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Closing Comments



Closing Comments


Corn makes new three-week highs despite modest increases in farmer sales.

USDA’s weekly crop progress report revealed that 91% of the U.S. corn crop had emerged as of June 7, up from 84% the previous week and up 1 point from the five-year average for the week. Significant delays continued to be a concern in the Plains and southwestern Midwest where excessive moisture has fallen this spring. Emergence progress was at 72% in Colorado, 79% in Kansas, 86% in Missouri, 89% in Nebraska, 72% in North Dakota and 88% in Texas.

The crop rated a condition index score of 382 (500=perfect crop), down from 383 the previous week, down from 385 the previous year, but up from the 10-year average for the week of 376. As such, my yield model points toward a seasonally adjusted yield of 168.5 bushels per acre, down from 169.0 bushels the previous week.

Ohio has the highest score at 409, while Kansas had the lowest score at 336, down another 4 points on the week. North Dakota saw the biggest loss of 7 points this week to 374, while South Dakota had the biggest gain at 7 points to 373. The bulk of the core Midwest saw improving ratings, while to the south and west saw modest deterioration.

This year’s crop ratings are above average for early June, despite excessive moisture in some areas of the belt. That’s not surprising, as traders assume that “rain makes grain.” Much of the Midwest is expected to see heavy rainfall over the coming two weeks, but it probably won’t raise too many red flags for traders until/unless they see a sharp decline in ratings for the crop as a whole similar to what we’ve already seen in the southwestern belt. Even so, strength in wheat that is responding to weather concerns, as well as positive outside money flow can support modestly higher prices near-term.

Producer sales appeared to increase when prices rose to three-week highs today. However, outside money flow remained positive enough to hold prices from falling significantly, with most contracts finishing the day with just fractional losses.


Soybeans add to gains on solid soymeal demand; planting delays.

USDA reports that 79% of the U.S. soybean crop was planted as of June 7, up from 71% the previous week, but down from the five-year average for the week of 81%. Delays are most concerning in the southwestern belt, where planting progress was at 30% in Missouri, 31% in Kansas, 70% in Arkansas and 83% I Nebraska. All of these states should be at 70% or better by June 7.

Soybean emergence on June 7 was at 64%, up 15 points on the week and up 1 point from the five-year average for the week. Problems again are in the southwestern belt, with Arkansas at 60%, Kansas at 19%, Missouri at 20% and Nebraska at 59% emergence.

The crop rates a condition index score on June 7 of 374, down from 381 the previous year, but up from the 10-year average for the week of 369. The highest rating was in Wisconsin at 406, while the lowest was in Missouri at 322. As expected, areas with excessive rain are seeing lower ratings. My seasonally adjusted yield model puts the crop at 45.1 bushels per acre, which is down from last year’s 47.8 bushels per acre.

Soymeal basis was again steady to firm across the Midwest amid good demand. That helped support cash basis for soybeans amid tight farmer selling, which in turn supported the board. Additional support came from serious planting delays in the southwestern belt that will likely lead to lost acreage and production from that region. That doesn’t turn the soybean balance sheet bullish, but it does help support a good bounce following recent declines to oversold territory. Additional heavy rains in the southwestern belt may help add additional risk premium to new-crop bids in the days ahead.


Wheat climbs higher on weather concerns.

The winter wheat crop was 91% headed as of June 7, up 7 points on the week and up 7 points from the five-year average for the week. The crop had essentially completed heading in Arkansas, California, Kansas, Missouri, North Carolina, Oklahoma and Texas. Harvest progress was listed at 4% on June 7, down from the five-year average for the week of 12%, largely due to recent heavy rains in the Southern Plains and across portions of the South. It was a little surprising to see 20% of Texas and 13% of Oklahoma harvested, down from the typical pace of 30 and 37% respectively. Anecdotal reports as of June 7 had been that only spotty harvest had occurred.

The crop rates a condition index score of 325, down from 326 the previous week, but up from 269 the previous year and up from the 10-year average for the week of 312. Arkansas dropped 11 points to 343, while Missouri dropped 8 points to 340, while most other states were either unchanged or saw very modest changes.

The spring wheat crop was 97% emerged on June 7, up from 91% the previous week and up from the five-year average for the week of 80%. The slowest state was North Dakota at 96% emerged, up from the normal pace of 71%.

The crop rates a condition index score of 373, down from 375 the previous week, down from 375 the previous year and down from the 10-year average for the week of 380. Montana was unchanged at 364, while South Dakota gained one point to 349. Otherwise, Idaho lost 2 points to 394, Minnesota was down one point to 379, North Dakota lost three points to 381 and Washington lost three points to 356.

