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Midday Update

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Midday Update

·         The dollar continued to tumble in early trade today, continuing a pattern began overnight when China began to actively sell the greenback for the purpose of propping up the yuan to prevent a larger collapse. The dollar broke below the 100-day moving average to trade at four-week lows with the charts starting to suggest even lower levels possible.

·         The break in the dollar would normally attract buying of the major commodity indices, and they did see a small bounce this morning. However, buying is being limited by fears that China’s problems will spread in the global economy, damaging demand for commodities at large.

·         The Department of Energy reports that crude oil stocks fell 1.7 million to 453.6 million barrels in the week ending August 7. However, stocks remain near levels not seen at this time of year over the past 80 years of keeping records. Gasoline stocks dropped 1.3 million barrels and are in the middle of the range typically seen this time of year, as are distillate stocks, which increased by 3.0 million barrels during the week.

·         Ethanol stocks dropped to a calendar-year low of 18.5 million barrels in the week ending August 7, versus 19.2 million the previous week and 17.8 million barrels in the same week last year. Production rose to 965K barrels per day during the week, up from 961K the previous week and 931K the previous year. The record for production was 994K barrels per day in mid-June.

·         The big focus today is USDA’s crop report. USDA shocked the trade by raising corn and soybean yields as they did in both 2008 and 2010, two analog years. Key numbers from the report versus trade expectations as surveyed by Reuters are as follows:

U.S. New-Crop Ending Stocks

2015-16

Wheat

Corn

Soybeans

billions of bushels

USDA August 12 Report

0.850

1.713

0.470

Average Trade Estimate

0.858

1.424

0.301

Highest Trade Estimate

0.913

1.634

0.402

Lowest Trade Estimate

0.742

1.178

0.210

Previous USDA Estimate

0.842

1.599

0.425

Water Street Solutions

0.913

1.178

0.241

 

U.S. Yields & Production

2015-16

2015-16

Corn

Soybeans

Corn

Soybeans

Yield in bushels per acre

Production in billions of bushels

USDA August 12

168.8

46.9

13.686

3.916

    Pre-Report Estimates

Average Trade Estimate

164.500

44.700

13.327

3.724

Highest Trade Estimate

167.500

45.700

13.763

3.806

Lowest Trade Estimate

160.400

43.200

13.009

3.570

Previous USDA Estimate

166.800

46.000

13.530

3.885

Water Street Solutions

161.500

44.400

13.098

3.730

 

·         Corn futures are down 17 cents on the above USDA numbers, but several cents off their lows.

·         Soybean futures are down 47 cents on USDA data.

·         Wheat futures are down 9 cents in Chicago, down 7 cents in KC and down 5 cents in MN on weakness in the other markets.

·         Live cattle futures are steady to 50 cents weaker on fears that demand for product will wane as we move into September, with expectations in the trade of steady cash this week at best.

·         Feeder cattle prices have been on both sides of unchanged this morning, with traders worried about tightening margins if this year’s corn crop proves to be smaller than currently projected by USDA.

·         Lean hog futures are mostly $1 to $1.30 higher on a technical bounce. The composite pork product price is down $1.32 this morning on weakness in loin, rib, ham and belly prices.

 

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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