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Closing Comments



Closing Comments


Corn futures extend loses on bearish chart signals as dollar rallies and wheat sinks.

Tuesday afternoon’s USDA weekly crop progress report indicated that 92% of the U.S. corn crop was planted as of May 24, up from 85% the previous week and up from the five-year average for the week of 88%. Delays were seen in just six states, including Colorado 66%, Kansas 84%, Missouri 85%, Nebraska 92%, North Carolina 96% and Texas at 77%. Producer still planting at this date face penalties on their crop insurance in many states for each day beyond the deadline, but the crop as a whole is ahead of schedule.

Emergence of the crop was pegged at 74% as of May 24, up 18 points on the week and up 8 points from the five-year average for the week. Ironically, just three states posted delays relative to normal for their state; Kansas 64%, North Carolina 90% and Texas 74%.

The crop rated 74% Good to Excellent in its first condition ratings of the growing season, which was very close to trade expectations of 75%. The crop rates a condition index score of 383 (500=perfect crop), up from the 10-year average for the first crop rating of the season of 374. Scores for key states included Illinois at 392, Indiana 386, Iowa 394, Kansas 346, Minnesota 374, Missouri 360, Nebraska 360, North Dakota 386, Ohio 406 and South Dakota 367. The initial yield model estimate for this year’s crop comes in at 168.8 bushels per acre.

The dollar rallied, pulling corn and wheat lower. Prices slipped through areas of chart support, accelerating losses. December corn broke below a triple-bottom at $3.72 per cwt, sending it down to $3.66. This brings the it very close to its October 1 contract low of $3.6425. July corn is also very close now to its contract low of $3.4675. Look for prices to pause near these levels. Movement in the dollar, as well as wheat prices, may very well determine whether we hold those levels or slice right through them.


Soybeans hold modest gains as Argentine strikes support soymeal prices.

USDA reports that 61% of the soybean crop was planted as of May 24, matching trade expectations, but up from the five-year average for the week of 55%. Substantial delays are seen in Kansas, Missouri and Nebraska due to persistent wet weather, but there’s still time. Emergence on May 24 stood at 32%, up 19 points on the week and above the five-year average for the week of 25%. Delays were seen in the same above three states, but Indiana also lagged its normal pace by five points.

Strikes in Argentina continue to frustrate movement of grain and shipments of product. Friday morning’s USDA weekly export sales report could provide confirmation, but the cash market suggests that some soymeal business is coming our way due to the uncertainty of Argentina. Crush margins have been good, maintaining demand for soybeans, supporting old-crop prices. However, rallies tend to be quickly sold on ideas that growing supplies will eventually overwhelm the market.

November prices bounced late in the session after a test of Tuesday’s low held. The long-term outlook remains bearish until/unless the weather outlook for the growing season changes. However, the oversold nature of the market so early in the growing season suggests that we could find a near-term low in the days ahead.


Strong dollar drops wheat below chart support, accelerating losses.

USDA reports that 77% of the winter wheat crop was headed as of May 24, up from 68% the previous week and up from the five-year average for the week of 67%. Significant delays were generally in the eastern Midwest, while significant advances were in the Plains and Pacific Northwest.

The crop rates a condition index score of 328, unchanged on the week and up from the 10-year average for the week of 312. Scores were unchanged in Arkansas & California, down in Colorado, Missouri, Montana, Nebraska, North Carolina, Oklahoma and Oregon, while modestly higher in remaining states. Conditions were generally lowest in the Central Plains and portions of the Pacific Northwest, while best in the Midwest.

Spring wheat planting rose to 96% as of May 24, up 2 points on the week and up from the five-year average for the week of 79%, but below trade expectations of 98%. Planting is completed in Idaho, Minnesota and Washington, at 98% in South Dakota, 96% in Montana and 93% in North Dakota, which is above the five-year average for that state of 68%. Emergence for the crop was at 80%, up from 67% the previous week and up from the five-year average for the week of 54%. All states were ahead of normal.

The crop rates a condition index score of 372, up from 367 the previous week, but down from the 10-year average for the week of 382. Scores for the six primary production states include Idaho 394, Minnesota 373, Montana 365, North Dakota 378, South Dakota 346 and Washington 356.

