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Closing Comments



Closing Comments


Exporters sold 27 million bushels of corn in the week ending September 26, including 25.1 million bushels of this year’s crop, with the remainder being for next year’s crop. The current-year sales were down from 32.9 million bushels sold the previous week and were down from the five-year average for the week of 35.8 million bushels. U.S. corn is one of the more expensive sources amid the major exporters at this point.

Marketing year sales to all destinations total 571 million bushels, down 5 million or 1% from the previous year. Sales to date fall short of the seasonal pace needed to reach USDA’s target by August 31 by 5 million bushels, after exceeding the pace by 3 million bushels the previous week.

However, demand for grain sorghum remains quite strong, thanks to China. Exporters sold 6.0 million bushels of U.S. grain sorghum during the week ending September 26, up from 2.9 million the previous week and above the five-year average for the week of 1.0 million. Sales to China accounted for 5.6 million bushels of the total, with the remainder going to Japan.

Rumors spread through the industry again today that the EPA may finally be prepared to release its long-awaited 2014 biofuel blending mandates. Ethanol prices dropped sharply on the rumors, along with sharply lower gasoline prices. However, officials say that an announcement is unlikely today.

Showers and thunderstorms scattered across much of the central Midwest today, sending combines back to the shed. The current system is expected to slowly drift across the Midwest the next couple of days, with cooler air trailing behind it. We appear to be moving into a bit wetter pattern, which will allow harvest progress, but at a slower than preferred pace.

As such, December corn largely consolidated inside the previous day’s trading range today. Rallies near the previous day’s high were sold, while dips near contract lows were bought. The consolidation allowed the market to partially correct oversold conditions, but the longer-term path of least resistance remains lower, with a drop below $3 still considered likely by us and a growing number of trade participants.


Exporters sold 32.7 million bushels of soybeans in the week ending September 26, including 31.9 million bushels for the current year, with the remainder for the 2015 crop. The current-year sales were down from a whopping 94.3 million sold the previous week and they were down from the five-year average for the week of 41.1 million bushels. Sales to China accounted for 26.9 million bushels of the past week’s sales of current-year soybeans, while previous sales to unknown destinations were reduced by 7.2 million bushels.

Marketing year sales to all destinations total 1.062 billion bushels of soybeans, up 86 million or 13% from the previous year. Exporters typically have sold 41% of final soybean shipments by this point in the season, whereas they had sold 59% of final shipments by this point last year. However, this year exporters have already sold 62% of USDA’s target for the current marketing year that ends August 31, suggesting that USDA may need to increase its target, which I have been advocating.

Sales to date exceed the seasonal pace needed to reach USDA’s target by 358 million bushels, but that is down from 371 million the previous week. That doesn’t mean that USDA’s target is 358 million bushels too low, but it could be 50 million bushels too low.

Active buying in the nearby soymeal futures provided modest support for soybeans today. The bull-spreading was largely due to disappointment that this year’s crush activity isn’t increasing as fast as needed as the harvest lags its normal pace. Demand for protein is strong. This year’s supply is expected to overwhelm that demand, but it’s taking time to do so amid the slow harvest.

Yet, sellers continued to emerge on rallies today in the soybean market, limiting gains. FC Stone’s survey of grain industry representatives showed a probable final yield of 48.4 bushels per acre, which is very close to my yield model, currently at 48.2 bushels per acre. Actual harvest results suggest that the national average could end up closer to 50 bushels per acre. As such, we continue to see selling pick up when prices approach $9.25, with expectations that we will soon be dropping below $9.


Exporters sold 27.2 million bushels of wheat in the week ending September 26, up from 14.6 million the previous week and up from the five-year average for the week of 21.1 million bushels. Brazil was noticeably absent from the U.S. marketing during the week.

Marketing year sales total 498 million bushels, down 182 million or 27% from the previous year. Sales to date exceed the seasonal pace needed to reach USDA’s target by May 31 by 32 million bushels, up from 25 million the previous week.

Exportable Russian wheat supplies are being pulled off the global market by high domestic prices. French prices are firming following this week’s purchase by Egypt. The dollar is pulling back from recent four-year highs. Speculative fund managers that were holding very large net short (sold) positions, particularly in Chicago, saw this as a signal to take profits.

