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Closing Comments

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Closing Comments

The Conference Board leading indicator was up +0.6 percent over the prior month, just beating expectations while their lagging indicator was up +0.2 percent. While economic indications show continued resilience of the US market, Atlanta Fed President Lockhart stated that the Fed would use a “slow…halting” effort to raise rates. Bonds rose and the dollar was lower.
Comments by Goldman Sachs that commodity prices could see another drop in price to adjust supplies in the face of weaker demand from key consumers like China. This kept the pressure on crude oil, testing the water under $40 for the second day in a row. The CRB Index of 19 commodity prices has already shed 20 percent this year, the biggest yearly drop since 2008.
Winter will begin shortly with anticipated snow accumulation across Iowa and northern Illinois.
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Corn

Corn finds positive export news and strengthening basis levels.

30.7 million bushels of reported export sales, the best of the year, provided early support for the corn market. A rebound in sorghum sales and renewed interest in Chinese purchases of sorghum and DDGs coupled with the US improving ability to compete on the export market has provided recent support to the market. Expect next week’s sales number to be larger as the US is now competitive with Argentine and Brazilian corn.
Corn basis continues to firm in the western corn belt irrespective of the record western crop. Several processers have improved their spot bit by more than 20 cents in the last 20 days in an effort to secure more ownership as farmers are reluctant to sell at these levels. The post-harvest basis improvement is typical, but significant this year in light of ample western supplies.
December options expire this week with a significant put volume at both 3.70 and 3.80 strikes.
So far for the week, December corn has added 6 cents and now back to the price futures were trading going in to last week’s USDA report. December will encounter resistance at 3.70-3.73 to finish this week.

Soybeans

Soybeans find support on strong weekly sales and reluctant sellers.

Soybeans found support on weekly USDA reported export sales of 66.1 million bushels of soybeans. This was well above the market expectations and a three-week high number. However, the ample supplies and weak crush margin continues to cap rallies.
Soymeal was able to close higher on bargain hunting after reaching near four year lows yesterday, but light cash market demand, ample domestic supplies and this weekend’s Argentine election continues to weigh on meal.
The board crush values have likely stabilized and a bounce from a rally in soymeal futures would be expected soon.

Wheat

Wheat leads grains on exports news and concern for incoming cold-snap.

The incoming cold front in the US Midwest and Plains are creating some concern for winter wheat stress. Well below normal temps are expected into the Gulf states.
USDA reported export sales came in above expectations at 26.5 million bushels.
Strategie Grains, the French consultancy, pegged the EU soft wheat shipments at 26.8 million tonnes, 300,000 tonnes above last month’s estimate but still sharply lower than the 32.5 million tonnes exported last season.
UkrAgroConsult stated that Ukrainian winter grain planted area declined by 3.45 million acres this season compared to last year, while winter rapeseed acreage dropped by more than 605,000. Leaving winter crop acreage at its lowest level in 10 years.
Minneapolis led the complex today, closing December up 8 ¾ followed by Chicago up 7 ¾ and KC trailing up 3 ¾.

Livestock

Cattle give back recent gains while hogs find support.

Morning boxed beef cutouts were lower across the board today, with choice down -1.60 at 205.08 and select down -2.66 to 194.04. This puts the choice/select spread at 11.04. Pork cutout values were higher, with carcass up +2.70 to 74.89. Bellys up +4.40, loins up +5.48 and ribs +3.41.

Cash hog prices in the Midwest were steady to $1 per cwt lower, with packers having sufficient inventory throughout the Thanksgiving week amid persisting over-supply. Strong packer margins and large kill numbers have helped to mitigate the recent downtrend in prices.

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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