Home Market Market Watch Closing Comments

Closing Comments

SHARE

https://www.hoosieragtoday.com//wp-content/uploads//2015/05/image0099.jpg

Closing Comments

Corn

Corn futures remain under pressure as the crop gets off to a good start.

USDA’s weekly crop progress report indicated that 55% of the U.S. corn crop was in the ground as of May 3, up from 19% the previous week and up from the five-year average for the week of 38%. Minnesota continued to lead the way with 83% planted, up from 38% the previous week and up from the five-year average for the week of 34%. As a general rule, most states west of the Mississippi River, along with Illinois and Michigan, were ahead of normal, while southern and eastern areas were behind normal.

The agency also reported that 9% of the U.S. crop had emerged as of May 3, up from 2% the previous week, but still below the five-year average for the week of 12%. Ironically, the only state where emergence was ahead of normal for the date was in Kansas.

Futures came under pressure overnight as traders reacted to the rapid planting pace, with rains expected in dry areas while previously wet areas dry out a bit. Additional selling hit this morning when orders were placed to purchase 5,000 July corn puts at the $3.20 strike price, which was still more than 35 cents below the market at the time.

July corn slipped to its lowest level in nearly seven months, with December doing the same. Rapidly sliding wheat prices added to the pressure. However, prices came well off their lows as the dollar sank and money began to flow into the broader commodity sector, limiting losses in the grain market.

In fact, prices firmed into positive territory late on the outside support, posting a friendly reversal on the charts. Today’s action suggests that corn may be prepared to confirm a near-term low if we continue to see weakness in the dollar, but much of that may depend on what happens with Greece in the days ahead as much as it does weather in the Midwest.

Soybeans

Soybean prices reflect firm undertones as Argentine workers strike.

USDA reports that 13% of the soybean crop had been planted as of May 3, up from 2% the previous week and up from the five-year average for the week of 9%. Mississippi led the way at 52% planted, up from the typical pace of 44%. Similar trends were seen in soybean planting as in corn, with western areas planting faster than eastern areas overall. In fact, Minnesota farmers had already planted 32% of the crop as of May 3, up from just 1% the previous week and above the five-year average for the date of 7%.

Shipments out of Argentina’s largest port at Rosario have slowed dramatically, raising hopes that more business will be sent our way. However, gains were limited on the realization that the additional business is not likely to dry up our supplies. Union workers representing a fifth of the crush industry are on strike, with port workers supporting them by walking off the job as well.

Soyoil prices continue to show good strength, rising to fresh two-month highs today on increased volatility in the global vegetable oil market. That combines with the possibility of Argentine soymeal business shifting to U.S. shores to provide good margins for crushers, increasing demand for soybeans.

Nonetheless, today’s buying kept prices well within their recent trading ranges, with gains limited by rising global surpluses overall. Yet, the new-crop soybean/corn price ratio finished the day at 2.52 to 1, attempting to buy soybean acres at the expense of corn. The market seems scared that rapid corn planting will increase acres at the expense of soybeans. Corn could buy more acres, but that would still leave opportunity for soybean acres to expand from USDA’s March 31 estimate, which could provide a rude awakening to traders on June 30.

Wheat

Wheat futures slide to new contract lows on poor demand, despite focus on poor growing conditions in the Central Plains.

USDA reports that 43% of the winter wheat crop was heading as of May 3, up from 28% the previous week and above the five-year average for the week of 34%. Progress was ahead of normal in states previously under stress, such as Kansas, Colorado, Oklahoma, Texas and Arkansas. The wheat-state of Kansas was 41% headed, up from the normal pace of 28%.

The crop rated a condition index score of 325 (500=perfect crop), up from 323 the previous week, up from 281 the previous year and up from the 10-year average for the week of 320. South Dakota saw a 13-point drop during the week to a score of 269, while Washington saw a 10-point gain to 327. The wheat-state of Kansas was unchanged at 286, while Oklahoma and Texas both saw modest gains. Some of the best wheat is in Montana, and also in the eastern Midwest.

Spring wheat planting progress reached 75% by May 3, up from 55% the previous week and above the five-year average for the week of 40%. Progress again was ahead of normal in each of the six major spring wheat growing states. Most impressive was Minnesota, where 95% of the crop was planted as of May 3, up from 81% the previous week and up from the five-year average for the week of 41%.

