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Closing Comments

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Closing Comments

Corn

Long positions and cooperative weather continues to weigh on corn.

Slow news day in grains leave traders looking for something to hold onto but favorable US weather, fund length in corn and soybeans, and overall commodity sector weakness keeps corn from closing positive. Corn took out the Thursday lows in morning trade, but traded off their lows for the balance of the session.

Talk of diseases such as Northern Corn Leaf Blight in some areas is starting in rumble in the market, but not significantly enough yet to give the trade a headline. Our recent flyover of the central and eastern corn-belt shows not only areas of great potential, but also more areas than anticipated of significant variability and nitrogen deficiency that could prove a greater risk than normal to disease and dry conditions for grain fill.

Corn held the USDA weekly condition rating at 70% good/excellent. They moved 1 point from good to the excellent category while maintaining all other categories. While summer condition ratings in historically wet years typically overestimate the actual condition, the trade continues to use this as the most reliable trend indicator in the absence of good yield checks or actual early yield data.

December 16 over December 15 spread has gained 23 cents from the 14th of July. Today September closed down 4 ½ at 3.66 ½, December closed down 4 ¾ at 376 ½.

Soybeans

Soybeans wrestle with early August production uncertainty.

Soybean condition ratings met the trade’s expectation of a 1 percent bump in G/E by moving one point from Fair over to Good – leaving G/E at 63%, up from the previous week of 62% and the previous year of 71%. The trade will continue watch for the tug of war between cooperative weather and the prospects of disease problems as August progresses.

While processors seem to have backed off a bit on their aggressiveness, the nearby board crush margin continues to be at very high levels and supportive of soybean processing.

Executive for ADM’s South American operations on Monday suggested the company now expects 15/16 Brazil soybean production profit margins to fall to 122.2 Reals per hectare compared to the 14/15 margins of 539.0 Reals per hectare.

November soybeans closed down 4 ¾ at 9.35 ½ while December meal was off 2.9 at 321 and December oil was well off its lows to close down .09 at 30.30.

Wheat

Chicago shows resistance to lower prices while KC and Minneapolis continue to struggle.

Weekly US wheat export inspections were to the low end of the guesses at 11 million bushels vs 14.2 last year. The season’s total is 115 million vs 148 last year.

Spring wheat harvest starting to get underway with what looks to be not only a cooperative forecast but a good crop. The harvest pace of 8% in six states is slightly behind the five year average of 11% but cooperative weather should help progress.

In the September contracts; Chicago closed down ¼ at 499, KC down 3 ¼ at 4.89 and Minneapolis struggles with good yields and harvest off 6 ½ at 5.17.

Beef

Packers pay up for fed cattle last week, strengthening futures.

Strength in live cattle and continued weakness in corn help feeders to find solid footing today with October up 3.100 at 208.900 as of this update.

Trade started sharply higher after packers paid higher prices for fed cattle at the end of last week and helping to justify the recent bullish indications and keeping the bears on the defensive.

Estimated daily slaughter was 107,000 head to start the week compared to 105,000 head last week and 110,000 a year ago.

October live cattle are trading up 2.250 at 148.225, off the late morning highs of 148.925.

Mid-day boxed beef was mixed, choice 233.66 +0.41, select 229.11 -0.18.

Pork

Positive near term demand expectations support hog prices.

Trade started higher on combination of profit taking and outside market strength reinforced by gains in cutout prices midday.

Estimated daily slaughter was 373,000 head today to start the week compared to 416,000 last week and 340,000 a year ago.

Midday mandatory FOB plant carcass 88.35 +0.87, bellies 157.82 -2.45.

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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