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Closing Comments

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Closing Comments

 

Corn succumbed to weakness after achieving a new short-term high, as the USDA Report lacked the firepower to sustain a rally, EVEN (Dec). Favorable weather and uneasiness over unresolved trade disputes are doing their part to hold down the market. From a global perspective, 2018/19 corn stocks received the biggest haircut of the grains, estimated at 36 MMT less than previously (down 20 MMT in China). U.S. corn production is estimated at 14.04 bbu with a 174 bpa yield, and acres of 88 million unchanged. USDA weekly export sales were light, coming in at 785,600 MT compared to estimates of 750K-1.4 MMT. Expect corn to be the leader and to gain on beans and wheat, but it will be difficult to get beyond near-term resistance without a bigger U.S. or world problem.

 

Soybeans had the biggest gains today, +6 ¾ (Nov). Of note, WASDE downgraded U.S. soybean 2018/19 stocks by 114 mbu. The trendline yield of 48.5 bpa was used with overall production down 112 mbu from last year. Exports were downgraded 10 mbu from the February forecast, but the uncertainty with China leaves a lot of question marks. World soybean stocks were below estimates of 90.9 MMT at 86.7 MMT. Brazil’s crop is predicted to be a record 117 MMT with Argentina at 56 MMT. USDA weekly sales were in the lower half of the range of estimates of 450K-900K MT, pegged at 632,600 MT.

 

Wheat traded weakness across the board post-Report: Chicago SRW -4, Kansas City HRW -4 ½ (July) and Minneapolis HRS -2 (Sept). Ending stocks in the U.S. were both over estimates while world ending stocks were below, with Russia projected to be well below last year’s record of 85 MMT at 72 MMT. Even though 2018/19 U.S. stocks were above expectations, they were at a 4-year low, coming in at 955 mbu. A weather problem overseas will be necessary to sustain any kind of long-term rally. All wheat production in the U.S. was seen by WASDE to by 1.821 bbu, higher than estimates of 1.774 and last year’s 1.741. Sales reported on the weekly log were weak for wheat as they were announced at 83,400 MT, which is well below the range of expectations of 250K-700K MT.

 

Live Cattle broke out to a new high not seen since March 23rd, June +1.850. The two factors struggling for the upper hand include large supplies on the one hand, and a large discount of futures to cash with strong demand on the other.

 

Hogs also jumped up and closed above yesterday’s high and through key resistance, +.750 (June). Like beef, pork has solid demand and gaining values underpinning trade. It is critical that demand remain ahead of big supplies to keep the market from rolling over.

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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