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Closing Comments

 

Corn had a small rebound from yesterday’s loss, +2 ½ at 3.65 (Sept) and +2 ½ at 3.79 (Dec). FC Stone came out with their U.S. yield prediction at 162.8 bushels/acre, which if right, would be a big haircut off the USDA’s 170.7 bushels/acre. This coupled with uncertainty in the market with weather, crop progress reports, etc., brought back a measure of sanity to trading. It is thought the market is likely trading a bpa in the mid to upper 160’s to this point. EIA Ethanol reported production was down 10,000 barrels from the previous week to 1.0 million barrels/day, a 0.20% decline from last year. Ethanol Stocks were also down 667K barrels to 20.85 million barrels, which is up 1.21% over last year. Corn used for ethanol was 105.21 million bushels, which is well over the 82.874 million bushel average needed to hit the USDA target for the year. Brazil released government trade numbers yesterday and they showed July corn exports were 2.322 MMT compared to July 2016’s 1.045 MMT.

 

Soybeans took Turnaround Tuesday the wrong direction yesterday, but made a modest correction today by trending positive, +6 ½ at 9.70 ¾ (Sept) and +5 ¾ at 9.77 ½ (Nov). The market is wrestling with the competing factors of too little rain in some areas, late plantings and small plant heights vs. better soybean genetics and the nature of the plants to make big rebounds late in the summer with timely rains. Will WASDE lower U.S. soybean carryover by at least 20-30 million bushels on the report next Thursday due to the increase in old crop exports? FC Stone pegged soybean yield at 47.7 bushels/acre compared to the last USDA number of 48. The USDA reported the soybean crush for the month of June was well above the expected 146.9 million bushels at 154.1 million bushels. Crush marketings were up modestly over last year, while soy oil stocks were right in line with estimates. With China under-bought, what level will be low enough for them to step in and resume buying? Currently, U.S. soybeans are over $.25 a bushel less expensive than Brazil, which could trigger a shift in export sales.

 

Wheat was down with spreading and fund liquidation, as Minneapolis was not able to lead its counterparts higher, although the hard red spring variety was up +4 ¼. Chicago soft red winter and KC hard red winter were – ½ and – ¾ respectively. With the weak U.S. Dollar, American wheat is the currently the world’s least expensive option, so this is helping to keep the bears at bay. An aspect of the August 10th report that will be closely watched by wheat traders is – how many prevent plant acres and failed acres make up the total HRS pie? This number could be much higher than an average year and will impact the total HRS wheat acres that will be reported on September 30th. In global news, it is worth noting that Australia has experienced extremes this season, with July temps 2.62 degrees Celsius above the highest average on record coupled with below average rainfall. Some analysts believe this could take the crop below 20 MMT compared to the USDA prediction of 23.5 MMT.

 

Live Cattle traded both sides of unchanged before surging across the finish line, +1.725 (Aug). It was reported that retail beef features fell the 2nd half of July, with the retail beef feature activity index down 8% from last year same time. Fed cattle slaughter is up well above last year’s levels with last week showing a 7.5% increase. A saving grace is that cattle weights are lower this year which has helped to offset some of the large slaughter numbers. The Choice beef cut-out was down $44/cwt from mid-June to $206.96 led by a decline in retail action. Brazil released government numbers showing July beef exports to be up over June’s 100,233 MT to 106,397 MT.

 

Hogs were able to bounce in spite of a weak technical posture, +2.150 (Aug) and +1.825 (Oct). Cash and futures moved closer together, as the cash index fell -.650 yesterday to 88.100. The pork cut-out is at its lowest level since June 19th, at $97.98. Last week was at $101.97. Brazil reported that their pork exports were down from June’s 54,004 MT to 48,713 MT. The weakening Dollar provided support, as it is now at a 15-month low.

 

In Other News, it was announced by the CME Group that trading volume was down 1% in July 2017 in comparison to July 2016. July 2017 options volume was down 8% to 2.9 million contracts/day vs. last year. Of the options, 2 million were electronic options which is up 21% over last year same time. Open interest at the end of July was 113 million contracts, which is 9% higher than the end of July 2016.

 

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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