Home Market Market Watch Closing Comments

Closing Comments

SHARE

https://www.hoosieragtoday.com//wp-content/uploads//2014/09/image00919.jpg

Closing Comments

Corn

USDA’s weekly crop progress report late Monday reported that the U.S. corn crop was 69% in the dent stage as of September 7, up from 53% the previous week, but still down from the five-year average for the week of 74%. Progress in key vulnerable states stood at 72% for Iowa, 45% for Michigan, 61% for Minnesota, 37% for North Dakota and 63% for South Dakota. The agency reported that 15% of the nation’s crop was mature, up from 8% the previous week, but down from the five-year average for the week of 26%. Very little of the northern crop is mature at this point.

This week’s crop condition index score is 387 (500=perfect crop), unchanged on the week. However, unchanged at this time of the year historically argues for higher yields. As a result, this week’s yield model jumped another 0.3 bushel to 173.0 bushels per acre. This past week’s rating continues to be the highest since 1994 for the week. It is up from a score of 345 the previous year and the 10-year average for the week of 346.

Condition index scores for key production states include 408 for Illinois, 389 for Indiana, 393 for Iowa, 379 for Minnesota, 418 for Missouri, 382 for Nebraska and 390 for Ohio. In other words, None of the top producing states are showing significant problems. Scores in the latest week data were unchanged in Indiana, Iowa, Minnesota, Ohio and Texas, 1 to 2 points lower in Colorado, Michigan, North Dakota and South Dakota, and higher in every other state.

Harvest reports are now coming from as far north as southern Iowa and central Illinois. I will occasionally hear a low yield, but the overwhelming pattern thus far has been very high yields. Rains are expected to be heavy over parts of Nebraska, Iowa, southeastern Minnesota and the Great Lakes over the next couple of days, but the pattern should improve beyond that point, allowing this year’s harvest to progress, with periodic interruptions.

Forecast models are continuing to progress warmer for this weekend’s outbreak of cold weather in the northwestern Midwest. As such, the risk of significant damaging cold appears to be low at this point. That should buy a bit more time for crops to continue to move toward maturity. We need to get to the first week of October to avoid significant maturity problems.

The trade expects USDA to peg this year’s corn crop at 14.288 billion bushels on Thursday on a yield of 170.7 bushels per acre. I look for USDA to come in closer to 171.5 bushels per acre, with bigger increases down the road. The Linn Group weighed in today with an estimate of 14.671 billion bushels on  a yield of 174.6 bushels per acre. This crop is creeping closer to the 15 billion-bushel mark, with estimated surplus stocks rising above 2 billion bushels.

December corn hit a new contract low today of $3.43 early today and hovered just above it the remainder of the day. The good news is that traders found few sell stops below the previous contract low. The bad news is that the trade appears ready to move lower once it sees USDA’s data on Thursday. The path of least resistance remains lower as we move into the early part of harvesting a big crop.

Soybeans

USDA reports that 12% of the U.S. soybean crop was dropping leaves as of September 7, demonstrating maturity. That was up from 5% the previous week, but it trails the five-year average for the week of 17%. Leaf drop in key vulnerable states stood at 3% for Iowa, 10% for Michigan, 3% for Minnesota, 10% for Nebraska, 19% for North Dakota, 12% for South Dakota and 2% for Wisconsin.

The crop rated a condition index score of 384, up 1 point on the week and the highest for the week on record. That compares to a score of 342 in the same week last year and the 10-year average score for the week of 348. Scores for key production states include 397 for Illinois, 382 for Indiana, 374 for Minnesota, 388 for Missouri, 382 for Nebraska, 385 for North Dakota and 378 for Ohio.

Both Iowa and Illinois reported disease problems; primarily Sudden Death Syndrome. However, Illinois’ rating increased 1 point in the week, while Iowa was unchanged. In other words, no significant problems show up for any of the major production states.

A rising condition score in early September historically supported big crops getting bigger. The latest rise in the score supported a rise in my yield model to 48.3 bushels per acre, up 0.3 bushels on the week. Yes, it’s hard for me to believe a national average yield that high, but so far the yield reports suggest that it is legitimate, so we’ll see what yields are as the harvest progresses northward. Thus far we’re hearing a lot of yields at 50 to 70 bushels per acre, with yields into the 90s in the Delta.

The Linn Group pegged the soybean crop at 3.959 billion bushels on a yield of 47.1 bushels per acre. A Reuters survey of trade participants revealed expectations that we will see USDA peg the crop at 3.883 billion bushels on Thursday on a yield of 46.3 bushels per acre. I mentioned that my yield model is at 48.3 bushels per acre, but I look for USDA to come with a number approaching 47 bushels Thursday morning.

November soybeans dropped to a new contract low of $9.92, settling just above it. Soybeans appear to be correcting their price relationship with corn, now dropping faster than the feed grain. This was something that I anticipated, but I expected it to happen once we got a bit deeper into harvest. Apparently the trade has seen enough data to give it confidence that this is a bin-buster crop.

Wheat

USDA reports that the spring wheat harvest advanced to 58% as of September 7, up 20 points on the week, but still 20 points behind the five-year average pace for the week. Progress reached 88% in South Dakota as the harvest begins to wrap up, but it was at just 42% for North Dakota and 54% in Minnesota, down 32 and 35 points respectively in those two key production states.

The crop rated a condition index score of 359, down from 366 the previous week, but essentially matching the 10-year average for the final crop rating of the year, suggesting a typical crop. That appears to be an average of some very good wheat and some wheat with problems.

