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Closing Comments

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Closing Comments

Corn

Corn traded both sides of unchanged today despite positive export numbers and cooler, wetter weather.

 

Weekly export sales were toward the high-end of expectations this morning at 588,200 metric tons, more than likely motivated by the post-report break into the week. Destinations were varied with Japan, South Korea, and China in the mix. Despite strong demand we are still lagging behind last year’s brisk pace; outstanding sales of 14.1 mmt are 19% less than last year, and shipments are also lagging 2% behind pace. However, continued pressure on the dollar could make domestic exports more attractive in the short-term.

 

Forecasts have shifted wetter in the Northern plains which will slow progress but give much needed moisture to areas already falling behind on annual rainfall. Planting begun in the central Midwest over the last couple of days should halt into the weekend as rain and cooler temps delay most activity until the end of next week. Overall, long-term forecast remain cool with extended planting windows still unknown into the beginning of May.

 

According to analyst reports, average Midwest spot ethanol profitability is estimated at 50-60 cents/bu or 20 cents/gallon. Matching the best so far in 2015.

 

Soybeans

Soybeans trade both sides of unchanged on good exports and weaker dollar but concerns over meal demand and SA farmer selling.

 

Despite better than expected bookings, soybean futures turned lower early on South American farmer selling and higher crop estimates but the trade is cautious in the face of heavy short fund positions. Weekly US old crop soybean sales topped guesses coming in at 11.5 million bushel with new crop in at 8.3 million.

 

Midday reports from the floor had funds selling 2,500 soybean, 1,000 soymeal and 1,500 soyoil. Cash market firming on flooding in the east.

 

Soybeans demonstrated a lack of sellers on recent trips to the lows of the long term trading range showing potential for more strength, but the lack of tightness in the soymeal market is a change in market dynamics that will continue to be a weight on the market.

Wheat

Chicago closes higher on the day while KC and Minneapolis continue to struggle with cooperative weather forecast.

 

USDA reported this morning that exporters sold just 1.8 million bushels of old-crop wheat, which would be a marketing year low and down 85% from previous week. New crop wheat totaled 4.1 million bushels in the week ending April 10.  The funds continue to hold a near record short position of over 101,000 contracts due to a variety of reasons like large world supplies, positive overall weather, and bearish technical momentum.  The Kansas-Chicago wheat spread also is not providing any relief. 

 

On the world scene, Australia has turned very dry, but the thought there for now is that there plenty of time left.  India, China, and Europe are all expected to see relatively positive amounts of moisture.  Recent drier and warmer conditions have been good for western Russia and Ukraine, but the improving conditions will only last a few more days before rain comes back into the picture.

 

Beef

Bid and offers remain wide in the cash market helping beef to continue its recent recovery.

 

Live cattle initially opened lower today but didn’t stay there for long, trading slightly higher on the day.  A quiet day of news.  Bids continue to be passed up at $159 with asking prices generally around $165.  Bid and offers are far enough apart that you’d expect a Friday trade this week.  Packers have increased the level of slaughters this week with a total near 20,000 head so far from last week.

 

Choice cutout is up $0.22 at noon, while the select cutout is up $0.39 with 102 loads traded.  Spot volume is seen active on choice cuts, but still minimal on select.  Pricing has stalled though following yesterday’s sharp increases.  With good weather expected into the weekend, good beef clearance is expected especially on hamburger. 

 

The latest weekly beef export data is positive for the cattle market.  Shipments of muscle cuts over the last weeks has averaged 12,224 mt, compared to 12,238 mt during the same four week period a year ago.  US exports to Japan during this four week period were 20% higher than a year ago and exports to South Korea were up 18%.  The biggest drag for US exports comes from Mexico which is down 38% compared to last year.          

 

Feeder cattle traded higher on the day on follow through support. 

 

Pork

Lean hogs recover from yesterday’s market losses.

After struggling for most of the day session hog futures recovered nicely into the midday and afternoon and are as of this writing posting triple digit gains over much of the complex.  The market sentiment is struggling to shift between the heavy slaughter numbers and the premium of futures over the cash market.  Although packers seem to be more interested in buying it is not overly supportive yet seasonally we should start to see an increase in demand which should help to curb the downside potential. 

 

Many people have been unsure of what to expect when it comes to pork exports given how slow the start of the year has been compared to both 2014 and 2013 levels.  Also the increasing pork supplies are not helping the overall confidence.  Current USDA projections are for pork exports to be 4.750 billion pounds which would be 2.2% lower than last year and down 4.8% from 2013 levels.  The reason for the concern in the export pace is for the first two months of the year exports were 15.9% lower.  The weekly pace is showing some improvement in March and are expected for April as well.  Although pork exports are increasing the strength seen in the US dollar and low prices in competing markets are both large obstacles for the entire industry.  The other concern to be watching is the spread of the HPAI will present a concern for an increase in chicken supplies when pork is already at the largest we have seen for the coming summer months. 

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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