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Closing Comments

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Closing Comments

Corn

Weak dollar amplifies gains as corn futures resume last week’s near-term bounce.

Exporters shipped 29.2 million bushels of corn in the week ending June 4, down from 38.7 million the previous week, but up from the five-year average for the week of 28.8 million bushels. There were virtually no significant shipments to China during the week.

Marketing year shipments to all destinations total 1.285 billion bushels, down 86 million or 6% from the previous year. Exporters typically ship 73% of final corn shipments by this point, whereas they had shipped 72% by this point last year. However, this year they have shipped 70% of USDA’s target thus far. As such, shipments to date fall short of the seasonal pace needed to reach USDA’s target by August 31 by 41 million bushels, versus being short 40 million bushels the previous week.

Exporters shipped 2.1 million bushels of grain sorghum in the week ending June 4, down from 6.3 million the previous week, but still above the five-year average for the week of 1.9 million bushels. Virtually all of the past week’s shipments again went to Chinese end users.

Marketing year shipments to all destinations total 292 million bushels, up 155 million or 112% from the previous year. Exporters typically ship 74% of final grain sorghum shipments by this point in the year, whereas they had shipped 65% by this point last year. However, this year they have already shipped 83% of USDA’s target for the year. As such, shipments to date exceed the seasonal pace needed to reach USDA’s target by August 31 by 32 million bushels, but that is down from 34 million the previous week.

USDA is scheduled to release its weekly crop progress report at 3 p.m. CDT today. A Reuters’ survey of trade participants reveals that the trade expects USDA to show that 74% of the nation’s corn crop is rated Good to Excellent, unchanged from the previous week.

Corn futures finished last week on a negative note, but I still felt they could have more bounce in them. That proved to be the case today to start the week. Gains were amplified by strength in wheat and a weaker dollar that increased the flow of outside money into the broader commodity indices, including the grains. Greece sounded a more conciliatory note early today, leading the euro to bounce and the dollar to slide. The dollar was down around 500 points for much of the morning, but was down roughly 1,000 points at the end of grain trade, amplifying gains in the grains.

Soybeans

Soybean futures see follow-through buying on strength in soymeal and in the grains.

Exporters shipped 8 million bushels of soybeans in the week ending June 4, up from 2.7 million the previous week and up from the five-year average for the week of 7 million bushels. Virtually no soybeans of note were shipped to China during the week.

Marketing year shipments to all destinations total 1.733 billion bushels, up 181 million or 12% from the previous year. Exporters typically ship 90% of final soybean shipments by this point in the year, whereas they had shipped 94% by this point last year. However, this year they have already shipped 96% of USDA’s target for the year. As such, shipments to date exceed the seasonal pace needed to reach USDA’s target by August 31 by 123 million bushels, but that is down from 126 million the previous week.

A Reuters’ survey of trade participants revealed expectations that this afternoon’s USDA crop progress report will confirm that 82% of the nation’s crop was planted as of Sunday, up from 71% the previous week. The trade also expects USDA’s first condition ratings of the season to show that 71% of the crop is rated Good to Excellent.

Demand for soymeal was good today, allowing the lead July contract to reach nearly four-week highs. That provided support for the soybean contracts as well, with added support from corn, wheat and the broader commodity sector on a weak U.S. dollar. Even so, both the lead July and the new-crop November failed to take Friday’s high, leaving the market vulnerable near-term, with traders anxious to see this afternoon’s first crop ratings of the season.

The new-crop soybean/corn price ratio finished today’s trade at 2.4 to 1, down from 2.54 to 1 last month. I expect this ratio to eventually slip below 2 to 1 later this year, based on strong historical tendencies.

Wheat

Wheat rally resumes amid a weak dollar and lingering weather problems.

Exporters shipped 11.1 million bushels of wheat in the week ending June 4, down from 13.4 million the previous week and down from the five-year average for the week of 21.4 million bushels. The week included a turn from the old- to new-marketing year on June 1, with shipments split between the two. We won’t know yet for some weeks what USDA donations were to close out the year, but the data suggests that old-crop exports should be close to the target, but that new-crop shipments are off to a slower-than-normal start.

