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Closing Comments

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Closing Comments

 

Corn traded in a tight range right around breakeven, EVEN (May) and + ¼ (Dec). The markets seem to have stabilized ahead of Thursday’s mega-Report from the USDA, as most are expecting corn acres to be even-to-under a million short of last year. Corn appears to be positioned for more fund buying (stochastics are showing oversold) and shrinking global supply. Currently, managed fund net longs are estimated around 248K contracts. In South America, Brazil’s first crop corn harvest is progressing at a normal pace, and second crop safrinha corn is doing well – in contrast to Argentina’s dire yield reductions.

 

Soybeans leaked away a few more cents today, as most are in “hurry up and wait” mode, -6 (May) and –5 (Nov). Anticipation is growing for Thursday, and expectations are for bean acres to increase by around a million acres, while soybean stocks are expected to be record large. Concerns still loom over the market regarding trade wars with China. However, some of that hysteria seems to have subsided, and one must remember that of the PRC’s 36 MMT of imports last year, 39% came from the U.S. To the South, Brazil looks to be hauling in another record-size crop, with Brazil crop roundup estimates now at 116 MMT vs. the USDA forecast of 113 MMT. Brazilian beans are currently about 67% harvested.

 

Wheat was down today, as winter wheat weekly condition ratings improved in yesterday’s data. The 6-14 day forecast is showing wetter, which prompted more selling from traders. However, much of the HRW belt is staying dry with no rains in the next 48 hours. Exports have been disappointing, with yesterday’s weekly inspections below estimates. Inspections are currently at 77.4% of the USDA forecast compared to the five-year average of 78.3%. Russia’s wheat stocks are up 25% over last year and export demand is eating it up. Russia looks poised to produce another bin-buster, as winterkill does not appear to be a major issue this year. Chicago SRW -5, Kansas City HRW –4 ¼ and Minneapolis HRS –3 ¼ (July).

 

Live Cattle took a pause from their freefall, +.250 (April) and -.050 (June). The Cattle on Feed Report confirmed large supplies ahead with big herds in feedlots combined with a wide basis. The market is also technically oversold. The battle between supply and demand continues.

 

Hogs seemed to find some footing today, as the search for a bottom continued, -.275 (April) and -.075 (June). Bringing pressure is stout short-term supply coupled with higher slaughter numbers than expected. Also the market is nervous about NAFTA negotiations, as well as concerned about China’s plan to impose a 25% tariff on pork. In other news, South Korea had their first case of hog hoof and mouth disease (900 were culled), but it is not believed to be widespread.

 

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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