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Closing Comments



Closing Comments


Exporters shipped 27.7 million bushels of corn in the week ending October 23, down from 28.3 million the previous week, but up from the five-year average for the week of 24.8 million. Marketing year shipments total 252 million bushels, up 76 million or 44% from the previous year. Shipments to date exceed the seasonal pace needed to reach USDA’s target by 6 million bushels, versus 9 million the previous week.

Exporters shipped 6.5 million bushels of grain sorghum in the week ending October 23, down from 12.1 million the previous week, but up from the five-year average for the week of 2.1 million bushels. Shipments to China accounted for 5.9 million bushels of the past week’s total.

Marketing year shipments to all destinations total 55.6 million bushels, more than twice the 26.2 million shipped by this point last year, mostly due to China. Shipments to date exceed the seasonal pace needed to reach USDA’s target by 18 million bushels, versus 15 million the previous week.

USDA is scheduled to release its weekly crop progress report this afternoon at 3 p.m. CDT. A Reuters’ survey of trade participants revealed expectations that USDA will peg corn harvest at 45% as of Sunday, up from 31% the previous week. The five-year average pace for corn harvest by this point is 68%. The trade expects the condition of the crop to be unchanged at 74% Good to Excellent.

Reuters reports that 0.9 million bushels of feed wheat from Great Britain is on its way to livestock feeders in the Southeast. European feed wheat supplies are quite cheap currently, which isn’t supportive for U.S. corn demand. Great Britain hasn’t sold us wheat since March 2012, when 1.7 million bushels crossed the Big Pond.

Money flowed out of the broader commodity sector overnight and early today, but that flow reversed this morning as the dollar turned lower once again. The dollar sank ahead of this week’s meeting of the Federal Reserve Open Market Committee that will discuss monetary policy. It is expected to release a statement on its monetary policy at 1 p.m. CDT Wednesday.

The increased money flow into the broader commodity sector helped support a rally in corn prices this morning, with added support from surging soybeans. December corn posted a bearish reversal Friday, followed by a supportive reversal today. The flip shows the volatility of money flow, while undercutting confidence in the chart signals. The key now will be the market’s ability to hold above $3.60, which would target $3.80. Fundamentally, it’s difficult to justify the price move, with a break expected down the road. However, short-term it is risky to go against the flow of the market.


Exporters shipped 80.7 million bushels of soybeans in the week ending October 23, up from 74.3 million the previous week and up from the five-year average for the week of 64.6 million bushels. Shipments to China accounted for 63.8 million bushels of the total. As big as the weekly total of 80.7 million bushels was, it was still down from 85.5 million bushels shipped in the same week last year.

Marketing year shipments to all destinations total 300 million bushel, up 38 million or 15% from the previous year. Exporters typically have shipped 15% of final soybean shipments by this week of the marketing year, whereas they had shipped 16% by this point last year. However, they have already shipped 18% of USDA’s target for the current marketing year. As such, shipments to date exceed the seasonal pace needed to reach USDA’s target by October 23 by 40 million bushels, up from 27 million the previous year.

The strong shipments provided support for soybean futures this morning, but the greater strength came from soymeal. Sales to date for the new marketing year are roughly twice the normal pace, due in large to problems in Argentina. Processors are now trying to gear up to meet that demand, keeping soymeal prices well-supported. December soymeal gained added momentum when it pushed above the 200-day moving average, but it is yet to be seen whether it can hold that level.

The cash soymeal market reflected those fundamentals today, with offers for next week’s rail soymeal up $15 per ton, although poor rail logistics are contributing to that strength. Farmer selling is picking up at these higher prices as harvest gains momentum, but export demand for meal continues to support crush margins. Illinois crush margins were estimated at an impressive $3.50 per bushel today, up from $2.34 per bushel the previous year.

The aforementioned Reuters’ survey revealed trade expectations that USDA will confirm that 70% of the soybean crop was harvested as of Sunday, up from 53% the previous week. Yet, that is still behind the five-year average for the week of 78%.

Increased money flow in the broader commodity sector ahead of this week’s Fed meeting combined with strong soymeal demand and big soybean export sales to encourage active short-covering and some bargain hunting in soybeans. The question now will be whether January soybeans can hold above $10. Look for volatility to be high ahead of Friday’s first notice day for deliveries against the November contract. Fundamentally, we still expect supply to eventually over-run demand, but that will take some time.


