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Closing Comments

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Closing Comments

Macro, global markets and open harvest progress weighed on the grain and oilseed markets today.

Crude oil traded lower on the expectation for more global supplies from Iran upon the finalization of the nuclear agreement. China released third quarter GDP results at 6.9%, which while above the expectation of 6.8% is below 7% for the first time since 2009.

The dollar index traded higher today off last week’s oversold condition and the trade expectation that the Fed is likely to raise interest rates sooner than Europe or Japan.

Corn

Corn struggles under weakness from wheat, open harvest and exports under expectations.

Export inspections for the week ending October 16 for corn totaled 18.1 million bushels of corn which is below the expectation for the week and off the weekly pace of 28 million bushels to meet the USDA target. While exports are only 13% of corn useage, the lack of impressive business on a weekly basis fits in with the current range-bound market mindset.

Open harvest progress continues the movement of bushels to market in geographies short on storage while end users are using weakness to continue to cover longer term needs.

On the radar in the corn market is short global sugar supplies and Chinese talks of building domestic ethanol capacity.

Weekly harvest progress today shows Corn 59% harvested vs 30% a year ago and 54% on average.

December corn was able to hold Friday’s low of 3.72 ½ and should find support here or above 3.76. Stochastics are oversold but still pointed lower waiting for a conclusion of the recent downtrend.

Soybeans

Another week of great shipments but wrestling with extra bushels at harvest and a market suspect of being behind on export commitments.

Export shipments this week were reported for the week ending Oct 16 to be 86.9 million bushels of soybeans. Excellent shipment pace, but the market is also dealing with many areas with above average yield getting sold rather than stored and a market anxious about the marketing year sales commitments being still behind pace.

Crop progress report today shows soybean harvest at 77% vs 51% a year ago and 68% on average.

The Buenos Aires Grain Exchange said that Argentine farmers are expected to plant 19.8 million hectares, 1 percent less than in the previous crop year.

The November outlook for weather in South America, shows showers should improve several production areas but may still be modestly below average for Mato Grasso/Goias/Minas Gerias.

Soy oil softened on weaker Asian soy oil and palm oil prices after the multi-week rally driven by El Nino production concerns and falling stocks.

November option expiration is this Friday.

Technically soybeans, while having given up much of last Tuesday’s rally, have not yet taken out any previous lows and November needs to find support int the 8.83-8.88 area. While crush margins have lessen somewhat on plentiful supplies, board crush continues to hold good margin.

Wheat

Wheat continues losses on anticipation of rain in US plains and large global supplies.

Export inspections for wheat came in at 7.5 million bushels which is nearly half of what the market was hoping for this week which has wheat exports off 20% from a year ago.

Rain expectations in the plains caused the most damage to Kansas City resulting in a loss of 4 ¾ cents to Chicago matching the lows in the spread from August and early October.

The December contracts lost 6 ½ in Chicago, 11 ¼ in KC and 7 ¾ in Minneapolis. Dec KC broke through the 4.76 level and now needs to hold the lows at 4.66 ¾. Chicago Dec is still above the 4.80 support level.

Livestock

Cattle finds follow through strength off strong cash market, but off highs from earlier in the day.

Cattle futures climbed higher supported by higher cash market late last week. October cattle futures picked up $1.40 while November feeders added $1.95.

The recent price climb has investors hopeful that buying interest is returning after the steep selloff, which is underpinned by the strong cash market.

Boxed beef cutout values higher on moderate to fairly good demand and light to moderate offerings. Choice were up $1.95 and select up $1.37 with choice/select spread at 5.91.

Hogs found some support, especially in December, with the interest in buying in the livestock markets. As of writing this, December is trading 0.375 higher while Feb is off 0.400.

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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