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Midday Update

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Midday Update

·         The dollar continues to trade at its highest level since late April this morning on expectations that the Federal Reserve will raise interest rates later this year. As such, money is flowing out of the broader commodity sector, although that also includes fund managers shorting (selling) the major commodity indices.

·         Grain and oilseed prices likely would have been lower anyway today as weather forecasts improve for the Midwest and USDA continues to print favorable crop ratings. However, the broad-based selling of the broader commodity sector amplifies those losses and takes prices lower than they otherwise would have gone.

·         One member of the trade this morning stated that “wheat is a dog” and that states the current sentiment toward the food grain. Elevators are full of wheat supplies that cannot be sold, with much of the soft wheat crop containing vomitoxin. The strong dollar makes the battle to move U.S. wheat even more difficult, with dry areas of Australia and Canada seeing some shower relief near-term. Wheat is posting 10 to 11-cent losses.

·         Sinking wheat adds to corn woes, but corn is also under pressure going into the weekend due to improving weather forecasts amid ongoing strong USDA crop ratings. These factors make it difficult to stay focused on crop problems, adding to the erratic and choppy July trade that we are seeing. Corn futures are 7 cents lower.

·         Soybeans face similar pressures to corn, but prices have erased session losses as processors push bids to obtain more supplies. Old-crop supplies are tightening, which in turn tighten the new-crop balance sheet as well. Demand is strong, thanks in part to Argentina’s problems as well as expectations of tightening canola supplies, with a great deal of uncertainty about this year’s crop. However, gains are still limited due to the belief that August weather is what truly matters for soybeans. Soybean futures are a penny higher.

·         Live cattle futures are 30 to 60 cents higher after erasing losses earlier today when they traded to their lowest level since April 23rd. Prices are consolidating while waiting for cash trade. Product prices are weaker again this morning.

·         Feeder cattle are $1 to $2 higher on cheaper corn prices this morning.

·         Lean hogs are mostly 15 to 40 cents weaker this morning amid sinking cash and product prices. The cash market is mostly steady to 50 cents weaker, while the composite pork product price is down nearly $1.

 

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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Arlan Suderman | Senior Market Analyst
WATER STREET ADVISORY® | www.waterstreet.org
(316) 729-4599 | asuderman@waterstreet.org

Past performance is not indicative of future results. The information contained in this report is intended for informational purposes only and is the opinion of the writer and may change at any time. This information was compiled from sources believed to be reliable but accuracy cannot be and is not guaranteed. There is no warranty, expressed or implied, in regards to this information for any particular purpose. There is SIGNIFICANT RISK involved in trading futures and or options on futures and may not be suitable for all investors. Investors should consider these RISKS and evaluate their suitability based on their financial conditions. No one should ever consider trading futures or options on futures with anything other than RISK CAPITAL. This information is provided freely and is NOT in the capacity of a trading advisor. NO LIABILITY on the part of the author exists for any trading loss you may incur in the use of this information. Information provided is not to be construed as an offer to sell or solicitation to buy any commodity or security named herein.

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