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Closing Comments

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Closing Comments

Corn

“Inside Day” on anticipation of tomorrow’s Quarterly Stocks report.

Corn ticks off time before tomorrow’s USDA Quarterly Stocks report. Trade expects 1.739 billion bushels of corn stocks as of Sept 1 vs 1.232 a year ago. Trade guess ranges from 1.647 to 1.850.

Longer term weather looks conducive to getting harvest underway in a bigger way. Corn harvest is reported to be at 18% which is 5% behind the average. Basis in many areas is holding up or strengthening either on local short-crop concerns or reluctance for farmers to let go of ownership at these price levels.

Floor sources claimed funds were buyers of 5,000 contracts of corn.

December corn closed up 2 ¼ at 3.89, taking a ½ cent away from the March carry in the process.

Soybeans

Soybeans recover much of yesterday’s loss, but good yield reports keep the market in consolidation.

In spite of sagging board crush margins, soybeans were able to close 7 ½ higher on the day. Funds are short and farmer selling is light in spite of good yield reports. A report surprise could get the fund position nervous with their short position, but first there needs to be a surprise to offset the view of plenty of supply and Asian market economic worries.

For soybeans, the trade expectations for the Quarterly Stocks report are 205 million bushel vs 92 million bushels last year. Trade range expectations are from 165 to 250 million bushel.

Globally, concerns is growing over El Niño impact on Palm Oil production areas. Analysts estimate Palm Oil prices could rise another 40% by mid-2016, leading Palm Oil to trade at a premium to Soy Oil which is currently 7% premium.

Treasury data from Brazil on Tuesday shows the government ran a $1.25 billion deficit in August, marking the fourth month of deficits.

China starts an extended holiday Thursday which could quite the news cycle down for a few days.

December meal needs to hold $300 for soybeans to be able to find a near term bounce. Soybeans are stuck in a month long consolidation between $8.60 and $8.95. Possible broadening bottom formation, but November is still at risk of $8.50 and lower if bearish sentiment grows. November led higher today, narrowing the carry to Jan by ¾ and grabbing 4 ¼ from the Nov/Nov spread.

Wheat

Wheat holding onto rally, but running short on steam without more weather headlines.

Wheat has stalled its rally on reported weather dryness “relief” for the Black Sea region and the US wheat belt.

In last night’s crop progress report, winter wheat planting move up to 31%, which is 9% behind last year and 4% behind normal. Dry conditions out west are keeping a lot of farmers from moving too aggressively into the fields. Texas is 24% complete which is 10% behind normal.

Egypt may up the protein level required for wheat imports, which could favor Black Sea at the expense of France and US.

Anticipation of tomorrow’s Quarterly Stocks report could add another weight on the wheat market, reminding the trade that the large stocks aren’t magically disappearing. The trade expects Sept 1 wheat stocks at 2.149 billion vs 1.907 at this time last year. There will also be 2015 wheat crop estimates with the trade looking for US all-wheat production at 2.133 billion bu, a 3 million decrease from last month.

Chicago December lost the least in the complex closing -1 ¾, with Minneapolis -2 ½ and KC -2 ¾.

Beef

Front-end beef supply keeps pressure on the cattle market…again.

Weakness returns to the beef sector. The weight of cattle continue to saddle the pipeline. Steer weights for the week ending September 12 were an average of 919 pounds, an all-time new record. Given the normal seasonal for weights to continue to climb into fall, look for weights to exceed 925.

Packers may have an incentive with their margins to accelerate slaughter which could be supportive, but the heavy weight cattle have to be worked through but the packers are going to see better demand for them to be willing to pay up and ramp up slaughter.

Technically the market is oversold, the funds are short and the market is due for a bounce – but in the meantime gravity is in charge.

Closing Market Snapshot

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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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