The gains eventually pushed Chicago December wheat above the top of the recent trading range, triggering additional short-covering that accelerated gains. The rally potential is significant due to the sheer size of speculative short positions in Chicago if in fact they would be scared out of those positions in a hurry. However, I still do not see the type of event that would stimulate such a rush to the door and still see longer-term strength in the dollar and weakness in corn that will likely limit gains in wheat over time.

The lingering weakness of the wheat market was reflected in how we closed the session today. This morning’s double-digit gains in Chicago that pushed the December contract to its highest level since September 18 evaporated late in the session. As such, contracts settled with modest gains, but back within the recent trading range, although at the top of that range.


Corn yield estimates continue to rise, conveying to cattle feeders that corn prices are simply going to get cheaper. We’re already seeing some bids in the Northern Plains trade in the low-$2 range. Optimism reigns eternal in the cattle-feeding world. That is pushing demand for light-weight cattle, particularly as cow-calf producers hold heifers back to rebuild their herds. The cash market provides strength for the futures market, which gapped higher today on this strong demand for feeder cattle. The latest CME cash index rose to another record $233.86 per cwt, up $0.20 on the day.

Strength in the feeder cattle market provided support for live cattle futures, but traders there are again getting cold feet. Contracts pushed to new highs early in today’s session, but profit taking pulled prices off those highs as traders worried about their lofty levels ahead of this week’s cash trade. Yet, prices rebounded late-morning, with buyers returning to push prices back near session highs ahead of the close. We’ll likely see more volatility in the lead October live cattle futures contract Friday as options associated with the contract expire tomorrow.

Cash trade remains quiet for the most part as packers continue to rely on contracted cattle. However, trade reports suggest that they are actively executing some basis deals for the November to February time period. Locking in basis would allow them to manage input cost risk on the board as supplies continue to tighten in the months ahead.

Exporters sold a net 12.0K metric tons of beef in the week ending September 26, down slightly from 12.3K tons the previous week and a steady seasonal pace, considering the fact that the dollar is near four-year highs. Sales for the year total 593K tons, down from 618K at this point last year, but still quite impressive considering current price and supply levels relative to the previous year. Actual shipments during the week totaled 13.7K tons, up from 13.4K the previous week.

The strength of export demand in combination with inelastic demand for ground beef here in the states provides the dynamics that continue to surprise the industry at these price levels. That’s stabilized product prices, although packer margins are still estimated to be at losses of nearly $72 per head.

Boxed beef movement reached 251 loads Wednesday, unchanged from the previous day, but down from an impressive 281 loads the previous week. Choice cuts were up $0.11 to $238.14 per cwt, while Select cuts were up $0.73 to $227.18. This dropped the Choice/Select spread to a one-month low of $10.96 per cwt. Movement at mid-morning today was good at 113 loads. Choice cuts were up another $0.36 per cwt, while Select cuts were up $0.95.


Pork exports have been red-hot the past couple months, providing an unexpected boost to prices at a time when the value of the dollar was soaring and Russia was supposedly blocking imports of U.S. supplies. Exporters sold 22.8K metric tons of pork in the week ending September 26, up from 20.3K the previous week. Actual shipments during the week totaled 23.2K tons, up from 15.5 K the previous week.

Lean hog futures continue to chop around largely between $93 and $96 per cwt for the December contract. Demand is surprising the industry at current price levels, but neither are we running short of supplies, with higher carcass weights largely offsetting a decline in slaughter numbers. Packer margins are strong at an estimated $24.70 per head, but packers are not having to search for hogs to slaughter. An ample number are being brought to them.

Today’s cash market was mostly steady once again, but one could find a market here or there that was up to $1 higher. The latest CME 2-day lean hog index came in at $109.45 per cwt, up $0.49 on the day. The index has been higher on each of the past 19 trading days, with gains over that period totaling $14. However, the lead October contract dropped lower today on expectations that the cash market will soon be softening.

Product movement reached 414 loads on Wednesday, up from 289 loads the previous day, but down from 427 loads the previous week. The pork market softened some on Wednesday, with the composite pork product price down $0.18 to $121.80 per cwt. However, it continues to trade near 7-week highs and up $21.62 from August 27th. Movement at midday today was routine at best at 175 loads, with the composite price recovering to $122.37, up $0.57 on the day.

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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