Home Market Market Watch Closing Comments

Closing Comments

SHARE

https://www.hoosieragtoday.com//wp-content/uploads//2015/05/image00933.jpg

Closing Comments

Corn

Traders look past week export data to take profits on large short (sold) positions in tandem with wheat.

Exporters sold 14.7 million bushels of corn in the week ending May 7, including 14.6 million old-crop bushels. The old-crop bushels were down from 33.1 million bushels sold the previous week, down from the five-year average for the week of 17.0 million and were a marketing year low. The low total was partially due to a cancellation of previous purchases by “unknown destinations” totaling 9.7 million bushels.

Marketing year sales to all destinations total 1.635 billion bushels, down 118 million or 7% from the previous year. Exporters typically sell 88% of final corn shipments by this point in the season, whereas they had sold 91% by this point last year. Thus far this year they have sold 90% of USDA’s target. As such, sales to date exceed the seasonal pace needed to reach USDA’s target by August 31 by 38 million bushels, but that is down from 49 million the previous week.

Exporters sold 5.8 million bushels of grain sorghum in the week ending May 7, including 1.6 million old-crop bushels. The old-crop sales were up from net cancellations of 0.1 million from the previous week, but were down from the five-year average for the week of 2.0 million bushels. China bought 6.0 million old- and 2.1 million new-crop bushels during the week. “Unknown destinations” bought 2.1 million new-crop bushels, but cancelled previous purchases of 4.4 million bushels of old-crop grain sorghum.

Marketing year sales to all destinations total 319 million bushels, up 163 million or 104% from the previous year. Exporters typically sell 73% of final grain sorghum shipments by this point, whereas they had sold 74% by this point last year. However, this year they have already sold 91% of USDA’s target. As such, sales to date exceed the seasonal pace needed to reach USDA’s target by August 31 by 62 million bushels, although that is down from 66 million bushels the previous week.

However, cash basis bids are tumbling for grain sorghum in many markets today in response to comments made by USDA’s attaché in China. The attaché noted that the Chinese government has taken notice of the large U.S. grain sorghum shipments to Chinese end users, believing that they are hurting government efforts to get end users to use their high-priced reserve corn. As such, the attaché’ fears that the government may take steps to block future grain sorghum imports.

The export data was bearish. The start of the growing season is seen by traders as bearish. Yet, corn prices came into this week oversold and due for a corrective bounce, facilitated by the sheer size of the speculative short positions. Wednesday’s reversal higher triggered follow-through buying today. Even so, July corn remains below pivotal resistance at $3.70. Continued strength in wheat is likely needed to push us above that level to encourage additional short covering.

Soybeans

Soybean futures stagnate amid expectations of burgeoning supplies, even though near-term cash supplies remain tight.

Exporters sold 8.3 million bushels of soybeans in the week ending May 7, including 5.0 million old-crop bushels. The old-crop sales were down from 12.5 million bushels sold the previous week and were down from the five-year average for the week of 7.6 million bushels. China made now new purchases during the week. In fact, China reduced previous purchases by 184K bushels.

Marketing year sales to all destinations total 1.821 billion bushels, up 178 million or 11% from the previous year. Exporters typically sell 95% of final soybean shipments by this point in the year, whereas they had sold 100% by this point last year. This year they have already sold 101% of USDA’s target for the year. As such, sales to date exceed the seasonal pace needed to reach USDA’s target by August 31 by 108 million bushels, but that is down from 116 million the previous week.

Soymeal demand is starting to slow. Exporters sold just 45.2K metric tons in the week ending May 7, down from 136.8K the previous week, down from the five-year average for the week of 103.1K and an 11-week low. Actual shipments during the week of previous sales remained strong at 201.8K metric tons, down from 235.5K tons the previous week, but up from the five-year average for the week of 127.2K tons.

Demand is softening, but farmers still aren’t selling. The balance is just enough to keep prices from breaking key chart support just beneath the market, but rally attempts are quickly sold due to the expectations of rapidly expanding supplies down the road.

Traders will not quickly forget USDA’s print of a 500 million-bushel new-crop soybean stocks estimate. As such, the new-crop soybean/corn price ratio finished the day at 2.43 to 1, down more than 10 points over the past few days as traders try now to discourage soybean planting after Tuesday’s bearish crop report.

Wheat

Wheat futures surge on speculative short-covering after prices fail to make new lows this week.

Exporters sold 9.5 million bushels of wheat in the week ending May 7, including 4.2 million old-crop bushels. The old-crop sales were down from the five-year average for the week of 7.9 million bushels, but it follows two weeks that saw net cancellations. The overall sales total continued to be disappointment, showing the lack of competitive pricing for U.S. wheat. However, the total did include new-crop sales of 367K bushels of hard red winter wheat and 551K bushels of soft red winter wheat to Brazil.

Marketing year sales to all destinations total 852 million bushels, down 311 million or 27% from the previous year. Sales to date exceed the seasonal pace needed to reach USDA’s target by May 31 by 18 million bushels, but that is down from 19 million the previous week.

Chicago July futures broke Wednesday, but then reversed to finish closer to their session high. Speculative fund managers holding near-record large short positions grew nervous, leading them to take profits on a portion of those positions. The lead contract gained upward momentum after taking out modest resistance near $4.90. Prices pushed to one-month highs as prices tripped preset buy stops that accelerated gains.

