Home Market Market Watch Closing Comments

Closing Comments



Closing Comments


Sinking crop ratings scare speculative hedge fund managers out of near record-large short positions.

USDA’s weekly crop progress report showed a sharp decline for eastern Midwest states. The crop rated a condition index score of 378 (500=perfect crop) as of June 21, down from 381 the previous week, down from 386 the previous year, but still up from 372 for the 10-year average for the week. Highest scores came in for Pennsylvania at 409, Wisconsin at 405 and Iowa at 401. Lowest scores were seen from Missouri at 337 and Kansas at 343 and Indiana at 351. Scores dropped 32 points in both Indiana and Ohio, while falling 13 points in Illinois.

My seasonally adjusted yield model put the corn yield at 167.0 bushels per acre, down 1.1 bushels on the week and down 2.0 bushels over the past three weeks. I believe that most yield models, including mine, will over-estimate corn yields until we get into late August or early September this year due to the nature of how USDA ratings are developed and their tendency to over-state crop ratings in June and July in excessively wet years.

The drop in ratings came in a market that had been leaning heavily to the short (sold) side, with last Friday’s CFTC report showing that hedge fund managers were approaching record large short positions. A sharp decline in ratings for eastern areas in what traders had considered “greenhouse” conditions got their attention. Suddenly they’re not comfortable holding large short positions, with another couple rounds of strong storms expected to move through the Midwest over the next several days.

July corn probed above the previous June high of $3.685, but settled just below it after reaching the five-week high. Resistance increases at the $3.70 area, but some traders will likely want to probe above that level for buy-stops. December corn rose to a nearly two-week high, settling above the 50-day moving average for the first time since March.


Soybeans pull back on speculative profit taking and increased farmer sales, but still garner support from expectations of tightening supplies and declining crop ratings.

USDA reports that 90% of the U.S. soybean crop was planted as of June 21, up just 3 points on the week and below the five-year average for the week of 95%. The trade had been looking for progress to come in at 92%, while I was looking for 91% planted. Progress was just 51% for Missouri, up 9 points on the week, but below the typical pace for the state of 88%. Kansas advanced 16 points to 73% planted, but remains below the typical pace of 91%.

The data suggests that 8.5 million acres of soybeans remained unplanted as of June 21, with 4.06 million located in Missouri, Kansas and Nebraska, with another half-million acres unplanted in Illinois. I do not expect those unplanted acres to fully show up in USDA’s June 30 acreage report, as its survey for compiling the report took place in early June when farmers were still hopeful.

Soybean emergence on June 21 stood at 84%, up 9 points on the week, but still 3 points behind the five-year average for the week. Just 50% of Kansas and 40% of Missouri soybeans had emerged as of June 21, behind the typical pace for those states of 82% and 78% respectively.

The crop rates a condition index score of 366, down 5 from the previous week, down 14 from the previous year, but still up 1 point from the 10-year average for the week. The biggest losses during the week were seen at 28 points to 350 in Indiana, 23 points to 352 in Ohio, 18 points to 357 in Illinois and 9 points to 371 in Michigan. The lowest scores were in Indiana at 350 and a score of 352 in both Ohio and Louisiana, while the highest scores were 406 in Wisconsin, 394 in Iowa and 389 in Kentucky.

My seasonally adjusted soybean yield model drops to 44.6 bushels per acre, down from 45.0 bushels the previous week. This report catches the attention of traders. Crop ratings are essentially no longer above average in a year when traders thought were experiencing “greenhouse” conditions. This raises the prospect that there is a legitimate problem with this year’s crop.

Both the July and November contracts uncovered increased speculative profit taking just below the 200-day moving averages for those contracts early today. Cash basis dropped sharply at some river terminals as farmer selling increased at points where shipment options were limited due to high water levels. Yet, prices recovered well from their lows and remained poised for a test of the 200-day moving average. Speculators like how the charts look yet to this point. November runs into increased resistance near $9.70.


Short-covering continues to lift wheat prices as harvest delays add up.

Winter wheat harvested advanced to 19% as of June 21, up 8 points on the week, but still down 12 points from the five-year average for the week. Harvest progress in Texas reached 64%, catching up with the normal pace for the week, but progress was behind normal in virtually every other state. Oklahoma stood at 58% harvested, down 15 points from the normal pace, while Kansas was at 8%, down 25 points from normal. Just 3% of Illinois was harvested, down from the typical pace of 29%, while Indiana lagged the normal pace of 20% by 15 points.

The winter wheat crop rated a condition index score of 319, down 3 points on the week, up 50 points on the year and up 9 points from the 10-year average for the week. Condition scores fell 25 points in Illinois and 15 points each in California, Indiana and Missouri. Scores rose 1 point in Idaho and Montana, was steady in Kansas and Michigan and down in every other state.

