Home Market Market Watch Closing Comments

Closing Comments

SHARE






[cid:image009.jpg@01CE6CE4.660D8B30]

Closing Comments

Corn

Corn gets a boost from the broader commodity sector, along with expectations of lower yields.

Exporters shipped just 18.5 million bushels of corn in the week ending October 1, down from 31.9 million the previous week and down from the five-year average for the week of 29.5 million bushels. The past week’s total included no bushels destined for China, while Japan took 3.9 million bushels during the week.

Marketing year shipments to all destinations to date total 127 million bushels, down 32 million or 20% from the previous year. Exporters typically ship 9% of final corn shipments by the first of October, whereas they had shipped 9% last year as well. However, they have only shipped 7% of USDA’s target thus far this year. As such, shipments to date fall short of the seasonal pace needed to reach USDA’s target by August 31 by 39 million bushels, versus being short by 22 million the previous week.

Exporters shipped 11.7 million bushels of grain sorghum in the week ending October 1, down from 13.3 million the previous week, but up from the five-year average for the week of 3.2 million bushels. The past week’s total included 11.6 million bushels destined for Chinese end users.

Marketing year shipments to all destinations to date total 41 million bushels, up 9 million or 28% from the previous year. Exporters typically ship 11% of final grain sorghum shipments by this point, whereas they had shipped 9% by this point last year. Thus far this year they have shipped 10% of USDA’s target. As such, shipments to date fall short of the seasonal pace needed to reach USDA’s target by August 31 by 7 million bushels, versus falling short by 10 million bushels the previous week.

USDA is scheduled to release its weekly crop progress report at 3 p.m. CDT this afternoon. A Reuters survey of trade participants reveals expectations that it will show the crop rated 68% Good to Excellent, unchanged on the week. The report is also expected to show that 30% of the crop was harvested as of October 4, up from 18% the previous week.

Money flowed into the broader commodity sector today, leading some of the major indices to gap higher taking out modest resistance on the charts. That provided modest support for corn, which is a part of many of these indices, but the feed grain found fundamental support as well. Yields are softening as we move deeper into harvest, following the anticipated pattern that should result in USDA making a larger cut of 2 to 3 bushels on Friday when it updates its balance sheet.

December corn rallied to a high of $3.94 today, essentially putting a triple top on the chart near $3.95. Triple tops can hold, but typically do not, suggesting more strength in the days ahead. Traders may be reluctant to push above the resistance ahead of Friday’s report, but they may not have a choice if the major commodity indices continue to find support this week. Next resistance is at $4, followed by $4.06. Chart action suggests that the market believes that it has priced in the worst of the fundamental news already for this year.

Soybeans

Soybean prices gain on strong demand and outside support.

Exporters shipped a 31-week high 41.2 million bushels of soybeans in the week ending October 1, up from 19.9 million the previous week and up from the five-year average for the week of 32.6 million bushels. Shipments to China during the week totaled 21.1 million bushels.

Marketing year shipments through the first 31 days of the year total 94.2 million bushels, up 2 million or 2% from the previous year. Exporters typically ship 5% of final soybean shipments by the first of October, whereas they had also shipped 5% by this point last year as well. However, this year they had shipped 5.5% of USDA’s target by the date. As such, shipments to date exceed the seasonal pace needed to reach USDA’s target by August 31, versus falling short of it by 4 million bushels the previous week.

This afternoon’s USDA crop progress report is expected to show that 62% of the crop rates Good to Excellent, unchanged on the week. Furthermore, the trade expects USDA to report that 41% of the crop was harvested by Sunday, up from 21% the previous week.

This morning’s USDA export inspection report showed aggressive early shipment of U.S. soybeans to China in the face of bearish sentiment here that China would not want many of our soybeans after breaking records importing South American supplies this summer. Demand is good. This puts the focus back on supply. Yield reports suggest that the crop is big enough to meet that demand, but we have observed some tendency for yields to soften as we move deeper into the harvest, which is what we expected.

November soybeans also found support today as they had finished last week near the bottom of their predominant trading range. It was natural then that traders might want to revisit the top of the range. Fund buying of the larger commodity indices of which soybeans are a part conveniently provided that buying interest, as did the strong export data. It’s interesting to note that the previously mentioned trading range has a slight upward bias to it, suggesting that traders may have already priced the bearish news into the market. Key resistance to overcome is at $9 per bushel.

Wheat

Wheat consolidates after recent gains.

Exporters shipped 20.5 million bushels of wheat in the week ending October 1, down from 23.4 million the previous week and down from the five-year average for the week of 24.2 million bushels. Less than 40K bushels were shipped to China during the week, while Brazil didn’t take any.

Marketing year wheat shipments total 295 million bushels, down 57 million or 16% from the previous year. Exporters typically ship 37% of final wheat shipments by the first of October, whereas they had shipped 41% by this point last year. Yet, this year’s shipments to date are only at 33% of USDA’s target. As such, shipments to date fall short of the seasonal pace needed to reach USDA’s target by May 31 by 46 million bushels, versus being short by 45 million the previous week.

