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Closing Comments

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Closing Comments

 

Corn traded sideways with a negative bent coming out of the weekend, -1 ¼ (Dec). Crop progress this afternoon is expected to show the U.S. harvest 80% complete. In South America, it is thought that corn planting is reaching the midway point. USDA weekly corn inspections came in under expectations of 600K MT at 375,951. The weekly Commitment of Traders report was delayed until this afternoon. It is thought managed funds are around 240K contracts short. However, the CFTC will not include any pre and post report activity, as it will only show results through Tuesday of last week. Even though corn was presented with a bearish picture with record yields and stocks, there does not seem to be aggressive selling at this point. How much lower will be enough for corn, with strong demand under the market?

 

Soybeans traded sharply lower with no fresh news and favorable South American weather, -12 ¾  (Jan). Bean futures crashed through support of both the 100 and 200-bar moving averages, and may have more room yet before bottoming. USDA weekly soybean inspections showed soybeans in line with expectations at 2,087,458 MT vs. estimates of 2,050,000 MT. While China was quiet this morning with continued port delays, the USDA reported a private sale of 135K MT of soy meal to the Philippines for 2017/18. This was well-timed in conjunction with President Trump’s visit there this week. Soyoil, which has been providing a boost, lost some steam with correction of its overbought condition. Look for trade to slow significantly as we near Thanksgiving week.

 

Wheat gave back the gains that had accumulated the last couple of days. The Dollar is up and so is competition with Russia, who as of last Wednesday have exported in excess of 20% over last year (as of July 1st). Weakness in the Russian Ruble is not helping the U.S. cause, as last week Gulf HRW was at a $10/MT premium to both Russian and German origin wheat, according to AgResource. In Brazil, heavy rains have impeded harvest progress as well as wheat quality, as Brazil is expected to produce 32% less than last year. Imports from production are estimated to total 7.0 MMT. USDA wheat inspections were on the low end at 301,039 MT vs. estimates of 350K MT. Chicago SRW -7 ¼, Kansas City HRW -5 ¾ and Minneapolis HRS -14 ¼.

 

Live Cattle fell down and closed a chart gap on Friday, and saw volatile action today before closing even (Dec). Upcoming reports to watch will be the November Cattle on Feed this Friday and Livestock Slaughter and Cold Storage next Wednesday. The choice cut-out and select boxes both showed gains on Friday. Slaughter margins are down from $128/head last year to $99/head this year, but still well above the five-year average of $5. Traders seem to be expecting a further break in the cash market with a seasonal slowdown heading into Thanksgiving.

 

Hogs took out Friday’s low and continued down for the 9th consecutive session, -.175 (Dec). Although action today took the market below the 200-bar moving, the Dec contract seemed to find support there for now, as it bounced off and closed above it. The deferred months showed small gains. Hogs continue to shoulder an overbought condition and large short-term supplies. However, pork values are holding up better than expected.

 

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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