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Closing Comments

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Closing Comments

 

Corn trended higher through parts of the day but tailed off, -1 ¼ (Dec). Corn does not have a fresh story and is following the lead of the other grains this fall. Undersold farmers in North and South America are muting any hints of rallies. Crop conditions are becoming less the focal point, as the USDA released ratings yesterday that showed corn 1% improved from good to excellent. The U.S. corn harvest was reported as delayed, at only 11% complete, which is behind the average of 17%. IL is especially behind at 11% harvested compared to 24% on average. According to Hightower, China’s demand for corn is much stronger than traders have expected. For the last three months they have imported 1.67 MMT. To put in perspective, the USDA has only projected China to import 3 MMT for the entire season.

 

Soybeans moved lower as traders position themselves for yield results and upcoming reports, -7 ¾ (Nov). The USDA reported soybeans 1% improved good to excellent from last week – important states showing improvement included IN, IL, NE, SD and ND. Early yield reports coming in from the field are better than expected, in some case phenomenal, considering the dry conditions to finish. Sixty-three percent of plants are dropping leaves. So far, yield results reported by growers seem to be vindicating the USDA, but there are still questions swirling around whether the later planted crops (that endured heat/dryness in critical parts of August) will fare as well. There were no new sales this morning, due in part to China celebrating a holiday week. To summarize China’s standing with soybean imports, for August the PRC imported 8.4 MMT, of which 6.1 MMT was from Brazil and 1.4 MMT was from Argentina. This compares to 7.7 MMT last year. For the period of January to August of this year, China is well ahead of last year, importing 63.3 MMT vs. 54.0 MMT. In South America weather, rains have hit dry areas of Brazil, which has helped to stem some of the concerns of excessive dryness as they get into their planting season.

 

Wheat had its highest close since mid-August in the Chicago Dec contract yesterday, but could not hold on to gains, with a weak finish. Short-covering seems to be the topic of the day leading into the Friday Grain Stocks report. Will the record Russian crop and large ending world stocks put a damper on potential rallies? The spring wheat market was really hot earlier in the year, but the huge Russian crop has offset the potential for a bull wheat market. But, HRS may get back in the 6.50-7.00 range depending on direction from grain stocks updates. The USDA reported winter wheat planting 24% complete compared to 13% last week, but less than the average year-to-date of 28%. Minneapolis HRS – 3 ¾, Kansas City HRW -1 ¾ and Chicago SRW – ¼.  

 

Live Cattle experienced a sharp drop yesterday, and continued lower today, -.950 (Dec). Is this just a short-term technical correction of an overbought condition and a reaction to the bearish Cattle on Feed and Cold Storage reports? The key August Placements number from the report was higher, while the market was expecting 3% lower. The big attention-getter was a 12% increase in the larger feeder cattle, between 800-899 lbs, especially hurting the December contract. The production of all meats, including turkey and chicken, is giving the market a challenge to absorb. Exports will continue to be a key component.

 

Hogs resumed yesterday’s correction of an oversold condition in the deferred months, +.675 (Dec). October was down (-1.075), as high short-term supplies and weak Chinese demand are dragging on the market. The CME Lean Hog Index is down to 59.08 as of September 21st, with around a 1.50 discount to cash. This is very low compared to the usual discount of 15.00 for the December contract this time of year.

 

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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