It would be presumptuous to say that the global balance sheet is being challenged with a shortage of wheat. However, traders holding near-record large short (sold) positions take notice when they suddenly start to hear about excessive rains at harvest in the Southern Plains, heat and dryness across portions of Europe and the Black Sea region, the Canadian Prairies and North China Plain. That tends to encourage short-covering, with other bargain-hunter buying thrown in for good measure.

Most of Alberta and Saskatchewan in Canada have had less than 40% of normal rainfall in the past month, according to local data. Some relief is expected over the weekend, but dryness is expected to remain a concern. Meanwhile, another round of heavy rainfall is expected to develop over the Central Plains later this week, just as wheat in that area reaches maturity.

Chicago July wheat rose to a two-month high today of $5.3725 before running into resistance at the 200-day moving average. That becomes the next obstacle to overcome. Kansas City ran into resistance at $5.54, with more significant resistance a dime higher. Unfortunately, Kansas City still has not been able to show leadership on this rally, which leaves confidence in it lacking. Even so, we continue to get just enough supportive headlines of adverse weather to keep outside money flowing into the wheat market.


Live cattle futures rally late on strong product prices.

History continues to be written in the cattle markets as the industry tries to survive the smallest cowherd in more than six decades. Rebuilding that cowherd simply makes things that much tighter, even as the economy improves, and with it demand for red meat.

The old established industry formulas for estimating packer margins saw those margins slip as much as $100 into the red in recent days. However, a deeper look at the premium being offered for cuts in the comprehensive USDA report that are not showing up in the spot daily market suggests a much different story, with packers working off small profits, or at worst small losses per head.

The packers held the line last week, slowing chain speed and cutting kill to 550,000 head. This week’s kill is expected to drop to 540,000 head, just as retailers stock up for the Father’s Day grilling weekend. Their hope would be to cut product supplies sufficiently to bump prices to improve margins, while also pressuring cash cattle prices to add to those margins as well. It’s too early to say whether the strategy will work in the long-run, but thus far it appears to be having some impact. Product prices surged in this morning’s spot daily trade, while cash prices for cattle have softened. What we don’t know is this week’s level of imports of beef supplies.

Today’s kill is estimated at 112,000 head of cattle, up 2,000 from the previous week, but down 5,000 head from the previous year. Week-to-date kill is pegged at 224,000 head, matching the previous week’s pace, but down 5,000 head from the same period last year.

Today’s rally took August live cattle to their highest level since May 29, but I wouldn’t call it a breakout yet. That would necessitate a break above last month’s high of $153.40 per cwt. Today’s high fell just short of testing that objective at $153.15 per cwt.

Feeder cattle are following, aided by good support at the sale barn amid ample lush pasture and expectations of cheap corn. The May high for August feeders was $225.675. Today’s CME 7-day cash index came in at $225.08 per cwt, down $0.85 on the day, but still up $2.02 from the previous week.

Product movement slipped to just 107 loads Monday on weaker prices, down from 176 loads the previous day and down from 132 loads the previous week. Choice cuts were down $0.54 to $244.11 per cwt, while Select cuts were down $1.26 to $236.31 per cwt. That firmed the Choice/Select spread to $7.80 per cwt, up from $7.08 the previous day, but down from $9.66 the previous week.

However, that all changed this morning when prices exploded higher, although volume on the spot daily market remained slow. Movement at mid-morning was just 72 loads. Yet, Choice cuts rose $3.84 to $247.95 per cwt, while Select cuts rose $5.41 to $241.72 per cwt.


Lean hogs slip lower on technical selling, lacking support from the fundamentals.

Lean hog futures continued to erode lower amid weakening fundamentals today, with the July contract slipping below the 100-day moving average to fall to its lowest level since April 24. The contract could see some consolidation near $80, but remains vulnerable amid continued weakness in the cash and product markets.

Today’s Midwest cash market was steady to 50 cents lower in the closely watched Iowa/Southern Minnesota market and up to $1 lower in Illinois, although steady elsewhere. The latest CME 2-day lean hog index was $82.37 per cwt, down $0.08 on the day, but still up $0.31 from the previous week.

Today’s kill is estimated at 423,000 head of hogs, up 1,000 from the previous week and up 13,000 from the previous year. Week-to-date slaughter is pegged at 845,000 head, up 3,000 on the week and up 73,000 from the same period last year. That’s a lot more product that needs to move through the system.

Product movement rose to 264 loads on Monday, up from 249 the previous day, but down from 293 the previous week. The composite pork product price slipped to $85.24 per cwt, down $0.32 on the day and down $1.86 on the week. Movement at midday today was slow at 154 loads on softer prices. The composite price was down $0.21 to $85.03 per cwt.

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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