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Closing Comments

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Closing Comments

Weekly EIA report showed an increase in crude stocks of +2.847 mln barrels to 428.8 mln barrels, a greater gain than the market anticipated which brought selling back to the complex. Unleaded stocks shrank -3.3 mln barrels and distillates dropped -1.3 mln barrels. Ethanol production grew 25,000 barrels while stocks grew slightly.
The dollar index rose above 98 for the first time since August as Fed Chair Yellen discussed the possibility of a US interest rate hike in December.
Trade is looking ahead to Friday’s US employment report from the Labor Dept. The key non-farm payroll is forecast to be up around 185,000 in Oct, following a rise of 142,000 jobs in Sept.

Corn

Corn closes December even as midday strength is capped by crop estimate concerns.

Average analyst guess for the USDA WASDE report has corn production at 13.564 billion bushels (USDA on Oct was 13.555) and a yield of 168.2, up 0.2 bu from the USDA’s October estimate.
Linn & Associates USDA corn estimates corn at 165.6 and crop production at 13.334 billion bushels.
Census Bureau US Export data for September has corn at 132.6 mil bu vs 156.4 in August.
US ethanol buyers have canceled or deferred contracts for cargoes of ethanol from Brazil. The opportunity for US buyers to take advantage of the cheap real/dollar relationship has now shut on the cash price jump of ethanol in Brazil to 5 ½ month highs. US imports of Brazilian ethanol has slowed after the peak of 361,000 barrels in August.
Brazil has secured the most competitive new world bid spot for corn as Argentine farmers hold back sales on expectations of November 22nd elections bringing a change to their export tax burden.
China’s ruling party has proposed letting some land like fallow to ease pressure on exhausted water and land resources.

Soybeans

Soybeans close higher supported by reluctant movement in the cash market and soyoil.

WASDE analyst guess average for soybeans are total production of 3.914 billion bushels, up from the October USDA estimate of 3.888 billion bushels. Average analyst yield estimate of 47.5 vs USDA’s October number of 47.2 bu.
Linn & Associates estimate USDA soybean yield at 48 bu and production of 3.942 billion bushels.

Census Bureau US Export data for September has soybeans at 86.4 mil bu vs 42.6 in August.
Soyoil gained on meal today. Meal is managing to maintain its support above $300 December, but ample supplies continue to cap bids. Soyoil was able to break out higher from its recent six day trading range, supported by gains in Palm Oil.

Wheat

Wheat finds technical support amid fluctuations in global and domestic weather outlooks.

While rains forecast for the US wheat and more favorable weather is shaping up in Eastern Europe, wheat was able to spark a rally within an hour of the open of the day trading session.
Census Bureau US Export data for September has wheat at 92.4 mil bu vs 74.8 in August.
December Chicago made it within ¾ of a cent of the early October high. Today’s high should provide resistance to the market, but trade through the high could spark additional short covering. Today’s close was the first close above the 200 day moving average – a first since mid-July. Unfortunately Chicago continues to gain on Kansas City, leaving the December spread at -33 ½.

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Livestock

Cattle trade limit down on supply concerns while hogs extend losses into new contract lows.

Cattle and feeder cattle futures traded the limit down for most of today’s session in anticipation of market ready supplies and heavy cattle. As of midday, December cattle were synthetically bid 62 cents below the trade limit. Feedyards in KS and TX priced cash cattle up to $142 per cwt with no bids from packers. Last week cash cattle in the Plains moved at $133 to 138.50.

Live cattle limits will be expanded to 4.5 on Thursday while feeder limits will expand to 6.750.

Cash hog prices were lower by as much as $3 per cwt. On Tuesday packers processed 435,000 hogs, up 10,000 from last week. Dealers project a Saturday kill of 180,000 head.

Average weights in Iowa-Southern MN direct market rose 0.5 pounds from last week to 282.7 pounds, but were down 2.5 pounds from the same period last year.

The wholesale pork price on Tuesday afternoon fell 1.93 per cwt, let by an $8.80 plunge in pork bellies. Declines in hog values have been able to hold packer margins steady in spite of falling product prices.

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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