This is a sample entry from John Payne’s newsletter, This Week in Grain, published on Monday May 09, 2016.
USDA WASDE report will be released tomorrow 5/10 at 11:00 am central.
Tomorrow’s WASDE could be really wild, for soybeans especially. Take a look at the expectations for 16-17 carryout’s. The ranges are really, really wide. In corn and wheat, I’m not so concerned because the range of supply numbers remains substantially large no matter how the trade views the WASDE. But in soybeans, the range between 290-500 represents a pretty sizeable chunk of demand. If the carryout is 500+, prices could end up sub 8.00. If they come in sub 300, we could be looking at prices in the mid 11’s or beyond. Keep in mind, this new crop carryout number will factor in high yield potentials. What happens if the trade gets concerned about weather or planted acres? Keep in mind I haven’t even mentioned South American yields yet.
I’m not concerned about corn plantings, those appear to be well on their way to getting completed on time with the pace being so far ahead of schedule already. But if I were a soybean bear, this chart would concern me. Soybean plantings are going to be slow for a while. Plantings were rapid over the weekend with pretty decent weather for mother’s day being observed everywhere, but going forward the windows to plant will shrink over the next week. If the rains would persist, especially over Iowa/Illinois COMBINED with a bullish WASDE, WATCH OUT.
The weekly COT report showed that managed money were net buyers through the week in soybeans and meal, while sellers in soy oil, corn and wheat markets. In livestock, funds pulled down cattle positions and added to hogs. Funds are now back to near record short in wheat, and the longest in soybeans.
Cattle fundamentals suffered again last week amidst a retracement on the charts. Box beef choice is back near 200.00, the level where prices bounced from a month or so back. Select values are below 200.00 for the first time in a long while. Boxed beef cutout values weak to lower on light to moderate demand and heavy offerings. The feeder cattle index has fallen as well but that is a little more backward looking and with the jump in futures prices, we expect that to level this week. This week’s drop in boxed beef values has reduced positive packer profit margins by at least one-third to one-half according to our sources. The sense that feedlots are getting cleaned up and not many market-ready cattle exist behind what is shipping now. The futures curve is starting to reflect that idea as August futures are almost more expensive than the front month May. Getting hedges rolled into August vs May are “cheaper” with this kind of term structure.
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