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Closing Comments

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Closing Comments

 

Corn has continued to inch closer to a bottom, -3 ¼ at 3.38 ¾ (Sept) and –2 ¾ at 3.53 ½ (Dec). Fund selling has continued to dominate the conversation. For corn to trend lower heading into harvest is seasonally normal. The Pro Farmer crop tour gave a “good but not great” assessment, coming in with an overall number of 167 bpa. There have also been several other Central IL crop tours that have been in agreement on findings of yields 10-20 bushels off of last year. The Commitment of Traders report will come out later this afternoon, and it will be interesting to see the numbers as corn is thought to be around 75,000 short.

 

Soybeans have had a combination of factors influencing the market this week, finishing negative today, -2 ¼ at 9.39 (Sept) and –2 at 9.44 ½ (Nov). The biodiesel announcement earlier in the week provided strength to soyoil, while the export picture continues to improve. The USDA reported a private sale to China for 2017/18 of 132K MT of soybeans. Additionally, Thailand bought 105,500 MT of soymeal for 2017/18. The Pro Farmer tour gave their overall yield a 48.5 bpa. Beans have shown substantially lower pod counts through the majority of growing areas. On the entirety of the eastern route the was the consistent theme of flat bean pods. There have been more reports of two and three pods than four. When you put all this together with the stress experienced throughout the season, anything is still possible for beans. It seems this year has more in common with a 2013 than the past three years. Another factor not to be overlooked is Hurricane Harvey, that is predicted to dump a deluge of rain on the Texas coast and large amounts up into the Delta area. This will cause delays to soybean harvests and will be key to price outlook next week.

 

Wheat traded in a narrow range, showing indecisiveness to end the week, Chicago SRW + ½, Kansas City HRW -1, and Minneapolis HRS even (Sept). It is difficult for wheat to put up much of a fight with corn, which has continued its trek to a bottom. The hard red winter harvest is almost complete. From samples collected, it is estimated that average test weights will be around 60.8 lb/bu, which is slightly higher than last year’s 60.7 lb/bu. Protein is estimated to be above last year’s 11.2% at 11.4%. Russia is busy carving out their huge harvest, as they have cut 62.2 MMT compared to 58.9 MMT last year, on almost less than 6 million acres, as they are averaging over a 20% higher yield per acre. Watch wheat’s action next week as funds hold an extreme short position and the market is oversold.

 

Live Cattle followed yesterday’s gains more positives, even at 105.950 (Aug) and +.100 at 106.925 (Oct). The Cattle on Feed report will be released this afternoon.  Estimates include: On-Feed as of Aug 1st 105% vs. 104% last report, July Placements 106% vs. 116% last report, and July Marketings 105% vs. 104% last report. The placement rate will be the most closely watched to determine whether the report is considered bullish or bearish. There is plenty of supply in all the meats, so export demand and China’s interest in U.S. beef will be crucial for price direction.

 

Hogs went lower with continued pressure from declining pork bellies, -.700 at 63.075 (Oct) and –.300 at 58.950 (Dec). The lean hog index for 8/22 fell $1.04, as it is attempting to come down into more normal alignment with futures. February hogs received supportive news as pork production is expected to fall by 465 million lbs from the 4th to the 1st quarter, almost double the reduction seen last year. Another factor that may not be fully reflected yet in the market, are two new packing plants set to open after September 1st, which could result in stronger packer demand.

 

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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