Exporters shipped just 7.8 million bushels of wheat in the week ending October 23, down from 17.7 million the previous week and down from the five-year average of 16.5 million bushels. Just 0.4 million bushels were shipped to Brazil during the week as it assesses its current crop.

Marketing year shipments to all destinations total 394 million bushels, down 197 million or 32% from the previous year. Shipments to date fall short of the seasonal pace needed to reach USDA’s target by 30 million bushels, versus being short of the pace by 21 million the previous week.

The aforementioned Reuters’ survey revealed expectations that USDA will peg winter wheat planting at 85% this afternoon, up from 76% the previous week, but basically in line with the five-year average of 86%. However, it will also likely show good progress in the Plains is being offset by sluggish progress in the Midwest.

USDA is expected to release its first crop ratings for the winter wheat crop. The trade expects it to show 68% of the crop in Good to Excellent condition, versus the five-year average of 51%. I’m looking for 72% of the crop to rate Good to Excellent to start the season.

Strength in the outside markets encourage more short-covering in Chicago, along with trend-following buying. However, Kansas City December posted very modest gains, suggesting that the staying power of this rally remains in doubt, especially with Great Britain wheat now making its way to U.S. shores. Both the Kansas City and the Kansas City/Chicago spread charts continue to look bearish.


Few people thought we’d ever see cash cattle at $170 per cwt, but that’s what happened across the Plains feedlot region late last week. In fact, a couple packers were said to be inquiring early for this week’s cattle availability, suggesting good demand once again. Furthermore, last week’s slaughter at 576K head came in above expectations and 11K head above the previous week.

Last week’s strong cash market pushed estimated margins to $129 losses per head. That’s still not as bad as the $139 per head losses last spring, but it is more pain than the packers would like to see.

Cheaper prices managed to stimulate product demand last week. Product movement rose to a three week high of 939 loads over the past week, up from 748 loads the previous week. Choice cuts finished the week at $247.41 per cwt, down $1.75 on the week. Select cuts finished the week at $232.71, down $2.07 on the week. The Choice/Select spread finished the week at $14.70 per cwt, down $1.19 on the day, but up $0.32 on the week. Movement at mid-morning today was routine, but Choice cuts were up $1.64, while Select cuts were up $2.94 per cwt.

December live cattle held above Friday’s low, adding credibility to support at $166.50 per cwt. However, the market needs to close above $169.75 to take out the bearish double-top on the December chart. The feeder cattle charts are less convincing, with the November chart still looking like it is developing an extended bear flag that could lead to another break lower. We’re still seeing pens of light-weight cattle, mostly 650 to 700 pounds, trading in the $150 to $160 per cwt range, but the cash index has stagnated. The latest cash index came in at $239.55 per cwt, up $0.21 on the day and the first gain that we’ve seen since the record high of $244.04 was set on October 14.


The cash hog market continues to slide, with Midwest terminals mostly $1 to $3 lower again today. The latest cash index came in at $100.35 per cwt, down $2.05 on the day and the lowest level for the index since September 10. The index has posted losses in each of the past 11 trading days, with losses over that period totaling $10.25 per cwt. It is expected to drop below $100 tomorrow.

Estimated packer margins remain near $11 per head, as cash hog prices drop at about the same rate as the product market. Rapidly falling product prices are fortunately increasing demand, but that demand continues to be more than offset by a larger supply.

Product movement over the past week totaled 1,774 loads, up from 1,565 loads the previous week and a five-month high. The composite pork product price finished the week at $98.25 per cwt, down $2.29 on the day and down $12.76 on the week. In fact, the composite price has been down for the past 14 straight trading days, with losses over that period totaling $26.20 per cwt. Movement at midday today was routine at 175 loads, but the composite pork product price rose $2.84 per cwt on a surge in demand for picnic cuts.

December lean hogs posted a bullish reversal on Friday, but lacked the follow-through to support the move today. It is again vulnerable to a retest of support at $88. Today’s rise in product prices is encouraging in light of the big rise in demand, but thus far we’re not convinced that demand will be able to keep up with expansion in the supply, with the futures market vulnerable to another $10+ in losses.

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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Arlan Suderman | Senior Market Analyst
WATER STREET ADVISORY® | www.waterstreet.org
(316) 729-4599 | asuderman@waterstreet.org

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