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Closing Comments

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Closing Comments

 

Corn traded in a narrow range, trending mildly positive to finish the week, +1 ½ at 3.52 (Sept) and +1 ½ at 3.65 ¾ (Dec). The weekly chart is trading at the lowest level this year. The attention is turning away from weather to crop tours, with the Pro Farmer kicking off on Monday. Exports are down this year as expected with the large South American crop taking the lead, as the 2017/18 YTD corn sales are at 14% of USDA forecasts compared to 35% in an average year at this time. Ethanol got a bearish report from the EIA with large stocks, but margins continue to be around 10 cents in the black. Watch for results from the Commitment of Traders report later this afternoon, to see how positions changed after the USDA report last week.

 

Soybeans were able to build on yesterday’s gains, scratching out another few cents, +7 ¼ at 9.37 ½ (Sept) and +4 ¾ at 9.37 ¾ at (Nov). Weather is a bigger story in this sector, and it was a mixed bag this week with some storms hitting and others missing. The trend for the next few days is not offering a lot of precipitation, although will be cool. The charts are oversold and looking to level out, and the increased export demand by China is helping the cause. The Chinese are taking advantage of the lowest U.S. soybean prices since early summer. This, coupled with Brazilian farmers tending to hold on to their crops with the unfavorable Real currency valuation. Look for crop conditions on Monday to show improvement and for crop tours to give another perspective to consider next week.

 

Wheat has maintained an oversold position and is overdue for a correction, as managed funds are holding a significant short position. The market ended on a positive note for the winter wheats  with Kansas City HRW + ¼ and Chicago SRW +2 (Sept). Minneapolis had a small setback at – ½  (Sept). U.S. wheat is the cheapest in the world and buyers are taking notice. While the global wheat price is up $.40/bu over last year, the U.S. wheat futures are unchanged or slightly below. Russia’s harvest has been delayed by weather, but is still ahead of last year at this time. SovEcon is predicting Russia’s total grain exports to increase by 3.3 MMT. Australia on the other hand, is continuing to show declining yield prospects as Rabobank pegged the wheat crop at 22 MMT in comparison to the USDA’s view of 23.5 MMT. But, world record ending stocks loom in the background as a damper on thoughts of rallying.

 

Live Cattle is trying to find a low enough price to level out supplies, -.750 at 106.375 (Aug) and –.325 at 105.900 (Oct). Cattle weights are a closely monitored barometer of supply, and average dressed steer weights for the week ending August 5th up to 880 lbs from 875 last week. The five-year average for that week is 874.2 lbs. It is thought that traders are of the persuasion that cash prices will continue to decline and pressure futures as cattle supplies grow in the fall. Consumer demand is also falling, which is expected for this time of year.

 

Hogs have seen sharp declines since Wednesday, with futures ending the session –.800 at 66.125 (Oct) and –.475 at 61.325 (Dec). Although the lean hog index continues to decline, cash continues to hold a large premium to futures. Supplies are large but export demand is strong. It has been reported that Argentina has agreed to allow U.S. pork imports for the first time since 1992. Will demand be able to keep up with bearish supply fundamentals?

 

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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