The trade expects this afternoon’s USDA crop progress report to show that 5% of the winter wheat crop was harvested as of Sunday. It’s also expected to show stable crop conditions for both the winter and spring wheat crops, according to a Reuters’ survey.

Harvest is very slowly picking up momentum in the Southern Plains amid saturated fields. Yields are varying from 15 to 60 bushels per acre, with test weights varying between 52 and 63 pounds per bushel, according to trade reports. Further east, harvest reports are still very slow to develop in the soft red crop.

This week’s Euro-monthly outlook turned hotter and drier for much of Europe and the Black Sea region for June and July. This could grab more headlines of stress on crops in this broad region, providing further support for unwinding more speculative short positions in wheat. Other areas of concern are the southwestern Canadian Prairies and North China Plain.

Today’s strength was encouraging, but I’ll feel much better once the lead contract is able to take out Friday’s high, which it failed to do today in any of the three wheat markets.

Beef

Beef complex firms after a week of losses as the cash market fails to break seasonally.

Live cattle futures pushed higher late in today’s session when early pushes below Friday’s low failed to uncover additional selling interest. Last week’s negotiated cash market was extremely thin, but also failed to show evidence of seasonally breaking. As such, traders are reluctant to take a futures market lower that is already at a big discount to the cash market. Today’s kill is estimated at 112,000 head, down 2,000 from the previous week, but matching the previous year.

The Feeder cattle market has a bit stronger underlying demand as long as the fat cattle market holds, lush pasture is readily available and corn prices are expected to remain cheap. The latest CME 7-day cash index came in today at $225.93 per cwt, up $1.45 on the day, up $3.22 on the week and up $6.15 over the past 11 consecutive trading days. However, August feeders continue to trade at a discount; even failing to take out Friday’s high suggesting that follow-through strength is needed as we move through the week.

We won’t know total product movement for last week until later today, but spot daily volume surged on the past week’s fire-sale. Movement reached 903 loads this past week, up from 619 loads the previous week, up from 887 loads the previous year and the largest total since a similar total in mid-November 2014.

Choice cuts finished the week at $244.65 per cwt, down $10.34 on the week and down $17.28 per cwt over the past three weeks. Select cuts finished the week at $237.57 per cwt, down $6.26 on the week and down $13.53 over the past three weeks. That means that the Choice/Select spread dropped to $7.08 per cwt, down $4.08 on the week and down $5.55 over the past two weeks.

Movement at mid-morning today was slow, even for a Monday, at 56 loads. Choice cuts were down another $0.09 to $244.56 per cwt, while Select cuts were down $1.58 to $235.99 per cwt.

Pork

Lean hog futures remain under pressure as cash market leaks lower amid soft product demand.

Today’s Midwest cash market was mostly steady to 50 cents weaker, continuing a pattern that we’ve seen in recent days. The latest CME 2-day lean hog index came in today at $82.45 per cwt, down $0.02 on the day, but up $0.27 on the week after three days of bouncing modestly last week. Today’s kill is pegged at 422,000 head of hogs, up 2,000 from the previous week and up 60,000 from the same period last week.

Product movement over the past week recovered to a five-week high of 1,633 loads, up from a dismal 1,396 loads the previous week and up from 1,592 loads in the same week last year. However, it took lower prices to stimulate that demand. The composite pork product price slipped to $85.56 per cwt, down $1.24 on the week. The lower prices break a string of 9 straight weeks of a rising composite price, with gains over that period totaling $21.45 per cwt. However, demand had been suffering greatly as prices rose to five-month highs.

Movement at midday today was slow once again at 139 loads, but at firm prices. The composite pork product price at midday was $85.65 per cwt, up $0.09 on the day on strength in prices for butt and picnic cuts.

July lean hogs continued to consolidate just above the 100-day moving average, which is currently at $80.75 per cwt. Meanwhile, the October contract consolidate just above $70 amid oversold conditions.

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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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.

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