Home Market Market Watch Closing Comments

Closing Comments

SHARE

https://www.hoosieragtoday.com//wp-content/uploads//2015/02/image00918.jpg

Closing Comments

Corn

Corn futures benefit from outside money flow, with added support from positive chart signals.

Exporters shipped 27.6 million bushels of corn in the week ending February 5, up from 26.0 million the previous week and up from the five-year average for the week of 26.4 million bushels. Marketing year shipments total 617 million bushels, up 14 million or 2% from the previous year. Exporters typically ship 40% of final shipments by this point in the year, whereas they had shipped just 31% by this point last year. This year they have shipped 35% of USDA’s target as they focus on shipping soybeans ahead of the South American export season.

Exporters shipped 4.8 million bushels of grain sorghum in the week ending February 5, down from 5.1 million the previous year, but up from the five-year average for the week of 1.4 million bushels. Shipments to China accounted for all of the past week’s total.

Marketing year shipments to all destinations total 156 million bushels, up 99 million or 174% from the previous year. Exporters typically ship 43% of final grain sorghum shipments by this point in the marketing year that ends August 31, whereas they had shipped 27% by this point last year. However, they have already shipped 58% of USDA’s target for the current year, threatening this year’s supply.

As such, shipments to date exceed the seasonal pace needed to hit USDA’s target by August 31 by 39 million bushels, up from 38 million the previous week. Furthermore, Chinese end users are already actively buying the 2015 grain sorghum crop.

Corn futures opened higher overnight, turned lower on a stronger dollar, but then rallied again today as the dollar turned negative. The lead March corn chart is beginning to post some positive chart signals, inviting additional buying as well.

The key today is that March corn failed to take out the January 21 high of $3.925. That remains an objective for market bulls going forward, but failure to do so would leave the market in a sideways trading range near-term. Corn remains in a better position than soybeans near-term due to the expectations of a continued decline in acres in the world.

December corn looks a bit more impressive as it busted to its highest level since January 13 today. This dropped the new-crop soybean/corn price ratio to 2.29 to 1 as the market attempts to get enough corn acres. I look for that ratio to continue to trend lower into the growing season, although we can expect periodic corrections in corn’s price relationship with soybeans.

Soybeans

Soybeans consolidate higher as traders balance a big South American harvest against strong demand ahead of those competing supplies becoming available.

Exporters shipped 54.6 million bushels of soybeans in the week ending February 5, down from 62.5 million the previous week, but up from the five-year average for the week of 42.8 million bushels. Shipments to China made up 36.4 million bushels of the past week’s total.

Marketing year shipments to all destinations total 1.431 billion bushels of soybeans, up 215 million or 18% from the previous year. Exporters typically ship 63% of final soybean shipments by this point in the marketing year that ends August 31, whereas they had shipped 74% by this point last year. However, this year they have already shipped 81% of USDA’s target for the year. As such, shipments to date exceed the seasonal pace needed to hit USDA’s target by August 31 by 311 million bushels, up from 308 million the previous week.

Harvest was slowed by substantial rains in northern Brazil over the weekend, but the week ahead should see active progress as the rains shift south to aid pod fill in southern areas. We’ll likely see USDA begin to ratchet down Brazilian production, while ratcheting up Argentine production in the months ahead.

March soybeans continued to be capped by the 20-day moving average, which is trending lower. November continues to be capped by the 20-day moving average as well. Traders are focused on an increase of money into the broader commodity sector as the dollar shows weakness and crude oil pushes higher, but are reluctant to become too bullish as the South American harvest comes in.

Wheat

Wheat benefits from increased money flow into the commodities, but traders are growing wary of waiting for Egypt amid continued sluggish export shipments.

Exporters shipped 14.6 million bushels of wheat in the week ending February 5, down from 15.3 million the previous week and down from the five-year average for the week of 20.9 million bushels. The past week’s total included 2.3 million bushels out of the Pacific Northwest to China.

Marketing year shipments to all destinations total 571 million bushels, down 257 million or 31% from the previous year. Exporters typically ship 67% of final wheat shipments by this point in the marketing year, whereas they had shipped 70% by this point last year. This year they have shipped just 62% of USDA’s target. As such, export shipments to date fall short of the seasonal pace needed to hit USDA’s target by May 31 by 51 million bushels, versus being short by 49 million the previous week.

Wheat benefited from broad-based buying of the commodity sector today, with additional strength coming from optimism that we will soon see a big deal with Egypt. However, traders are growing wary of waiting for Egypt, which is probably their intent. Egypt is a shrewd buyer and typically buys on price breaks. As such, we’ll likely see wheat define a broad sideways trading range until we get closer to spring to assess the condition of the crop.

Beef

Feeder cattle lead the way higher as cash fundamentals improve for fat cattle.

