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Closing Comments

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Closing Comments

Corn

Corn finished the week with new contract lows while the USDA announced sales of 375,936 mt (14.8 million bushels) of corn sold to Mexico for the 14/15 marketing year. 

 

Weather looks good for harvest progress for the next seven days for most areas.  There is a little more precipitation added to the Corn Belt for Saturday, but it is .5 inch and more scattered in general.  The early yield reports continue to range from very good to exceptional while long elevator lines are already developing in areas that have started corn harvest. 

 

While yields are encouraging, several areas are reporting concern over stalk and root quality – encouraging harvest on higher moisture than normal. As reported in the Midday Update, some Midwest elevators are closing for the weekend because they are overwhelmed with wet corn to dry down.

 

Technical selling persisted after taking out the contract lows in corn.  The combinations of the U.S. dollar near 4 years highs, anticipation of open weather for substantial harvest progress, and an overall bearish sentiment to the grain markets kept things negative going into the weekend.  For the day corn closed down .06 ¾ and .07 ½ for the week.

Soybeans

Soybeans accelerate their nearly three month trend lower today following through after yesterday’s contract low close. Good early yield reports, expected harvest progress over the next week and general bearish tone going into the weekend kept soybean complex on the lows. 

 

USDA announced sales of 1.236 mln mt (45.4 million bushels) of soybeans sold to China.  The purchase is believed to be part of the 176 million bushel agreement signed earlier this week and expected by the market.

 

Oil World estimates all world 14/15 oilseed supplies near 604.6 mmt vs 570.2 last year.  Total usage near 502.6 (record) vs. 485.2 last year and ending stocks at a record 102.0 mmt vs. 84.9 last year.

 

The possibility of a 48 bushel yield or higher has been noted by some traders as harvested bushels continue to beat expectations.  A 48 yield would add around 118 million bushels to ending stocks that are already at 475 million bushels.  Selling beans out of the field and storing corn in the bin will further bring pressure to soybean prices during harvest.  For the day soybeans closed down .14 ½ and .28 ¼ for the week.

Wheat

The entire wheat complex continued the trend of new lows to end the week with Chicago and Minneapolis the weakest. Informa Economics estimated the 2014 U.S. all wheat production at 2.046 billion bushels compared to the recent USDA estimate at 2.029 billion with Spring Wheat estimated at 590 million vs. the USDA estimate of 572 million.

The renewed strength of the dollar continued to pressure the global wheat competitiveness while the new lows in corn and the growing expectation of surplus feedstuffs pressured the feed grade wheat. Chicago wheat matched prices last seen on July 1st of 2010.

Spring wheat faced additional harvest pressure with the warm and dry forecast for next week giving the market confidence that the last 20% of acres will come in without weather challenges. Large yields in Spring Wheat have brought with it a lack of high protein wheat leading to discounts in some areas as high as 30 cents per 1/5 of a point under 14% protein.

Chicago, Kansas City and Minneapolis close their December ’14 contracts down .14, .09 ½ and 14 ¾ respectively.

Beef

Feeder and fats once more enjoyed positive trade today as feeders look poised to once again test their contract highs. Live cattle however are beginning to flag even as feeders maintain strength, potentially cutting into cattle feeders already thin margins despite today’s historic prices and deeply discounted corn and DDGs.

 

Live cattle have weakened primarily under softening product prices as boxed beef and select have dropped by $1.37 and $1.38 cents respectively since Wednesday. Cash markets have remained thin as bids of $155 in Kansas yesterday did not weaken asking prices of $163-164. Dressed asking prices remained firm yesterday at $253-254, however there were reports today of limited trades in Nebraska at $245.

 

For the time being it seems as if the cheap price of corn will continue to hold feeders, while fat cattle continue to become more precarious with their enhanced exposure to consumer demand and product movement.

Pork

Yesterday’s reversal action continued today retracing the recent slide in the October and December contracts. While the market continues to hold a negative trend, uncertainties over supply continue to amplify market volatility. That being said today’s session has consolidated in a small range following strength in the overnight.

 

A steady increase in cash markets over the course of the week and a $2.33 surge higher in cutout values both contributed to yesterday’s turn around. Estimated daily slaughter for yesterday was 415,000 head, giving a week to date total of 1,647,000 head up from last week’s 1,629,000 head but still down from year ago numbers. Lower slaughter numbers continue to be offset by average weights 11 pounds over last year’s average, meaning only a 4% increase in slaughter numbers could take pork production to unchanged from a year ago.

 

While the market continues to march through the production left by PED, high weights and increasing slaughter will become increasingly bearish factors for this market over the next 6 weeks.

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.

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