expected to harvest up to 238.54 million tonnes of grain in the 2018/19 season as corn and soybean growers reap bumper crops due to great growing weather and harvest conditions according to Brazilian government officials. Most of the gain expects to be in corn, with output expecting to rise to 91.08 million tonnes.

Farmers who participated in U.S. crop subsidy programs reported "prevented plantings" for Oct. 1, 2018 of 0.928 million acres of corn, unchanged at 0.928 million acres reported a month ago, 0.276 million acres of soybeans versus 0.276 million acres last month, 0.374 million acres of wheat versus 0.372 million acres last month, the Department of Agriculture said on Thursday. (Reuters)

President Trump and President Xi Jinping are looking more and more likely to meet at a G20 meeting next month in Buenos Aires to discuss trade between the US and China. Conflicting news was heard yesterday on whether or not the two would meet as the trade war between the two nations continues to intensify.

Managed Money Funds were estimated buyers of 20,000 corn contracts, 7,000 soybeans, 2,000 soymeal, and 2,500 soyoil in yesterday's trade. They were sellers of 5,000 wheat.

Macro traders will look for reassurance from economic data out today. Reports out today include Export Prices and Import Prices at 7:30 AM CDT, and University of Michigan Consumer Sentiment at 9:00 AM.

December Hogs closed sharply lower for a second session, down $1.55. December hogs are at a larger than normal discount to cash. Support sits at $54 and next resistance level is at $56.

December Live Cattle closed higher at $116.77. Resistance is at $118.35 with support near at $116.65.

Dressed Beef Values were higher with choice up 0.40 and select up 0.72. The CME Feeder Index is at 158.37. Pork cutout value was down .59.

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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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