Historically, wheat has a track record of moving against the fundamentals for periods of time as money flows either in or out of the market. That had us watching for a possible short-covering rally after the crop report. How far this rally goes will hinge on a number of factors, such as the dollar, corn prices, disease reports in the Plains or the lack thereof, conditions in Russia, etc. I would not be surprised to see the rally exceed $1, but neither is that  yet assured due to the uncertainty of the above factors. Yet, longer-term fundamentals remain bearish.

Beef

Live cattle futures surge on record high product prices, cash expectations and positive chart signals.

One of the stories of the past year has been the resiliency of the cash market. The other side of that story has been the skepticism of the futures market, as reflected by its frequent large discount to the cash market. That skepticism has recently kept a lid on June live cattle futures near the $152 level. The contract would occasionally spike above it, but sellers would quickly emerge to push prices lower; often cattle feeders wanting to hedge supplies believing that lower prices are ahead.

However, futures prices continued to press the topside of the past month’s trading range, eventually breaking through this week and tripping buy signals on the charts. Fundamentally, futures traders became uneasy with the large deficit with the cash market amid strengthening product prices on good demand. Choice cuts rallied to a new all-time record high this morning, fueling today’s rally.

June live cattle traded to their highest level in more than a month, pushing above resistance near $153.60 and targeting a possible test of resistance at $154.675 per cwt. Traders will likely be reluctant to sustain a move above that level until they see this week’s cash trade, which is now expected to show rising cash prices from last week’s $161 to $164 as packer margins improve with product prices.

This week looks to be have one of the highest slaughter totals of the year. The highest week thus far for 2015 was 576K head in January. A year ago we were averaging more than 600K head slaughtered per week. Today’s kill is estimated at 114,000 head, down 1,000 from the previous week and down 4,000 from the previous year. Week-to-date slaughter is estimated at 453,000 head, up 9,000 from the previous week, but down 20,000 from the previous year.

Feeder cattle futures followed the fat cattle market higher. Obviously, prospects for higher cash cattle improves margin possibilities for putting light-weight cattle on feed, although that is mitigated somewhat by near-term strength in corn prices. The latest CME 7-day feeder cattle cash index slipped to $219.17 per cwt, down $0.09 on the day, but up $3.14 on the week. August feeder cattle are testing chart resistance near the $219 level.

Boxed beef movement on the spot daily market rose to 162 loads Wednesday, up from 161 loads the previous day, but down from a strong 237 loads the previous week. Choice cuts rose to $263.17 per cwt, up $2.21 on the day, while Select cuts were up $1.36 to $249.11 per cwt. That pushed the Choice/Select spread to a five-month high of $14.06 per cwt, up from $13.21 the previous day and up from $11.88 the previous week. Movement at mid-morning was routine at 73 loads, but Choice cuts rose $1.35 to a record $264.52 per cwt. Select cuts were up $2.38 to $251.49 per cwt.

Exporters sold just 8.6K metric tons of beef in the week ending May 7, down from 14.7K the previous week, down from 12.7K in the same week last year and the second lowest weekly total of the year. Estimated sales to date for 2015 are down 21% from the previous year’s pace. Actual shipments during the week slipped to 11.9K metric tons, down from 12.0K the previous week and down from 13.9K in the same week last year. Estimated shipments to date for the calendar year thus far are down 7% from the previous year’s pace at this point.

Pork

Lean hog futures continue to consolidate while waiting for the cash market to catch up.

Today’s cash market was once again mostly steady to $1 higher, as the cash market continues to close the gap with futures prices as they consolidate near recent highs. The June contract is consolidating just below $85 per cwt. The latest CME 2-day lean hog index came in at a four-month high of $80.18 per cwt, up $1.09 on the day, up $5.61 on the week and up $20.60 over the past 28 consecutive trading days. The May contract’s last trade was unofficially at $81.70 today.

Today’s kill is estimated at 420,000 head, down 4,000 from the previous week, but up 7,000 from the previous year. Week-to-date kill is pegged at 1.670 million head, down 14,000 from the previous week, but up 43,000 from the same period last year.

Product movement Wednesday totaled 344 loads, up from 335 loads the previous day, up from 310 loads the previous week, but it is still a light total for a Wednesday. The composite pork product price slipped to $83.40 per cwt, down $0.27 on the day, but up $5.91 on the week. Even so, it was the first drop in the composite price since April 22.

Exporters sold just 13.7K metric tons of pork in the week ending May 7, down from 16.7K the previous week, but still up from 8.0K metric tons sold in the same week last year. Estimated calendar year sales to date are still up 65% from the pace at this point last year. Actual shipments during the week totaled 19.3K metric tons, down from 23.5K the previous week, but up from 10.2K in the same week last year. Estimated shipments to date for 2015 are up 73% from the previous year’s pace.

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//2015/05/image01033.jpg

https://www.hoosieragtoday.com//wp-content/uploads//2015/05/image01133.jpg

https://www.hoosieragtoday.com//wp-content/uploads//2015/05/image01233.png

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

 

 

https://www.waterstreet.org/s/ws-80x70.png

Arlan Suderman | Senior Market Analyst
WATER STREET ADVISORY® | www.waterstreet.org
(316) 729-4599 | asuderman@waterstreet.org

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.