Friday’s fat cattle cash market was stronger in price and volume than expected by the trade, providing a boost for today’s trade, with additional strength coming from active buying in the feeder cattle futures market. Friday’s cash trade was nearly nonexistent in Texas, but finished with good movement at $162 per cwt in Kansas and $161 to $162.50 in Nebraska, with some going for $255 on a dressed basis.

Last week’s kill is estimated at 544,000 head, down 19,000 from both the previous week and the previous year. Carcass weights dropped to 815 pounds, down from 820 pounds the previous week, but still up from 806 pounds in the same week last year.

That brings total beef production for the week to 442.5 million pounds, down from 460.5 million the previous week and down from 452.4 million pounds in the same week last year. Beef production for the calendar year thus far is estimated at 2.640 billion pounds, down 4.1% from the previous year. This week’s slaughter will likely be similar, which should begin to stabilize boxed beef prices.

Last week’s boxed beef movement totaled 821 loads, down from 876 loads the previous week, but up from 770 loads the previous year. Choice cuts finished the week at $239.08 per cwt, down $3.36 on the week and down $21.37 over the past three weeks. Select cuts finished the week at $233.81 per cwt, down $1.93 on the week and down $17.03 over the past three weeks. The Choice/Select spread narrowed to $5.27 per cwt, down $1.43 on the week. Again, the slower slaughter levels should begin to stabilize product prices; at least that is what futures traders are anticipating.

Boxed beef movement at mid-morning today was good for a Monday at 101 loads. Choice cuts lost another $0.86 to $238.22 per cwt, while Select cuts were up $0.31 to $234.12. This dropped the Choice/Select spread to $4.10 per cwt.

The lead two feeder cattle futures contracts locked the $4.50 daily limit higher this morning on follow-through buying from Thursday’s reversal, with traders encouraged by Friday’s strong fat cattle trade and on the big discount to the cash market, which is currently near $210 per cwt.

The strong start to the week creates problems for packers. They were able to put pressure on the cash market previously due to the strong downdraft of the futures market. Last week’s mid-week reversal changed that, with cash moving higher on Friday. Failure to extinguish this week’s strength combined with stabilizing product prices would be expected to support stronger cash again this week as well.

Pork

Cash market leads futures lower, negating Friday’s big rally.

Early calls coming from the trade this morning were for higher lean hog futures, following through on Friday’s strength. However, that didn’t happen. Rather, traders focused on weak fundamentals to turn sellers once again. Product prices did firm at midday, but the cash market appears to be gaining downside momentum.

First support for April lean hogs is at $66.15 per cwt. However, traders will be watching the low set by the expiring February contract for its next possible target if the cash market isn’t able to stabilize soon.

Today’s cash market was mostly $1 lower in the Midwest. The closely watched Iowa/Southern Minnesota market as steady to $1 lower, while Illinois was mostly $1 to $2 lower. The latest CME cash index came in at $67.90 per cwt, down $0.98 on the day, down $3.23 over the past week and down $20.61 per cwt over the past 8 weeks. In fact, the latest index is down $16.34 cwt over the past year.

Last week’s slaughter is estimated at 2.250 million head, up 4.1% from the previous year. That brings slaughter for the year to date to 11.964 million head, which is still down 0.6% from 12.039 million head slaughtered by this point last year. However, the higher carcass weights continue to push the pork supply higher, overwhelming demand that is actually doing fairly well. However, it means that packers continue to operate off of margins of $15 to $20 per head and do not have to use that revenue to chase the market to get their needs met.

Product movement totaled 1,838 loads last week, down modestly from 1,871 loads the previous week, but up from 1,731 loads in the same week last year. However, it is doing so at the lowest prices in four years as supply overwhelms demand. The composite pork product price finished the week at $72.94 per cwt, down $5.39 on the week and down $11.44 per cwt over just the past two weeks. Movement at midday today was decent at 203 loads, with the composite price firming $0.96 to $73.90 per cwt.

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.

https://www.hoosieragtoday.com//wp-content/uploads//2015/02/image01023.jpg

https://www.hoosieragtoday.com//wp-content/uploads//2015/02/image01118.jpg

https://www.hoosieragtoday.com//wp-content/uploads//2015/02/image01218.png

www.waterstreet.org 
or 1-866-249-2528

 

 

https://www.waterstreet.org/s/ws-80x70.png

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.

The information contained in this e-mail message is intended only for the personal and confidential use of the recipient(s) named above. This message may be an attorney-client communication and/or work product and as such is privileged and confidential. If the reader of this message is not the intended recipient or an agent responsible for delivering it to the intended recipient, you are hereby notified that you have received this document in error and that any review, dissemination, distribution, or copying of this message is strictly prohibited. If you have received this communication in error, please notify us immediately by e-mail, and delete the original message. Water Street Solutions is an equal opportunity provider. Water Street Solutions is an equal opportunity employer.

 



Indiana Farm Expo