Emergence of the spring wheat crop was pegged at 30%, up from 9% the previous week and up from the five-year average for the week of 16%. Once again, each of the six major producing states were ahead of normal. Most impressive again was Minnesota at 54% emerged, up from 20% the previous week and up from the five-year average for the week of 25%.

Russia’s Ag Minister proposed today that their export tax be lifted by May 15 and a new formula adopted. The current formula puts a tax on all wheat exported amounting to 15% of value plus 7.5 euros, with a minimum tax of 35 euros or $1.06 per bushel. The move if approved is expected to dump more cheap wheat on the global market, reducing demand for U.S. wheat.

Egypt released a snap tender to buy wheat for late June delivery on Monday afternoon. The results of that tender showed that Egypt bought 4.4 million bushels of wheat; split between Russia and Romania. U.S. wheat continues to be uncompetitive.

Participants in the first day of the annual Wheat Quality Council tour in the Central Plains found quite a variety of conditions. Yield checks were everywhere from 70+ bushels per acre on good bottom ground to a number of fields that were zeroed-out due to drought and/or winterkill. Stripe rust was commonly found in many fields as well. Last year’s Kansas crop was a disaster. Agronomists told tour participants Monday night that this year’s crop is better, “but not much.”

Even so, wheat futures came under additional pressure today, with all three exchanges posting new contract lows due to poor export demand highlighted by Egypt purchasing from Russia and Romania. Prices came off their lows as the dollar broke sharply lower, increasing the flow of money into the broader commodity sector, but the weakness in the face of the wheat tour results reflect the overall bearish sentiment of speculative fund managers content to hold near record large short positions.

Beef

Live cattle futures find support from a smaller showlist this week, along with good product movement.

June live cattle traded to their highest level since April 17 this morning before buying interest dried up and profit taking started once again. Futures traders continue to maintain their skepticism that the industry will be able to hold cash prices at these levels. Prices dropped into the red late-morning, but the downside risk should be limited by a drop in this week’s showlist, which showed big losses in available numbers in four key production states. Early-week trade suggests expectations of a steady cash market, but there’s still time for that to change.

Product movement on Monday was good on the spot daily market at 147 loads, up from 138 loads on Friday, but down slightly from a strong 150 loads the previous Monday. Choice cuts were at $255.64 per cwt, up $1.00 on the day, while Select cuts rose $0.68 to $243.90 per cwt. That pushed the Choice/Select spread to $11.74 per cwt, up from $11.42 the previous day and up from $8.91 the previous week. Movement at mid-morning today was decent at 98 loads, with Choice cuts up $1.33 and Select cuts up $0.36 per cwt, pushing the Choice/Select spread to $12.71 per cwt.

Today’s kill is pegged at 114,000 head, down 1,000 from the previous week and down 6,000 from the previous year. That brings week-to-date slaughter to 227,000 head, up 7,000 from the previous week, but still down 11,000 from the same period last year.

Pork

Lean hog futures continue to find good support from lighter carcass weights and good demand.

Today’s Midwest cash market continued to ratchet higher; trading mostly steady to 50 cents higher. However, some markets in Ohio were $1 to $2 higher. The latest CME 2-day lean hog index rose to a three-month high of $71.17 per cwt, up $1.68 on the day, up $5.34 on the week and up $11.59 over the past 21 consecutive trading days.

Demand for product remains good, with the composite pork product price up the past eight trading days in a row and up 15 of the past 19 trading days. Movement on Monday totaled 272 loads, up from 231 loads on Friday, but down a bit from 289 loads the previous Monday. The composite pork product price firmed to a three-month high of $74.32 per cwt, up $0.46 on the day, up $3.46 over the past week and up $6.84 over the past eight consecutive trading days. Movement at midday today was routine at 186 loads, with the composite price up another $0.61 to $74.93 per cwt.

Today’s kill is estimated at 419,000 head, down 10,000 from the previous week, but up 6,000 from the previous year. Week-to-date slaughter is pegged at 844,000 head, down 14,000 from the previous week, but still up 46,000 from the same period last year.

June lean hogs pushed to $83.55 per cwt, more than $10 above the cash market. It was the highest price for the contract in more than two months. The market is over-bought and due for a correction, which would probably be healthier for the market longer-term to avoid ramping up production too much to exceed the nice increase in demand enjoyed by the industry.

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//2015/05/image0109.jpg

https://www.hoosieragtoday.com//wp-content/uploads//2015/05/image0119.jpg

https://www.hoosieragtoday.com//wp-content/uploads//2015/05/image0129.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.