This afternoon’s USDA crop progress report is expected to show that 47% of the winter wheat crop was planted as of October 4, up 16 points on the week. Traders are particularly interested in planting progress in the Southern Plains, where dry soils have slowed the pace.

Commodity Weather Group notes that 60% of Ukraine and 35% of Russian wheat has “significant moisture shortages cutting back crop development. Furthermore, it notes that nearly half of the Former Soviet Union wheat belt has establishment problems, while 20% has germination problems. Dryness and unseasonably cold temperatures are at fault.

Wheat prices consolidated recent gains today. It garnered support from the broader commodity sector, but gains were limited by soft demand and the fact that prices have already rallied more than a half-dollar. Fundamental support came from dryness in the winter wheat belt, Australia and the Black Sea region.

Beef

Cattle come under pressure once again as product prices continue slide.

Last week’s cash trade was largely $118 to $124 per cwt on a live basis, precipitating much of the collapse of the board last week. Prices bounced on Friday, but weakness returned to the market today, fueled by additional weakness in the product market. We simply have been dumping too much meat on the market relative to demand as packers try to clean up high carcass weights.

We’re seeing some early signs packers may be seeing tighter supplies, but carcass weights remain nearly 50 pounds above two years ago and 22 pounds above the previous year. As such, this market still has a lot of meat to work through as long as a relatively strong dollar continues to limit exports while stimulating imports. Demand is expected to improve as we move beyond National Pork Month this month, but we need to see the supply tighten by getting the market current and slowing imports.

Product movement on the spot daily market over the past week totaled a one-year high of 973 loads, up from 970 the previous week, but down from 1,076 loads in the same week last year. Choice cuts finished the week at $205.77 per cwt, down $6.46 on the week and down $39.13 over the past six weeks. Select cuts finished the week at $201.36 per cwt, down $8.44 on the week and down $34.08 over the past seven weeks. The Choice/Select spread finished the week at $4.41 per cwt, up $1.98 on the week.

Movement at mid-morning today was routine for a Monday at 82 loads. However, prices were again lower. Choice cuts fell another $1.34 to $204.43 per cwt, while Select cuts were down $2.15 to $199.21. That firmed the Choice/Select spread to $5.22 per cwt.

Feeder cattle came under additional pressure today, with corn prices firming at a time when fats were weaker. Delivery worries also haunted the lead October contract, which traded near $177 per cwt amid sharp losses on the cash market. The latest cash index came in at $182.76 per cwt, down $5.13 on the day, down $8.57 over the past week and down $22.57 over the past 15 consecutive trading days that the index has posted losses. The cash index hasn’t been this low since early May 2014.

Packer margins remain quite high for this time of year, above $50 per head. Yet, packers are expected to slow the chain speed modestly this week in an attempt to firm product prices. Today’s kill was pegged at 106,000 head of cattle, down 3,000 head on the week and down 9,000 from the same day last year.

Pork

Lean hog futures look vulnerable on concerns that demand will wane.

Today’s cash market was again mostly steady across the Midwest, with the supply of hogs appearing to be well-balanced with demand. Carcass weights are slowly rising as the number of hogs slowly declines as expected. Demand has been good, but is expected to ease as we move into the last half of this month. As such, December lean hogs are struggling to sustain gains, with today’s weakness in the nearby months testing trend line support off the August and September lows. Yet, the deferred contracts found support from stronger corn prices.

Packer margins continue to hold primarily above $20 per head. That provides incentive for packers to keep the industry current. The supply of hogs is roughly 9% above the previous year week to week, but it was 10% to 13% above the previous year for much of the summer. Today’s kill is pegged at 435,000 head of hogs, up 9,000 on the week and up 8,000 head from the same day last year. The latest CME 2-day lean hog index came in at nearly a four-week high of $73.06 per cwt, up $0.41 on the day and up $0.86 over the past week.

Product movement rose to 1,644 loads over the past week, up from 1,623 loads the previous week and up from 1,448 loads in the same week last year. The composite pork product price rose to $85.53 to close out the week, up $1.59 on the week and up $2.63 over the past two weeks, reflecting solid domestic demand. Movement at midday today was slow at 147 loads, but the composite price rose another $0.62 to $86.15 per cwt.

Closing Market Snapshot

[cid:image001.png@01D0FF78.1AED1D90]

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.

[cid:image010.jpg@01CE6CE4.660D8B30]

[cid:image011.jpg@01CE6CE4.660D8B30]

[cid:image012.png@01CE6CE4.660D8B30]

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

[https://www.waterstreet.org/s/ws-80×70.png]

Arlan Suderman | Senior Market Analyst
WATER STREET ADVISORY(r) | 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.