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Closing Comments

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Closing Comments

 

Corn felt pressure from the impending First Notice Day this Thursday, -3 ½ (Dec). Traders holding long December positions must exit by FND, or risk being delivered upon. Thus, whether they decide to roll out to a deferred month or just exit their position, a sale against the long in Dec is required to offset the position, applying downward pressure to the market. This is not atypical, following the Thanksgiving holiday weekend. The USDA announced corn export inspections under expectations for the holiday-shortened week, as they pegged them at 638,711 MT vs. the estimated 650K MT. In ethanol, futures are close to multi-month lows, which is cutting into producer profit margins.

 

Soybeans and soymeal trended positive today, with January beans finishing, +2 ¾ (Jan). On the world scene, veg oils are under pressure from India’s announced tax restructure on imports. However, the domestic oil story is positive, with biodiesel imports coming under new tariffs and the October crush report due out at the end of the week. It is also expected that the EPA will be announcing the new RFS mandate by the 30th. Fundamentally, it is hard to understand why beans are not breaking, but demand continues to chew up supply. Demand is the key to future action, and the idea that China is very under-bought for Dec-Jan-Feb is helping keep things in check. Weekly export inspections came in a little under the expected 1.7 MMT, with the USDA penciling them in at 1,578,592 MT. South American weather continues to be a non-issue at this time, especially in Brazil, but there are some concerns developing of dryness in Argentina.

 

Wheat continued its lackluster performance from last week, with another down day. Chicago SRW -6 ¼, Kansas City HRW –7 ¼ and Minneapolis HRS -13 ½. Weekly export inspections for wheat were above projections of 300K MT, at a solid 344,721 MT. A positive vibe for exports involves China, where in October their imports were up 49.3% over September, with the U.S. being the leading provider. The PRC’s imports for Jan-Oct is almost 27% higher than last year. For this period, Australia is the largest source, but the U.S. is right on their heels. 

 

Live Cattle pushed higher, as the market carved out a short-term bottom last Monday and has been in an uptrend since, +1.250 (Dec). All the meats have experienced a flood of speculative buying, which has helped to buck seasonal trends. The beef market is still battling large supplies, with slaughter and production both up from last year. The Cold Storage report was also considered bearish with frozen stocks up. Look for results from the COT report to indicate whether the market is overbought.

 

Hogs moved in step with the cattle complex, with more gains, +1.275 (Dec). Helping to drive the market is strong domestic demand along with concerns of lower slaughter numbers than expected. However, slaughter and production are both up over last year. On the hand, the Cold Storage report was supportive with frozen stocks below expectations. Today’s trade saw the Dec contract eclipse the Lean Hog Index, which it has been lagging for some time, 64.525 vs. 63.980.

 

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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