Spring wheat was 23% headed as of June 21, above the five-year average pace for the week of 15%. Progress in individual states was: Idaho 40%, Minnesota 26%, Montana 10%, North Dakota 19%, South Dakota 42% and Washington 61%.

The crop rates a condition index score of 378, up 2 points on the week, up 1 point on the year, but still 2 points below the 10-year average for the week. Individual state scores were: Idaho 394, Minnesota 391, Montana 361, North Dakota 391, South Dakota 356 and Washington 346.

Lower winter wheat ratings supported follow-through short-covering today in the wheat market. Progress should gain momentum near-term in the Plains, but Midwest producers are feeling the pain of deteriorating quality as heavy rains keep them out of the fields. Traders speculate that the harvest low may be behind us, leading them to take profits on this year’s big price decline.

Chicago July wheat runs into resistance at the 200-day moving average just above the market at $5.24, while Kansas City July is eyeing the 100-day moving average at $5.37. All three markets suggest that more upside is possible, although nothing has been easy for wheat traders over the past couple months. Fundamentally, there’s still plenty of wheat in the world, but we should see increased opportunities for supportive headlines regarding dryness in the northern Plains, Pacific Northwest, Canadian Prairies and Australia as we head into the month of July.


Once again, cattle futures struggle to sustain gains following a price spike.

Early indications are that retailers sold good volumes of beef for the Father’s Day grilling weekend and are now interested in stocking up for anticipated demand for the Fourth of July three-day holiday weekend. That’s providing good support for product demand this week. Beef imports remain significant, but much of that is 90% lean beef, while steak demand tends to be higher for the holidays.

Strength in the product market lifted estimated packer margins to more than $75 per head, with some indications that margins are even better than that. As such, packers are expected to yield to the temptation to pull more animals through the plants this week, which could again put pressure on the product market once the Fourth of July demand is met.

Today’s kill is pegged at 113,000 head of cattle, matching the previous week, but down 2,000 head from the previous year. Week-to-date slaughter is pegged at 221,000 head, down 3,000 from the previous week and down 9,000 from the same period last year. However, slaughter numbers are expected to pick up relative to the previous week as we go through the week.

Support for live cattle futures comes from ideas that we should see steady cattle prices this week; perhaps a bit better. However, traders are reluctant to take out Monday’s highs due to the realization that we’ll likely see product prices turn seasonally lower once again as we move into July. As such, futures consolidated lower today.

Feeder cattle futures took their signals from the fat cattle market, with added pressure from higher corn prices. August feeders were actually able to probe above Monday’s high soon after today’s open, but could not sustain the move and turned lower. Today’s 7-day cash index was delayed and not available yet at this time.

Product movement on the spot daily market rose to 127 loads Monday, up from 91 on Friday and up from 114 loads the previous week. Choice cuts rose $0.91 to $253.95 per cwt, while Select cuts rose $1.83 to $248.06 per cwt. That dropped the Choice/Select spread to $4.98 per cwt, down from $5.09 the previous day and down from $6.87 the previous week. Movement at mid-morning today was sluggish at 65 loads, with Choice cuts up $0.91 and Select cuts down $0.28 per cwt.


Lean hog futures consolidate following a supportive cold storage report and ahead of what is expected to be a bearish USDA quarterly hogs and pigs report on Friday.

Today’s Midwest cash market was mostly steady, although Illinois markets were quoted at steady to 50 cents lower. Packer margins are estimated at $10.72 per head, providing an incentive to pull hogs through the plant, but the supply is readily available without having to bid prices higher. The latest 2-day cash index came in at a five-week low of $79.43 per cwt, down $0.37 on the day, down $1.97 on the week and down $3.04 over the past 12 consecutive trading days.

Today’s kill is estimated at 422,000 head of hogs, down 2,000 from the previous week, but up 22,000 from the previous year. Week-to-date kill is pegged at 839,000 head of hogs, down 9,000 from the previous week, but up 62,000 from the same period last year.

Product movement fell to 216 loads Monday, down from 298 loads on Friday, but up from 210 loads the previous week. The composite pork product price bounced to $84.70 per cwt, up $2.05 from the previous day and up $0.09 from the previous week. Movement at midday today was slow at 192 loads, with the composite price down $1.13 to $83.57 per cwt. Weakness in the composite price came largely from a sharp drop in picnic and ham cuts. Yesterday’s USDA cold storage report showed a particularly large supply of hams.

The cold storage report provided support for the hog market, with supplies shrinking from the previous month, rather than expanding as expected. However, gains were limited by expectations of a bearish quarterly hogs report from USDA on Friday. Many of those bearish expectations have been priced into the market, but traders would like to get a look at the numbers before moving to new lows. Trade estimates should be out over the next day or so for the report.

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.




or 1-866-249-2528




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.