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Closing Comments

Corn

Corn futures break again on longer-term demand concerns as the dollar rallies off chart support.

Exporters sold 35.3 million bushels of corn in the week ending April 30, including 33.1 million old-crop bushels. The old-crop sales were up from 32.8 million bushels sold the previous week and were up from the five-year average for the week of 20.8 million bushels. The past week’s sales total included the cancellation of previous purchases of 3.3 million bushels of U.S. old-crop corn, while “unknown destinations” cancelled another 1 million bushels.

Marketing year sales to all destinations total 1.620 billion bushels of corn, down 118 million or 7% from the previous year. Exporters typically sell 86% of final corn shipments by this point in the year, whereas they had sold 91% by this point last year. Thus far this year they have sold 90% of USDA’s target. As such, sales to date exceed the seasonal pace needed to reach USDA’s target by 71 million bushels, which is up from 60 million the previous week.

Exporters sold 4.3 million bushels of grain sorghum in the week ending April 30, including net cancellations of 0.1 million old-crop bushels. The old-crop cancellations compared to net sales of just 0.2 million bushels the previous week as Chinese end users have pretty much emptied the shelves already. The five-year average for the week is 1.8 million bushels.

The past week’s data showed that Chinese end users actually bought 4.2 million old-crop bushels, while “unknown destinations” cancelled 4.3 million bushels of previous purchases. In other words, a couple of cargoes previously assigned to “unknown destinations” were rolled to Chinese buyers. China bought 2.1 million new-crop bushels, while “unknown destinations” bought 2.3 million bushels.

Marketing year grain sorghum sales to all destinations to date total 318 million bushels, up 164 million or 107% from the previous year. Exporters typically sell 72% of final grain sorghum shipments by this point in the year, whereas they had sold 72% by this point last year. However, this year they have already sold 91% of USDA’s target for the year. As such, sales to date exceed the seasonal pace needed to reach USDA’s target by 66 million bushels, although that is down from 72 million the previous week.

Traders took note of the cancellations of previous purchases by China and “unknown destinations” in this morning’s export sales report. That raises concerns about longer-term demand, particularly in light of Wednesday’s ethanol report showing the slowest demand for corn by biofuel processors in 29 weeks. A stronger dollar added weakness as the funds were sellers of the major commodity indices, with the crude oil market posting its greatest losses in a month.

Soybeans

Soybean futures sink with broader commodity sector as traders brace for bearish crop report next week.

Exporters sold 25.3 million bushels of soybeans in the week ending April 30, including 12.5 million old-crop bushels. The old-crop sales were down from 15.9 million the previous week, but were still up from the five-year average for the week of 7.4 million bushels. China bought just 0.2 million old-crop bushels during the week, while canceling previous purchases of 3.7 million bushels of new-crop soybeans. However, “unknown destinations” bought 6.2 million old-crop and 16.5 million new-crop bushels during the week.

Marketing year sales to all destinations total 1.816 billion bushels, up 176 million or 11% from the previous year. Exporters typically sell 94% of final soybean shipments by this point in the year, whereas they had sold 100% by this point last year. However, this year they have already sold 101% of USDA’s target. As such, sales to date exceed the seasonal pace needed to reach USDA’s target by August 31 by 125 million bushels, up from 124 million the previous week.

Demand for soymeal remains seasonally strong as well, even as processors try to fill previous large orders still on the books. Exporters sold 136.8K metric tons of soymeal in the week ending April 30, up from 134.7K tons the previous week and up from the five-year average for the week of 94.5K tons. Actual shipments during the week totaled 235.5K metric tons, down from 295.7K the previous week, but up from the five-year average for the week of 127.1K tons.

Traders took note that China is largely absent from purchases of old-crop soybeans, while cancelling previous new-crop purchases. Furthermore, traders are positioning for next Tuesday’s USDA crop report, which the trade expects to show that new-crop 2015-16 ending stocks will rise to 443 million bushels, with global supplies continuing to rise as well.

July soybeans find first support at $9.65, with resistance ultimately near $10. November soybeans find first support at $9.4975, with resistance at $9.635. However, the underlying tone remains bearish due to rising global supplies and fears that China will see easing demand in the months ahead due to a shrinking hog herd.

Wheat

Wheat futures slide again as supportive headlines dry up amid a rising dollar and poor export demand.

Exporters sold 11 million bushels of wheat in the week ending April 30, including net cancellations of previous purchases of 5.4 million old-crop bushels. The old-crop cancellations though paled compared to net cancellations of 16.5 million bushels the previous week, but are well-below the five-year average sales for the week of 9.0 million bushels. A deeper look at the data reveals that China rolled a previous purchase of 2.1 million bushels of hard red spring wheat forward to the new marketing year, leaving a sense of delayed demand.

