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Closing Comments

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Closing Comments

US dollar news was quite today after last week’s fireworks, giving up about half of Friday’s gain on the euro bouncing off an oversold condition.

In Argentina, with 72 percent of polling reporting, the opposition candidate Macri had 36 percent of the votes compared to President Fernandez’s chosen candidate, Daniel Scioli. The tight race will lead to a runoff between the two candidates on November 22nd. Mr. Macri has promised that if elected, he will eliminate the export taxes on commodities and stop intervention in the agricultural export markets. Mr. Scioli indicated he would look at the tax policy, but has made no pledge on action. The market concern is with a Macri government there would be fresh soybean supplies available for export.

Stock markets was mixed in the face of new home sales plunging to the slowest pace in 10 months as higher prices and slower economic growth weigh on the US housing market.

Energy struggled under flat usage of diesel from mediocre shipping activity and concern from Goldman Sachs that refined petroleum product stockpile storage sites are nearing historical levels which could further weigh on crude oil prices.

News out of Indiana reports a woman on a waterfowl hunt was shot in the foot by her dog named…Trigger.

Corn

Corn caught in identity crisis between higher wheat and lower soybeans. Decides to finish near session highs.

Harvest progress as of October 25th on corn is 75% vs the five year average of 68%.

Lack of farmer selling and interest by commercial buying helped corn to follow the path of wheat higher. Corn though is not suffering from a market caught short like wheat, however the COT Friday report did show managed money as of the 20th had gotten rid of 19k longs and added 40k short positions on the week prior, not bullish behavior – but not unexpected as the market has been unloading the length that had been built going into the October USDA report.

Disappointing inspections in corn this week showed up at 16.3 million bushels versus the market expectation of 22.6 million. This is more than 16% off from last week and nearly 26% behind last year.

Like wheat, corn was able to follow through on the 3-Day Fade Buy from Friday. December will be encountering nearby resistance at the 3.86 and 3.95 areas. Bull spreads continue to strengthen with Dec/March now at 9 cents.

Soybeans

Soybeans start the week on a down note on Argentine elections, better South American weather and weakness in meal and soy oil.

Harvest progress this week from the USDA is 87% vs the five year average of 80%.

Concern over the strength of Mr. Macri in the Argentine election had the trade worried about the prospects for Argentine beans and meal entering the global market.

Excellent weekly export shipments of 98.2 million bushels exceeded the trade expectation of 71.7 million bushels. This is nearly 13% better than last week and more than 15% better than a year ago. Seasonally the size of shipments should peak in the next two weeks and descend in size as South America takes over the export business. According to price action today…good news is bad.

Cuba bought three cargoes of US soymeal for nearby delivery but booked bigger orders for cheaper Argentine soymeal.

South American weather is favoring rains to improve moisture for drier soybean regions in the northern belt and a drop off in showers in the 11-15 day which would assist in timely planting activity.

Rumors floating in Brazil for a potential upcoming November 9th truck driver strike.

Weak meal on steady domestic offers and light export demand and weak soy oil on lower Malaysian palm oil weighed on soybeans and affected the profitability of crushing soybeans. Below is the Board Crush Margin chart for buying November soybeans and selling December meal and oil.

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Wheat

Wheat was the undisputed market champion today on a market spooked by the size of fund short positions and ongoing weather concern in the Plains and Black Sea production areas.

The market was surprised by the amount of change in position by managed money on Friday’s Commitment of Trader’s report that showed managed money had unloaded more than 10k contracts of long positions and added nearly 25k contracts of short positions. Creating concern in the trade that any significant headline in wheat could create short covering, apparently the fear of a concern was sufficient to create the concern in the market today.

This morning’s export inspections for wheat were disappointing as the market expected 13.8 million bushels but received inspections of 11.7 million. This is 17.5% below the previous marketing year. Obviously the trade wasn’t focused on exports today – bad news is good?

Ethiopia one million tonnes wheat tender gives the marketplace hope for the demand in wheat, but analysts point out that not more than half of the tender will be likely to make it in-country in the shipping period and that the purchase does not really change the global demand landscape.

Sunday night gapped open to start the trading session, executing and following through on the 3-Day Fade Buy from that we had discussed Friday. Chicago led the short covering strength, followed by KC and Minneapolis after. Dec Chicago will encounter resistance at the 200 day moving average around 5.24.

Livestock

Hogs mixed after Friday selloff while cattle in weak consolidation zone after the recent rally.

The World Health Report, raising the specter of possible carcinogen status of red meat may have weighed on the cattle market today but the Cattle on Feed report also showed the continued placement of heavy cattle.

Showlists are coming in mixed this week, with overall numbers close to unchanged. Cattle feeders are once again reluctant to post early week asking prices. Most are looking to no worse than steady. Beef continues to face retail competition from relatively cheap pork and chicken. Daily cattle slaughter is estimated to be down 0.89% from a week ago and unchanged from a year ago.

Cattle and feeder cattle are still in their recent uptrend (inside the larger downtrend) but the market is over-bought in the Stochastics which have now crossed for lower. Today’s low in cattle and feeders need to prove support or the market is at risk of a break.

Pork was also a bit lower from the WHO processed meat health report that cited hot dogs and bologna may not be healthy food, but is also keeping an eye on the potential for increased demand from China opening more purchase areas as well as improved packer margins in relation to beef packers.

The pork cutout is up $1.05 at noon as some values rebound from sharp declines on Friday. The overall tone of the market is still soft according to market reports. Daily hog slaughter is estimated to be up 7.94% from a week ago and up 2.35% from a year ago.

Closing Market Snapshot

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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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