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Closing Comments

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Closing Comments

 

Corn needs a fresh catalyst to fire up the market, -3 ¼ (Dec). NASS released crop progress results yesterday afternoon showing corn is unchanged from last week at 61% good/excellent, with harvest 7% complete compared to the average of 11%. Corn is 86% dented. Corn crop conditions at this point are not as relevant, with the maturity rating getting more attention at 34% compared to the average of 47%. Will late season heat be able to help? Adding drying costs in a tight margin environment is not attractive. Farmers may be looking at “wet” corn contracts as an alternative, offered thru some elevators and ethanol plants. Yield reports so far are trending better than expected, but not on the level of last year. Brazil’s summer corn planting is off and running, estimated at 9.3% complete compared to 9.7% last year. Planted area is expected to be less at 9.5 million acres vs. last year’s 13.1 million acres.

 

Soybeans could not find any fresh news to support gains, –2 ¼ (Nov). Stats Canada released their soybean production estimate, well above last year at 8.3 MMT compared to 6.5 MMT. Canola also is seen higher at 19.7 MMT from 18.2 estimated in August, and just above last year’s 19.6 MMT. Soybeans received a 1% downgrade in crop conditions from NASS yesterday to 59% good/excellent, while soybean harvest is 4% complete vs. the average of 5%. Forty-one percent of the soybean crop is dropping leaves. Yield reports so far have been mixed but seem to indicate better than expected (but lower than last year), despite lower crop conditions and a dry finish. The actual results will become clearer in the days to come.

 

Wheat saw mixed trading, as the market turned up stronger at the close: Chicago SRW – ½, Kansas City HRW – ¼, and Minneapolis HRS -3 ¾. Adding to the gloomy day in the markets, Stats Canada revised their total wheat crop up from 25.5 MMT to 27.1 MMT, but it is still well below last year’s 31.7 MMT. Spring wheat is in line with last year at 20.1 MMT vs. 20.5 MMT. Ukraine’s Ag Minister says their expectations for total grain production will be in the neighborhood of 61-63 MMT, down from 66 MMT last year. The USDA crop progress report showed that the winter wheat crop is 13% planted compared to the average of 15%. In export news, Russia won another bid for Egyptian business, as the GASC announced they purchased 175K MT of Russian origin wheat. Egypt continues to be the grand prize that is just out of reach for the U.S. The USDA has pegged Russian exports this year to grow substantially, from 27.8 MMT to 32.5 MMT. This is thought to be about their limit due to infrastructure limitations. Wheat may be a sleeper though in 2018, as it is a very global product. Australia and Argentina, two of the world’s largest exporters, are having significant problems and caution is warranted for the bears.

 

Live Cattle were able to continue their orderly march up the chart, +.400 (Oct). It has been a battle of large supplies vs. a positive long-term outlook. According to the CME’s Daily Livestock Report, the first seven months of 2017 featured the highest estimated cattle feeding profitability per steer ever. This has been a huge financial reprieve for cattle feeders who bled large amounts of red ink in 2015 and into 2016. However, August profitability turned negative, and it is projected that breakeven prices may be as good as it gets for the rest of the year.

 

Hogs had a large break-out led by December, +1.675. The pork cut-out was up 33 cents at 78.09, while bellies rose a dollar. The market has been searching for a bottom – have prices now fallen far enough to find renewed demand interest? A wild card to consider is if Hurricane Maria’s track were to head to NC, there would be a large number of hogs in its path. Stay tuned

 

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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