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Closing Comments

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Closing Comments

 

Corn was able to follow the lead of wheat with a small gain to start the week, + ¼ (Dec). Harvest yields from the weekend have trended higher for both corn and soybeans, with plenty of variability thrown in the mix. Much more harvest data should be available by week’s end. The weekly corn inspections announced by the USDA were slightly under expectations of 800K MT at 738,779 MT. For the crop year to-date, corn export sales are down 51% from last year. Harvest is around 16% complete compared to 7% last week. Harvest should make great progress over the next few days due to favorable conditions.

 

Soybeans gave up the big gains from Friday, following below the 200-day moving average and finishing –13 (Nov). Like corn, soybeans yields have been reported better than expected, with some areas of early beans (that started very poorly and experienced dryness) surprising on the yield monitor. Soybeans are the leader of the grain complex this fall, so if big yields persist, there could be a significant downside price risk. The next week will be closely watched, as more definitive harvest numbers will be available. USDA weekly inspections were slightly below estimates of 1.2 MMT, as they were reported at 1,030,051 MT. China is on holiday this week, so expect a slowdown effect, in addition to the PRC backing off sales until the results of the crop report. The expanded forecast for Brazil is indicating showers and storms across the entire country after October 2nd, which is not adding a positive vibe to the CBOT either.

 

Wheat led corn and the rest of the grains today, as spring wheat is getting the focus as we near the USDA Grain Stocks report on Friday. It is expected that harvested spring wheat acres will be slashed. That combined with a cut in anticipated Australian wheat production due to poor rainfall numbers in September is leading to a buzz among traders. If the dryness continues another 14 days, another cut of 1.0 MMT is not off the table. WASDE should also trim production substantially in the October 12th report. Minneapolis was out in front, +13, while Chicago and Kansas City were +4 ½ and +3 ¾ respectively. USDA weekly inspections were above expectations, coming in at 499,995 MT vs. thoughts of 450K MT.

 

Live Cattle gave a volatile reaction to the bearish Cattle on Feed report after the close on Friday, closing lock-limit-down in December, -3.000. The report showed On Feed at 103.6% of last year compared to expectations of 102.7%, while August placements eclipsed estimates of 97.1% at 102.6%. The longer term outlook is more upbeat, but short term supplies are a weighty proposition to overcome. Monthly Cold Storage had frozen beef stocks at 476.3 million lbs for August, which was unchanged but up 10.3% for the month, which was considered bearish, according to Hightower.

 

Hogs rallied in spite of cattle’s downfall and a bearish Cold Storage report on Friday, +.800 (Dec). Frozen pork stocks were down 5.5% from last year but up 3.8% on the month. The Lean Hog Index is all the way down to 60.12, a far cry from the large premium it held over futures not long ago. The pork cut-out was also down 52 cents on Friday to its lowest level since November 17, 2016. It would appear that hog futures still have potential to go lower – stay tuned for action tomorrow.

 

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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