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Closing Comments

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Closing Comments

Currencies were the feature in today’s global market as European Central Bank President Mario Draghi discussed a further interest rate cut and raised the possibility of further easing measures to counter weak inflation in the euro zone.

As of midday trade, the euro has returned to a three week low of 1.1133 after shedding -0.0213, causing the dollar to rally 1.312 to 96.380 or up 1.36%. The largest single day rally for the US dollar index in 2015.

The greatest impact in the foreign exchanges has been in the US dollar, Swiss franc and Japanese yen. The Brazilian real traded marginally higher along with the Canadian dollar.

Dow Chemical said it would “review all options” for its farm chemicals and seeds unit, which has reported falling sales for nearly a year.

Corn

Corn suffers under the continued reminder of slow export pace and higher dollar.

This morning’s USDA export sales report showed 9.7 million bushels for the 15/16 marketing year, about half what the market was anticipating. In spite of the disappointing export sales numbers – which the market has begun to grow accustomed to and the pressure from the strong dollar – the market only lost 2 ½ in the December contract.

The winding down of harvest and reluctance from sellers seems to be holding corn in a value area. While reluctant to sustain rallies, new sellers have become hard to come by at these levels. The market is range bound for now, but the market is keeping note of shrinking carry-out in spite of the third largest harvest at hand. Being the futures market – the focus is taking notice of the strengthening El Nino, close in intensity to the 82/83 El Nino and a risk of warmer/dryer ’16 summer if it rapidly shifts to La Nina.

Reports out of China suggest a potential for a 50% reduction in corn purchases for state stockpiles for the 15/16 season than last year. Local governments focus efforts on subsidies to processors encouraging the usage of more domestic grain.

Corn is coming out of its oversold condition. Support tomorrow should be around the 3.74 area Dec with resistance around 3.87.

Soybeans

Soybeans give up overnight gains on currency concerns in spite of continued Chinese demand.

Weekly export sales for soybeans surprise even the most optimistic expectations, coming in at 74.6 million bushels but by the opening of the day session, the optimism from the bullish demand story was quickly taken away by the rally in the dollar index.

Brazil has had a hot/dry start to the growing season – similar to last year – but models are showing favorable conditions on the horizon for areas of concern. Brazilian analyst AgroConsult estimates Brazil soy production for 2016 at 100.6 mmt – compared to last season at 96.2 mmt.

Soybean weakness was able to stay above yesterday’s low and close to the 9.00 area as we go into November option expiration tomorrow. The daily chart is continuing to march slowly up is shallow up-trend and the weekly charts are showing continued strength with front month contracts likely to run into some resistance in the 9.30 and 9.50 area.

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Wheat

Wheat gives up Wednesday gains on the disappointing export sales and stronger dollar.

Concern over FSU/Eastern Europe dryness/coldness continue, however some relief in rainfall seems to be developing to help with the late establishment of crop. Winter models are showing opportunity for moisture and snow cover which should bring protection from winter kill.

Rains for US Plains have had their primary accumulation in the Texas/OK Panhandle regions and SW Kansas. The system has currently split into lighter Nebraska rains and intense system over Oklahoma City.

Livestock

Deferred cattle strongest, feeders higher but off their highs while hogs lower in all months on large frozen stocks and seasonal pressure.

September 30 cold storage:

– Frozen beef stocks 496.37 million lbs. Highest on record for month of September vs. 470.49 million on August 31.

– Frozen pork belly stocks 10.831 million lbs vs 13.679 million August 31.

– Total pork stocks 656.376 million lbs. Highest on record for month of September vs 656.351 million August 31

– Frozen Chicken stocks 799.800 million lbs vs 780.982 million August 31.

Boxed beef cutout values higher 0.98 on Choice and steady on Select on moderate demand and light to moderate offerings. Choice rib, chuck, round and loin steady to firm, while Select steady to weak. Beef trimmings were firm to higher on moderate to good demand and moderate offerings.

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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