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Closing Comments

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Closing Comments

Corn was sold hard during the day session but was able to claw off its lows into the closing bell. Export sales were somewhat disappointing, coming in at the bottom of the expected range and just over 1 mmt. Weather markets are characterized by the frenetic struggle between reality and the forecast, a struggle experienced in earnest since Sunday. Hotter and drier forecasts catapulted the market higher on Sunday, but better than expected rain on the ground across several key growing areas will always trump a forecast. Now heat returns and precipitation chances are minimal into the beginning of next week. Each run of the forecast still has the ability to support this market, but the fact remains that damage has yet to be done to this crop. We are here because of weather premium, hot and dry weather will continue this run higher, but if it fails to show up it will become quickly apparent that 4.40 and 2.0 bb of corn carryover cannot co-exist for long.

 

Soybeans were under pressure throughout the session, though new crop managed to close nearly .10 off of its lows. The primary driving force lower continues to be weather, with better than expected rains falling across many dry areas of Iowa, Illinois, and Indiana. Export sales came in above expectations for beans with 1.58 mmt sold between old and new crop verses high end of expectations of 1.3 mmt. However, meal and oil both disappointed falling short of sales expectations. As with corn, soybeans will continue to trade the forecast, with funds waiting to either defend their historically large position, or liquidate it if technical support should start to give way. Unfortunately, with the speed and severity of this rally in beans, it will take a rather deep retracement to convince market technicians that this move is over.

 

Wheat continued its orderly sell-off today despite better than expected export sales numbers. Wheat I clearly marching to the beat of its own, with funds more than happy to sell every break-out from this support area of 4.50 – 4.80 Chicago wheat. This strategy will work until it does not, and just as beans and corn before it, sellers must have caution in a market that has consolidated this long, regardless of how negative the fundamentals are. Export sales came in at 762k mt, well over the high end expectations of 500k mt.

 

Despite a very negative day of trade, Cattle were able to erase most of their heavy losses from the session into the final minutes of trade. Cattle continue to trade in a tightly choppy pattern, leading many sellers to capitulate on small rallies or on hard breaks. Most of the live trade in the South today was at $123, with dressed trade in the North at $198, both around $5-$7 lower than last week. Packers continue to benefit from this grinding to negative environment.

 

Hogs continue to climb today pushed by better than expected demand for exports driven primarily by China. The USDA is calling for exports of pork to rise by as much as 8% in the second half of this year.

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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