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Closing Comments

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Closing Comments

 

Corn continued the sideways chop heading into Report Day tomorrow, + ¾ at 3.57 ½ (Dec). Most analysts are expecting the USDA to trim back their 169.5 bpa prediction from the last report. Average expectations range from 166-167 bpa. Ear weights have been a big topic of debate. The September report has a history of being fairly well in line with the final result, so it will be interesting to see on which side the USDA falls. USDA inspections were sub-par for corn for the week ending September 7th, coming in at 662,173 MT compared to estimates of 800K MT. Look for this afternoon to feature the USDA’s first take on harvest progress to-date. It is expected to be at 5%, which is slightly behind average. Focus will start to shift to South American weather, as their planting season gets underway. Early on, Argentina looks a little wet while Brazil is a little dry. Safras Mercado reported their first forecast for Brazil’s 2018/18 corn crop at 93.59 MMT, as they expect an 11.5% drop in acres planted and a decline in yields to 5.73 MT/hectare compared to 5.99 MT/ha last year.

 

Soybeans, like corn, are looking ahead to tomorrow’s report results, as they traded in a range, -2 at 9.60 (Nov). All eyes are on the USDA and whether their prediction will go up or down. It is predicted by analysts that the yield will decline to 48.7 bpa from the previous 49.4 bpa. Old crop and new crop carryout is also expected to tighten up. Soybeans had good conditions in August, but finished on a less than ideal stretch with dryness and cool temps, which has some concerned about the crop rapidly turning and shutting down. Demand has continued to provide underlying support as evidenced by export reporting today. Soybean weekly inspections announced by the USDA were way over estimates of 550K MT, as they showed up with an impressive 1,106,268 MT. Additionally, the week opened up with another nice private sale of 352K MT to “unknown” destination for 2017/18.

 

Wheat could not muster the strength to fend off the bears pre-report, as Chicago SRW finished –3 (Dec), while Kansas City HRW was –6 ¾ and Minneapolis HRS -4 ½. The crop report tomorrow will be influential to price direction, as all attention has turned to the USDA’s thoughts at 11am. Spring wheat could still turn out to be a bull story, with demand rationing taking the forefront this fall. USDA weekly inspections for wheat were solid, as they eclipsed expectations of 400K MT at 446,957 MT for the week ending September 7th. In global news, Australia’s crop continues to see reductions, as it is now estimated their crop will be 20 MMT vs. last month’s thoughts of 23 MMT. The Russian Grain Union in Moscow indicated that the government is going to make an extra effort to build up export and storage capability, as their yields continue to amaze.

 

Live Cattle were mixed as October had a small setback, -.125, while December ended +.025. The market outlook is bullish in early 2018, but the weight of hefty supplies is keeping things in check in the current months. Demand will be a critical component to working through large inventories.

 

Hogs continued the negative momentum, led by the front month, -.575 (Oct). The cash market is being weighed down by the declining pork cut-out which fell to $81.58 from $83.14 the week before. But, the large discount of futures to cash is providing support along with new slaughter plants coming online last week. Look for February to lead.

 

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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