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Closing Comments

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Closing Comments

Oil prices rose after the US oil rig count fell for the ninth straight week, indicating crude production could decline in coming months which might help reduce the global supply glut.
US consumer spending in September recorded its smallest gain in eight months as personal income barely rose, suggesting a cool in domestic demand. Additional data showed weak inflationary pressures, which would argue against the Fed raising rates yet this year.
DuPont unveiled its 30 million gallon per year cellulosic ethanol plant in Nevada Iowa this week.
Effective Nov 1, corn daily limits will move from 30 cents to 25 cents, soybeans from 70 cents to 60 cents and Chicago and KC wheat will move from 40 cents down to 35 cents.

Corn

Corn finds support on technical buying in the face of global demand concerns.

End of month squaring, technical buying and supportive cash markets helped corn trade higher on the last day of this week and month.
The cash market and basis looks to be doing its job of paying for transportation on reports of trains being booked from the northwestern corn belt into Illinois and Indiana processors. Commercials in many cases are content with their ownership for now but are concerned that in many cases their ownership is not in place past November which will require some either drastic action in basis or a rally in futures to get the farmer interested in transferring ownership.
Bull-spreading in the futures is pointing to the strong nearby demand, with December contracts gaining on the deferreds. Dec to March carry is now at 9 ¼.

The December contract lost -5 ½ cents for the month of October but gained 2 ½ for the week. MACD and Stochastics are pointed up with nearby resistance round 3.90 December.

Soybeans

Soybeans recovers on running out of sellers and continued export demand.

Basis bids are holding mostly steady for corn and soy shipped to the Gulf Coast after a recent drop in freight drop on Midwest rivers.

AgRural estimated Brazil soybean planting progress at 31% complete, up from last week’s 20% but lagging the long term average of 42%. Mato Grosso is at 36% vs the long term average of 66%.

USDA reported a purchase of 120,000 tonnes of US soybeans to China for delivery in the 15/16 marketing year. This was the first announced purchase since Monday.

Strength in the soy oil and soymeal relative to soybeans helped the board crush margin recover some of its recent losses. Friday the crush margin traded as low as 81 cents, but was able to close the week at 96 cents. Soy oil is finding support on continued Palm Oil production concerns and news that China is expected to continue a rapid crush pace for oil.

December meal was able to follow through after yesterday’s reversal action, but couldn’t manage to close on its highs. For the week, January soybeans lost -10 ¼ while closing the month off -8 ¼.

Wheat

Wheat finds continued support from the large nervous “short” fund position.

Australia’s wheat crop could face quality downgrades as part of the country’s eastern grain belt are forecast to receive heavy rains in the days ahead, potentially damaging the crop which is ready for harvest. Dry weather in September and above average temperatures this month have cubed yields of high-protein Australian prime hard wheat

Total Canadian wheat, barley corn and oat production for 15/16 is forecast to fall to 49.2 mmt, a 4% decrease from 14/15 due to the decrease in wheat production from the abnormally dry conditions.

Argentine farmers are expected to harvest 9.5 million tons of wheat for 15/16 compared to 14/15 production of 11.75 million tons.

Spot basis for hard red winter wheat were are steady to firm at elevators across the southern Plains on slow farmer sales.

Chicago wheat gained 31 ½ this week, the best since June, and 9 ¼ for the month. Chicago December came within a penny of the 200 day moving average – this will likely prove resistance, but if it doesn’t it could be the catalyst that sparks more short covering.

As of Tuesday, according to the Commitment of Traders report, Managed Money reduced its short position by -8,257 contracts, but added new long contracts of 10,746. Explaining the fact that open interest had not fallen as is expected on “short covering” rallies.

Livestock

Cattle finish the week just under where they began while hogs slow their freefall.

Cattle futures closed lower amid concern that processors had purchased their needs earlier in the week and may not step into the cash market again this week for the typical Friday trade. The uncommon midweek trade at $1.38 a pound on a live basis was flat with last Friday’s trade. This offered the market midweek support, but enthusiasm has waned on attention on the potential for heavy cattle boosting supplies.

Friday’s slaughter showed an estimate of 100,000 cattle vs 104,000 last week and 100,000 a year ago. Hogs showed 391,000 slaughtered Friday vs 431,000 a week ago and 409,000 a year ago.

Cash hog prices traded steady to $2 per cwt lower on Friday and plentiful supplies fill packer inventories. Pork bellies tumbled to their lowest level in three months as the sandwich season switches from BLT to ham and turkey.

The average pork packer margin for Friday was $28.80 per head, down from $32.75 on Thursday and $31.10 a week 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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