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Midday Update

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Midday Update

·         The Department of Energy reports that crude oil stocks rose 2.6 million to 456.2 million barrels in the week ending August 14. Supplies remain near their highest level on record (80 years) for this time of year. Gasoline stocks fell by 2.7 million barrels during the week and are in the middle of the seasonal range, while distillate stocks (includes diesel) increased 0.6 million barrels and are also in the middle of the average range for this time of year.

·         Crude oil prices fell sharply following release of the data showing an unexpected rise in stocks, falling to fresh 6-1/2 year lows. That in turn triggered active selling of the major commodity indices on fears that rising crude oil supplies mean a slowing global economy that will buy fewer commodities overall. That then created pressure on grain and oilseed contracts that are a part of those indices.

·         Ethanol stocks rose to 18.6 million barrels in the week ending August 14, versus 18.5 million barrels the previous week and 18.3 million the previous year. Production remained unchanged during the week at 965K barrels per day, but up from 937K barrels in the same week last year.

·         Traders are anxiously waiting for this afternoon’s release of the minutes of the July Fed meeting. They’ll be parsing words in the minutes to look for further clues on a possible rate hike at the Fed’s September 16 & 17 meeting. That could also have significant impacts on the value of the dollar, and therefore money flow in and out of the broader commodity sector.

·         November soybeans dropped to $8.98 overnight, but found little selling interest below $9, resulting in a healthy recovery to $9.09. However, buying interest was also limited by fears that USDA’s yield may be right, allowing prices to pull back to $9.03. The sharp break in crude oil and the connected sell-off in the broader commodity indices then pulled soybeans under water, with the contract currently trading 11 cents lower after posting new life-of-contract lows and vulnerable now to $8.80 per bushel.

·         December corn garnered cautious support from the Pro Farmer tour that failed to show impressive yields in the west while highlighting problems in the east. The contract hit buy stops above Monday’s high of $3.795, pushing the contract to $3.83. However, the selling the broader commodity indices is pulling corn under water, with prices currently unchanged on the day.

·         Wheat futures are down 3 cents in Chicago at their lowest level since the post-USDA report sell-off, while down 5 cents in KC and down 2 cents in MN on broader commodity selling amid big stocks and weak demand.

·         October live cattle are down $2.45 per cwt on a broader sell-off on worries about beef demand, trading to its lowest level in three weeks, breaking more than $1 below support at $146. There are reports of small numbers of cash cattle moving in Nebraska and Iowa at $232 to $233 per cwt on a dressed basis.

·         Feeder cattle are mostly $2.35 to $2.65 lower on weakness in the fats and firm corn prices.

·         Lean hogs are $1.00 to $1.70 lower after breaking chart support and amid concerns that supply will overwhelm demand in the weeks ahead. Today’s cash market is 50 cents lower in Indiana and parts of Ohio, while mostly steady elsewhere. Reports were lacking from Illinois.

 

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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