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Closing Comments

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Closing Comments

Corn closed its 5th consecutive day lower and marks 10 of the last 12 sessions lower as fund liquidation continues to pressure price as larger acres and more productive weather has removed all of the weather premium that had been built into the market. Basis levels have improved in many locations in the Midwest, particularly processing facilities, as farmers again shut their doors on the price break. Technical signals like RSI and Stochastics are in an oversold situation and should provide stability to the market as the fund liquidation panic subsides and the realization that the crop is not yet in the bin returns to the trade. Funds were reportedly sellers of 13,000 corn today, marking the 12th consecutive day of fund selling.

Soybeans started the session extending their slide – with November trading as low as 37 ½ lower – but bargain hunters brought the November contract back to life – closing only 4 lower on the day. A report from the USDA attaché noted that the growth in China’s feed industry and demand for protein meal thanks to the recovery of their swine market should lead China to import a record 86 mln metric tons in 16/17, up from the estimated 83 mln in 15/16. On the technical side, November soybeans were able to reach a 38% retracement of the rally from the first of March to the 13th of June. Today’s bar shows ‘selling exhaustion’ for now, but need confirmation follow through higher tomorrow. The weekly charts are overbought and funds are long, but the strong demand structure and the risk of August weather should continue to maintain support for the market for now.

Wheat weakened a bit as the plentiful harvest and supplies weigh on the market, but all three exchanges were able to hold above the lows established on yesterday’s weakness. The dollar trading lower into the later session helped to provide support while Black Sea harvest reports show yields running above and quality the same as a year ago – adding to the global bearish tone. That being said, winter wheats typically have seasonal bias higher from the beginning of July through the end of August. The short fund position and historic lows should offer a supportive bias for now.

Cattle closed lower across the board despite this morning’s boxed beef showing Choice 0.95 higher and Select 2.18 higher. August cattle futures continue to trade at discount to the current cash levels. The market will be watching tomorrow’s carcass weights as an indication of how cattle are getting positioned at feedlots and how they compare to last year.

Hogs traded lower, weakest in August, on continued technical selling and expectation for cooperative production weather and cheaper feed costs.  

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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