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Closing Comments


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Closing Comments

The USDA May crop report provided the much needed information to take the bean market to a level not seen since November 2014.  Let’s get right to it since the report grabbed all the headlines today.

Corn finds a lot more demand according to the USDA May crop report with an increase by 525 million bushels overall.  300 million increase in Feed and residual usage, 50 million bushels in ethanol, and another increase of 175 million in export expectations.  Looking at both sides of the coin, expecting a decline of corn acres because the current corn/soybean ratio is now at 2.75 and should put more pressure to raise a big overall yield.  Corn would still be at a cheap price should a summer issue show up and much bigger rallies should be expected if a summer problem shows up.  On the other side, should the USDA forecast come true the US would still have a carryout over 2.1 billion bushels.  In the end, the US will not be running out of corn anytime soon but the report did make things less comfortable in the carryout and weather scares or actual issues will bring a bigger premium than before.

Soybean ending stocks for the 2016/17 crop year were reduced to 305 million bushels and 100 million below the average trade guess.  The “old crop” carryout was reduced to 400 million bushels down from 445, by raising exports by 35 million bushels and another 10 million bushels to crush.  Again, the corn/soybean price ratio has grown to 2.75 and would encourage more bean acres down the road.  If the regional areas continue to experience delays of getting into the fields then the decision to possibly change some acres around becomes even easier.  The South American reduction in crop expectations also helped add to the rally as well today.  Brazilian soybean production was cut 1 mmt to 99 mmt, and Argentine soybean production was cut 2.5 mmts to 56.5 mmts and very close to most estimates.

Wheat struggled to play along due to the increase in expected carryout.  The winter wheat production estimate was pegged at 1.427 million bushels and well above the trade expectations despite a drop in projected harvest acres of 2.5 million.  Ending stocks are expected to be at 1.029 million bushels vs. the previous estimate of 978 million bushels.

Cattle found it hard for much direction today, but holding up pretty well given the recent rally in the grains and in themselves over the last 7 trading sessions.  In the technical, live cattle have ran into resistance on the charts and limited by the 100 day moving average while the feeders have a little more to go if they want it.

Hogs nearby have now support off the 100 day moving average and the later contract months have held up even better overall.  Pork production is still expected to increase due to larger hog supplies and heavier carcass weights.

Closing Market Snapshot




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