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Closing Comments

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Closing Comments

French police forces launched a series of home raids on suspected Islamic militants in France. Meanwhile French air force slammed Raqqa, Syria with bombing strikes late Sunday.
On the energy front; NOAA data shows they estimate heating demand this season in the US so far has been 27 percent lower than the long term average – dampening the demand for heating oil and natural gas. Interestingly crude oil is currently up $1.26 in the December contract.
The World Meteorological Organization (WMO) said this current El Nino is on track to become one of the top three, or possibly top two, strongest on record. The warm eastern Pacific Ocean phenomenon is on track with events seen in 72-73, 82-83 and 97-98.
Today’s Commitment of Traders report showed as of November 10th speculators increased their net short position of corn by 75,739 contracts, increased their net short position of soybeans by 28,686 and in Chicago wheat they lowered their short position by 518 contracts.

Corn

Corn finds support on bargain hunting and oversold conditions.

This week’s Commitment of Traders report showed that speculators now hold a short position of -105,469 contracts while Managed Money changed their combined futures and options position from the previous week -83,169 to a net -53,404.
Corn exports continue to struggle on the global market. Inspections for the week ending November 12th showed 14.7 mln bu. -20 percent off the five year cumulative export average at this time.
This morning a large corn sale to Mexico of 952,000 metric tons for 15/16 and 487,000 metric tons for 16/17. While continue well behind average, behavior like this suggest the market views sub-3.60 as a value area. Corn is working to gain competitiveness with South America at the Gulf, but Argentina is now back being aggressive, especially in the deferred sales months.
Stochastics are still in the oversold range and are trying to turn up. Trade above 3.62 should give the market a nearby target in the 3.70-3.73 area December. So far corn has been able to maintain support above Tuesday’s report day lows.

Soybeans

Soybeans close higher on friendly export inspections.

The Commitment of Traders showed that as of November 10th, Managed Money shortened their net position in combined futures and options by -31,825 to a net -52,301. Interestingly, their change primarily came not from the selling of long ownership, but the new sales of 29,897 short positions.
Weekly soybean export inspections for the week ending November 12th came in at 79.4 mln bu. This was above trade expectations which is behind last year the same week by -2.5 percent, but 20 percent ahead of the five year average.
Processor bids seem to be holding steady on soybeans, but without strength from meal and oil to improve crush margins – a bigger basis push isn’t likely in the near term. Livestock producers seem content for now booking immediate needs only and staying open on the market for future needs
January soybeans were able to find support above last Tuesday’s report day low of $8.50. Soybeans are trying to come out of their oversold condition but will encounter resistance tomorrow of $8.59 with the next resistance above at $8.75.

Wheat

Kansas City leads Chicago, closing marginally higher on short covering ahead of COT report.

Top Ukraine Ag Ministry source suggests traders there believe poor weather that has halted some winter grain planting could push the country’s 16/17 wheat exports to fall to 3.5 mln mt from the current marketing year’s 16.5 mln mt of anticipated exports.
Conditions for winter wheat good/excellent came in at 52 percent which is up 1 percent from last week and matches the average trade expectation.
While wheat is oversold, it is at risk of executing its bear flag if last Tuesday’s lows are violated.

Livestock

Live Cattle, Feeder Cattle and Hogs limit down on most months on supply concerns.

While slaughter was down from last week, beef production was estimated to be up 1.1 percent from last year as weights remain near record highs. Weekly US beef exports for the week ending November 5th came in at 8,100 tonnes, compared with the prior 4 week average of 6,750. Cumulative sales for 2015 have reached 586,800 tonnes, down 10.7 percent from last year’s price.

Bearish influences from strength in the dollar, weakness in crude and copper seem to have contributed to the selling pressure seen in the meats.

The USDA estimated hog slaughter came in at 433,000 head Friday and 259,000 head for Saturday. This brought the total for last week to 2.388 million head, up from 2.360 million the previous week and up 7.5 percent from a year ago. Today’s slaughter was reported at 438,000 head.

The meats took out last week’s lows without much hesitation today. All of the meat markets are likely in climactic selling mode here at these levels. While lower prices are still possible in the next couple days, there should develop some stability and at least a short term base soon.

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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