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Closing Comments



Closing Comments


USDA’s daily export reporting system this morning included another routine corn sale. “Unknown destinations” bought 4.6 million bushels over the past 24 hours. It could have been South Korea, Mexico, Japan or another buyer, but it wasn’t likely China.

Otherwise, it was a very slow news day, with traders looking ahead to the weekend, when temperatures are expected to drop close to the freezing level in the northwestern Midwest. Very little of this year’s monster corn crop is expected to be lost, but traders figured they would hit the pause button on selling until they see tomorrow morning’s readings, just in case.

The grain and oilseed complex continues to see pressure from weakness in the broader commodity complex as well. Wall Street funds are bearish the broader commodity sector, leading them to be short (sold) the complex. One of the ways they do this is to sell the continuous commodity index, which is a basket of 17 commodities from the Ag, energy and metals sectors. The index chart dropped below critical support at 500 this week to four-year lows, suggesting grain and oilseed prices may continue to feel pressure from this broader commodity sector in the weeks ahead.

December corn spent most of today’s trading session within a two-cent trading range. Sentiment remains bearish, with rallies being sold. However, sellers were also lacking on breaks until traders have a chance to monitor this weekend’s temperatures in the northwestern Midwest. That said, the path of least resistance continues to be lower.


USDA reports that “unknown destinations” bought another 4.8 million bushels of U.S. soybeans in the past 24 hours. The trade will assume that the buyer is China, but we won’t likely know until the soybeans are shipped.

The big story in the soybean pit Thursday was USDA’s crop report, which confirmed a crop that was even bigger than the trade expected. In fact, the trade expects it to be even bigger in October. However, sellers backed away today until they see how another story plays out this weekend. Forecasters are calling for a broad scattered frost event across much of the northwestern Midwest, but with readings just high enough to avoid major production loss. A drop of a few more degrees could change it into a bigger story, but that still didn’t appear to be the case in today’s midday update.

This weekend’s frost event is being viewed through the filter of Thursday’s USDA crop report event. It would be viewed much differently if USDA were forecasting ending stocks of 150 million bushels, but the agency is calling for surplus stocks of 475 million bushels, with most in the trade expecting that to rise in October and November. The trade assumes that we could lose 25 to 50 million bushels of soybeans and still feel the weight of burdensome supplies over the next year.

Nonetheless, sellers backed off today until they could take a look at tomorrow morning’s temperature readings. That allowed prices to post a modest bounce going into the weekend.

Members of the National Oilseed Processors Association account for roughly 95% of all soybean crush activity. NOPA is scheduled to release its member crush data for August at 11 a.m. CDT Monday morning. We’re estimating August NOPA crush at 108.352 million bushels, due to a shortage of available soybeans to process. That’s a bit below the average trade expectation of 111.636 million bushels. Crush should surge once again in August when an abundance of new-crop supplies become available.

November soybeans firmed late on the frost factor, finishing the day near its session highs. However, today’s gains paled in comparison to losses over the past month in which time the speculative hedge funds built record large short (sold) positions. Today’s modest rally at a time when these fund traders hold such large short positions suggests that the trade really isn’t too concerned about this weekend’s event significantly altering bearish soybean fundamentals.


Euronext wheat futures dropped to $4.37 per bushel overnight, after converting for currency exchange rates, due to excessive feed quality wheat after this year’s excessive rains at harvest in France. That combined with USDA’s higher Black Sea export numbers on Thursday to pressure wheat prices today. Rains in the Plains winter wheat belt added to that selling pressure, along with bearish chart signals.

The bottom line is that wheat is trending lower and fund managers love a good trend. It’s going to be difficult to turn that train around as long as corn prices are dropping without a significant bullish story in the wheat pit. Rains in the Plains and the Russian wheat belt make it difficult to generate those bullish headlines needed to turn sentiment.

Wheat prices are oversold and due for a correction at all three exchanges. However, rallies continue to be sold, with global cash sellers pushing prices lower to maintain their market share. Thus far, it’s difficult to see anything on the horizon that would change that sentiment as long as corn prices are falling.


Cash trade was slow to develop this week. Bullish attitudes early on suggested follow-through strength to last week’s $8 gains. However, sentiment turned midweek and traders again got cold feet, fearing that beef was too highly priced relative to pork, leaving the red meat vulnerable to loss of market share. October is national pork month, when retailers tend to feature pork. Packers jumped on the drop in futures to drop their bids, even as packer margins dried up.

Some cash activity developed late in the week in the Midwest at mostly $157 to $159 per cwt on a live basis and $248 to $252 on a dressed basis, which would be down mostly $2 to $3 per cwt from the previous week for the Corn Belt. However, trade was slow to develop in the Plains feedlot region. There were reports of bids dropping to $158, with some cattle moving in Kansas at $161, down mostly $2 from the previous week. Later trade reports had cattle moving at $162, with prices firming as trade evolved.

Boxed beef movement dropped to 173 loads Thursday, down from 236 loads the previous day and down from 259 loads the previous week. Choice cuts were up $0.08 to $251.54 per cwt, while Select cuts were down $1.83 to $236.35. This pushed the Choice/Select spread to $15.19 per cwt, up from $13.28 the previous day and up from $13.43 the previous week and the strongest spread since December 11 of last year. However, this is also the time of year when the spread tends to come under pressure, as retailers feature pork and barbecue season wanes. Product movement at mid-morning today was good at 107 loads, with Choice cuts down $1.01 and Select cuts down $0.82 per cwt.

Futures prices saw follow-through selling today, but bearish conviction was lacking. Even so, sentiment in the fat cattle market appears to be more bearish than in the feeder cattle pit. Early weakness in the feeder cattle futures market looked more like a correction in an overbought market than it did topping action. As such, the weakness was bought, with prices settling near session highs on the strength of a strong cash market. This week’s sales reflected strong demand on expectations of cheap corn and ongoing tight supplies.

The latest CME cash index came in at a record $226.98 per cwt, up $0.60 on the day. The index has posted gains the past 10 days, with gains over that period totaling $9.63 per cwt.


Lean hog futures rallied sharply the last third of August into early September on expectations that the cash price would turn higher after falling for seven weeks straight. In fact, the lead October contract traded to a $10 premium to the cash market on those expectations. Now futures prices are pausing to reassess the cash market; waiting to see if it will catch up or stagnate.

The cash market did stop the bleeding and turn higher, but it’s failed to show much strength to sustain the move. Cash trade to close out the week was mostly steady, although some markets in the Iowa/Southern Minnesota region were 50 cents higher. This suggests a soft index in the days ahead. The latest CME 2-day index came in at $100.20 per cwt, up $1.18 on the day and up $4.75 over the previous week, but strength was waning.

We saw a similar upturn in the cash index at this time of year last year, before prices turned down again following the release of USDA’s quarterly hogs and pigs report. The next report is scheduled to be released on September 26.

Product movement dropped to 320 loads Thursday, down from 482 loads the previous day and down from 358 loads the previous week. The composite pork product price was up to $107.53 per cwt, up $1.38 on the day. Movement at midday today was also slow at 156 loads. Belly prices were strong, but ham prices were sharply lower, leading to a lower composite price. It came in at $106.55 per cwt, down $0.98 from Thursday.

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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