A strong dollar added to losses in the wheat market early today. Prices eventually sliced through additional levels of support, damaging charts and emboldening the bears to resume building short positions again. The short-covering rally could resume at any point if something were to scare traders out of their massive short positions, but such an event is currently not on the radar.


Feeder cattle rise on cheap feed prices, providing a lift for the fat cattle market.

Trade reports indicate that two major packers in Kansas bought cattle Tuesday for $1.50 over this week’s top. That allowed them to secure their needs for the week without impacting the negotiated cash market and without impacting their formula-bought cattle based off that negotiated price. This is increasingly becoming a valuable tool for packers to manage tight supplies while trying to maintain their operating margins.

Supplies are expected to increase in the weeks ahead, particularly in northern portions of the belt, where feeding has been expanding due to very weak corn basis in that region. Slaughter supplies will likely remain much tighter in Kansas, Oklahoma and Texas.

Futures trade continues to be in a very tight trading range. Upward momentum is weak, but then again selling is limited due to a series of moving averages sitting just below the June contract. A break in the cash could open the door for probing for sell stops below those indicators, but selling remains limited until traders see greater evidence of a breaking cash market.

Both total product movement and trade on the spot daily market slipped last week after retailers had secured their needs for the Memorial Day holiday. Prices firmed to start the week, but are mixed today, with ideas that product values will weaken again late in the week as retailers prepare to feature pork in the month of June.

Product prices strengthened on Tuesday, pushing today’s estimated packer margins up to $27.70 per head. The timing is good for seasonally pushing the number of cattle through plants upward in the weeks ahead.

Total market movement dropped to 6,600 loads last week, while movement on the spot daily market slipped to a six-week low of 771 loads. Boxed beef movement on the spot market Tuesday was 123 loads, down from 134 loads on Friday, but up from 115 loads the previous week.

Choice cuts moved at $261.07 per cwt, up $0.82 from Friday. Select cuts were up $1.58 to $249.20. That dropped the Choice/Select spread to $11.87 per cwt, down from $12.63 the previous week and down from $14.56 the previous week. Movement at mid-morning today was good at 116 loads, with Choice cuts down $0.31, while Select cuts were up $0.90 per cwt.

Today’s kill is pegged at 117,000 head of cattle, up 5,000 from the previous week, but down 3,000 from the previous year. Week-to-date slaughter is tabbed at 234,000 head, down 106,000 from the previous week and down 11,000 from the same time last year.

Feeder cattle continue to show a bit more strength than the fat cattle market, largely due to the break in feed prices, which feeders optimistically expect to last through the summer into the fall. As a result, the cash market has shown some renewed strength in recent days, although gains are limited by fears that the fat cattle market will not be able to hold current levels. August feeder cattle broke higher to trade above the April six high of $221.45 per cwt, reaching its highest level  since January 7. The latest CME 7-day cash index came in at $222.11 per cwt, up $2.26 on the week.


Lean hogs consolidate amid demand concerns at current price levels.

Today’s cash market was mixed, after being soft over much of the past week. Cash hogs in the closely followed Iowa/Southern Minnesota market were mostly steady to 50 cents higher, while much of the rest of the Midwest was steady to 50 cents weaker. The latest CME 2-day lean hog index came in at $82.91 per cwt, down $0.21 on the day, down $0.29 over the past two days, but still up $0.85 over the past week.

Product demand remains soft, but it is showing signs of firming again as retailers prepare to feature pork in June. Movement reached 348 loads on Tuesday, up from 265 loads on Friday and up from 330 loads the previous week. The composite pork product price rose to $86.67 per cwt on Tuesday, up $1.09 on the day and up $0.12 on the week. Movement at midday today was good at 237 loads, but the composite price was down $0.69 to $85.98 per cwt.

June lean hogs rose to nearly two-week highs this morning, but could not hold the strength as product prices softened. Prices are riding along above the 20-day moving average on the June chart, which is currently at $83.19 per cwt. I still believe that a deeper correction may be necessary to slow expansion plans a bit, while allowing the consumer to adjust to this year’s price rise, even though I see strong demand later this year.

Today’s kill is estimated to be 431,000 head of hogs, up 8,000 from the previous week and up 14,000 from the previous year. This brings estimated week-to-date slaughter to 864,000 head, down 408,000 from the previous week due to the holiday, but up 25,000 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

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