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Closing Comments

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Closing Comments

Fund buying shows up to start the week off again, a surprise since most may have looking at how last week closed.  At midday, funds were estimated buyers of 14,000 contracts of soybeans, and 9,000 contracts of soymeal, and 1,500 contracts of Soyoil.  Funds were estimated buyers of 18,000 contracts of corn and 4,500 contracts of wheat.

 

Grains came off their highs as buying dried up a bit and waiting for planting numbers update. 

Corn

Corn posts a solid start to the week thanks in most part to managed money short covering again.

Another strong weekly export inspection number for corn, coming in at 44.7 million bushels.

Rain and cold temperatures in western Nebraska have most holding of starting to plant this week.  Many other areas of the Midwest have been planting and guess for planting progress are anywhere from 30% to 40% planted. 

Spec margins for corn futures will rise to $1,155 per contract, an increase of 16.7% starting today.

Soybeans

Soybeans start the week off with a surprise and another round of fund buying.

Spec margins for soybean futures will increase to $1,700 per contract from the current $1,350 per contract.  Soybean Meal margins will also rise to $1,700 per contract from $1,100 per contract.  A reflection of the recent price swings in the grains.

The CME Group said it would raise margins to trade soybeans and soymeal futures next week, a move that could have contributed to the liquidation.

The first planting numbers for soybeans are expected to be around 3%. 

Soybeans lead the way initially in the Monday rally, reversing all of Friday’s poor action.  The settlement did not turn out as nice and makes for an interesting setup for possible turnaround Tuesday, however momentum is still for higher.

Wheat

Wheat follows corn to spark a morning rally, but better condition ratings expected.

Wheat futures will also be rising, to $1,540 per contract.  An increase of 16.7 %.

CFTC data showed Managed Money covered some of their wheat position as of the end of Tuesday, leaving them net short -88,241 after covering 17,922.

Expectations for an increase in wheat ratings to 58% good to excellent from 57%, had them on the defensive into the close today.

Livestock

Cattle markets post a modest rally despite higher grain markets.

The market recovered today despite all of the bearish sentiment that is still in the news.  The monthly cold storage report, released after the close on Friday, was somewhat supportive and showed the frozen beef supply down 5% from the previous month and down 3% from last year.  Also released on Friday was the quarterly cattle on feed report which was viewed as neutral to slightly bearish.  The main concern looming is that speculators are still net long and given the steep downtrend, the market is still vulnerable to a further set-back.  Seasonal demand should be picking up which could help to offset the negative sentiment and bring a low soon. 

Futures recovered nicely from the early morning decline and closed slightly lower for the front month and positive in the deferred months.  The monthly cold storage report was supportive showing frozen pork down 2.4% from last month and 8.7% from last year.  Cash markets were firmer late last week up $0.50 – $1.00 which supported an early rally to the highest level since April 11th.  Seasonal demand should be picking up as we head into grilling season and should help to support things near term.  The questions remains whether or not demand will be able to offset the increase in pork production as we approach the 4th quarter. 

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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