Marketing year sales total 848 million bushels, down 313 million or 27% from the previous year. Sales to date match the seasonal pace needed to reach USDA’s target by May 31, but they had exceeded the pace by 12 million bushels just one week prior.

Crop scouts on Day Two of the Wheat Quality Council’s tour of the Central Plains again found poor yields in western areas, but things trended better as they came east. The day’s average yield came in at 34.5 bushels per acre when it was all added together, up from 30.8 bushels the previous week, but still below the five-year average for Day Two of 37 bushels per acre.

Improving crop yields decreased supportive headlines on a day when traders saw poor export demand highlighted amid a strengthening dollar. The combination led to speculative selling once again, with USDA expected to confirm even larger surplus stocks on the 2015-16 balance sheet next Tuesday at 750 million bushels.

Beef

Live cattle futures lose momentum while waiting for this week’s cash trade.

Cattle futures slipped lower today while tiring of waiting for direction from the cash market. June live cattle broke below support at $150 per cwt, which had held the market the past two sessions. Longer-term, the market is trading a broader $4 range largely between $148 and $152 per cwt. Downside risk would appear to be limited near-term by the large discount to cash already held by futures. Upside is currently limited by skepticism that the cash can hold its current levels.

Today’s kill is estimated at 115,000 head of cattle, matching the previous week, but still down 5,000 from the previous year. Week-to-date slaughter is put at 444,000 head, down 6,000 from the previous week and down 35,000 from the same period last year.

Feeder cattle futures were missed today, with a bit more strength in the nearby contracts due to cheap corn and lingering strength in the cash market. However, the lead May contract has chart resistance near $216 per cwt, with August having resistance near $219. The latest CME 7-day index came in at $216.03 per cwt, unchanged on the day, but up $0.24 on the week.

Parker margins remain in the black an estimated $14 per head. Movement on the spot daily market Wednesday was 237 loads, up from 155 loads the previous day and up from 221 loads the previous week. Choice cuts were up $0.59 Thursday to $256.15 per cwt, while Select cuts were up $0.67 to $244.27 per cwt. That narrowed the Choice/Select spread to $11.88 per cwt, down from $11.96 the previous week and down from $12.49 the previous week. Movement at mid-morning today was routine at 84 loads, with Choice cuts up another $1.73 and Select cuts up another $2.04 per cwt.

Exporters sold a net 14.7K metric tons of beef in the week ending April 30, up from 12.4K the previous week and up from 12.5K in the same week last year. Estimated sales to date for 2015 are down 21% from the previous year. Actual shipments in the week totaled 12.0K tons, up from 10.8K the previous week, but down from 13.5K in the same week last year. Estimated shipments for 2015 to date fall short of the previous year’s pace by 7%.

Pork

Lean hog futures consolidate to allow the cash market to catch up.

June lean hogs largely consolidated lower within the previous day’s trading range today as traders work to correct and over-bought condition in the market. Cash prices continue to trend higher, as do product prices. However, futures are already at a large premium to the cash market, giving it some room to consolidate or correct lower near-term without falling behind the cash.

Today’s Midwest cash market was again mostly steady to $1 higher. Today’s CME 2-day lean hog index was $74.57 per cwt, up $1.53 on the day, up $7.32 over the past week and up $14.99 over the past 23 consecutive trading days. Unfortunately, the cash market is rising faster than the product market, leading to negative packer margins estimated at $6.55 per head.

Product movement totaled 310 loads on Wednesday, down from 464 loads the previous day and down from 372 loads the previous week. The composite pork product price rose to a three-month high of $77.49 per cwt, up $1.47 on the day, up $6.15 on the week and up $10.01 over the past 10 consecutive trading days. Movement at midday today was decent at 218 loads, with the composite price up another $1.19 per cwt.

Exporters sold a net 16.7K metric tons of pork in the week ending April 30, down from 24.6K tons the previous week, but up from 9.6K in the same week last year. This leaves 2015 estimated sales to date up 65% from the previous year. Actual shipments during the week rose to 23.5K metric tons, up from 19.8K the previous week and up from 10.9K tons in the same week last year. Estimated calendar year shipments to date exceed the previous year’s pace by 72%.

Today’s estimated kill was 424,000 head, down 1,000 from the previous week, but up 30,000 from the previous year. Week-to-date kill is estimated at 1.684 million head, down 25,000 from the previous week, but up 84,000 head from the same period last year.

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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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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