USDA also began reporting on winter wheat planting progress as we turn the calendar to September. Planting progress as of September 7 stood at 3%, down slightly from the 4% five-year average for the week. South Dakota was 4% planted, down from the normal pace of 10%, but otherwise no significant delays or problems were observed; certainly not the type that could justify rallying wheat prices in the midst of other markets sinking.

Chicago December wheat posted a new contract low mid-morning today of $5.2325 and chopped around just above it for much of the day. Germany announced that its quality is much better than expected this year, despite heavy rains at harvest. Brazil is expecting a big crop and Russia just harvested what will likely be a record crop. The bulls simply can’t buy a headline that would support a rally in the face of a surging dollar and sinking corn prices.

Kansas City is trying to consolidate above recent lows on firm demand for wheat with good protein, but the charts look very weak overall. Wheat needs help from one of the other markets and it simply isn’t there at this point, leaving the path of least resistance to the downside.

Beef

September feeder cattle futures traded to their highest level for any feeder cattle contract on record today, as the light-weight cattle market is leading the complex once again. Cattle feeders are convinced that corn prices are going lower as harvest reports begin to be known. Furthermore, they are emboldened by renewed strength in the fat cattle market, as well as in the product market. The latest CME cash feeder cattle index came in at $225.41 per cwt, up $1.13 on the day and just below the August 1 record high of $225.68 per cwt.

The cattle market is anxiously awaiting this week’s cash trade as packers made it clear this past week that they did not have control over enough formula cattle to meet strong demand for beef, leaving them aggressively bidding against one another to get the needed supply. This will likely continue as long as demand remains strong. Exports may struggle with the dollar trading at 14-month highs, so the domestic market needs to remain strong. Packer margins are estimated at $39.25 per head, up from $35.05 on Monday and up from $27.80 the previous week.

Boxed beef movement dropped to 155 loads Monday, which is good for a Monday, with prices firmer as well. Choice cuts were $251.39 per cwt, up $2.72 on the day, while Select cuts were $237.84, up $1.59 on the day. The Choice/Select spread rose to $13.55 per cwt, up from $12.42 the previous day. Movement at mid-morning today was solid at 108 loads, with Choice cuts down $0.26 and Select cuts up $1.60 per cwt.

October live cattle continue to consolidate just below this summer’s contract high of $160.75 per cwt. Traders are debating whether this is a bearish double-top, or whether the market is about to spring higher. Ironically, the December and February contracts are already trading to higher levels, suggesting that sentiment is shifting again, with renewed expectations of strong fundamentals into this winter.

Pork

Today’s cash market was mostly steady to $1 higher, with the bulk of locations at 50 cents to $1 higher. The latest CME cash index came in at $97.30 per cwt, up $0.99 on the day as the cash market rebounds. Meanwhile, the October futures contract is nearly $10 higher, expecting even higher cash prices in the weeks ahead as supplies decline due to PED virus problems in the herd earlier this year. Now we need to see if that highly-anticipated hole in supplies actually occurs, beginning later this month into the fall.

Carcass weights jumped to 214.7 pounds in the latest data, suggesting that perhaps producers are beginning to hold hogs back to put on more weight once again, which is seasonal. That puts this year’s weights at 4.8% above year ago levels, but that’s still better than the 5 to 6% above year ago that we saw for much of the summer.

Product movement dropped to 276 loads Monday, down from 279 loads on Friday, but still decent for a Monday. The composite pork product price increased slightly to $103.54 per cwt, up $0.38 on the day. Movement at midday today was decent at 209 loads, with the composite price up another $1.54 to $105.08 on good demand for hams.

October lean hogs basically erased the previous day’s losses, when profit taking was the dominant feature. Current consolidation is on either side of the 50% retracement of the late-summer collapse. However, traders want to get a better feel for the scope of declining supplies later this month before pushing the lead contract higher, with futures already at such a premium to the cash market.

Closing Market Snapshot

 

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading and may not be suitable for all investors.

https://www.hoosieragtoday.com//wp-content/uploads//2014/09/image01019.jpg

https://www.hoosieragtoday.com//wp-content/uploads//2014/09/image01119.jpg

https://www.hoosieragtoday.com//wp-content/uploads//2014/09/image01219.png

www.waterstreet.org 
or 1-866-249-2528

 

 

 

Past performance is not indicative of future results. The information contained in this report is intended for informational purposes only and is the opinion of the writer and may change at any time. This information was compiled from sources believed to be reliable but accuracy cannot be and is not guaranteed. There is no warranty, expressed or implied, in regards to this information for any particular purpose. There is SIGNIFICANT RISK involved in trading futures and or options on futures and may not be suitable for all investors. Investors should consider these RISKS and evaluate their suitability based on their financial conditions. No one should ever consider trading futures or options on futures with anything other than RISK CAPITAL. This information is provided freely and is NOT in the capacity of a trading advisor. NO LIABILITY on the part of the author exists for any trading loss you may incur in the use of this information. Information provided is not to be construed as an offer to sell or solicitation to buy any commodity or security named herein.

The information contained in this e-mail message is intended only for the personal and confidential use of the recipient(s) named above. This message may be an attorney-client communication and/or work product and as such is privileged and confidential. If the reader of this message is not the intended recipient or an agent responsible for delivering it to the intended recipient, you are hereby notified that you have received this document in error and that any review, dissemination, distribution, or copying of this message is strictly prohibited. If you have received this communication in error, please notify us immediately by e-mail, and delete the original message. Water Street Solutions is an equal opportunity provider. Water Street Solutions is an equal opportunity employer.