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Closing Comments

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Closing Comments

Corn closed higher with the beginning stocks for 16/17 being lowered 7 mln bu as reductions in 15/16 feed and residual use and ethanol use was more than offset by increases in exports and seed use. Production for 16/17 was projected 110 mln bu higher from the increased planted and harvested area off the June 30 acreage report. Projected 16/17 corn use is raised 30 mln bu as increased prospects and higher seed use more than offset lower projected use for feed, residual and ethanol. Exports are projected 100 mln bu higher on reduced competition from Brazil. Corn ending stocks for 16/17 are projected 73 mln bu higher.

Global coarse grain supplies for 16/17 are projected slightly lower this month. Coarse grain beginning stocks are down slightly from last month mostly reflecting reductions in barley from the EU and corn for Brazil. Brazil corn production for 16/17 is reduced 2.0 mln tons based on lowered yield expectations.

With the July report out of the way, the trade will now turn its attention back to the weather forecast as we near the middle of July and move into the important grain-fill period. Current models are showing a Midwest ridging to build after this coming weekend which will bring significantly higher temperatures and drier weather which should provide market price support until the market feels the threat has past. Current high crop condition ratings and recent moisture has bought the market good cushion for yield – but triple digit temperatures will cause the bears to pause for the moment. Look for upside resistance for now in the Dec contract in the 3.85-3.95 area.

Soybeans found good strength today despite US oilseed production for 16/17 being projected up 2.5 mln tones on higher soybean production. Soybean supplies are raised 60 mln bu with lower beginning stocks partly offsetting production gains. Soybean ending stocks for 16/17 are projected at 290 mln bu, up 30 mln from last month. Soybean exports for 15/16 are projected at 1,795 mln bu, up 35 mln reflecting shipments and outstanding sales through early July. Soybean ending stocks for 15/16 are projected at 350 mln bu, down 20 mln from last month.

Global oilseed ending stocks for 16/17 are projected at 76.1 mln tons, up 1.0 mln with higher soybean, rapeseed, and sunflower stocks only partly offset with lower peanut stocks.

The market will be watching if the forecasts of hot/dry weather arrives and persists into the critical August reproductive timeframe. Initial upside target is the July 4th gap on the November chart of 11.37. The realization of hot/dry weather would lead the November contract price above the June highs.

Wheat closed green today despite the USDA projecting US supplies for 16/17 were raised 180 bushels from the previous report on increased production and slightly higher beginning stocks. Production was raised throughout the wheat belt with winter wheat yields projected to be a record high, and spring wheat yields expected slightly above average. Feed and residual use was increased by 100 mln bu on the anticipated increased feed source competitiveness with corn. US exports were raised 25 mln bu to 925 mln, which would be the highest in three years. Ending stocks were raised 55 mln bushels to 1,105 mln bu, the highest since 88/89.

Global 16/17 wheat supplies are raised 9.2 mln tones to 983 on increased production and beginning stocks. The increased global production was partially off-set by the decrease in French production by heavy rains and the drop in Algerian yield from the worse-than-expected drought.

Short covering in the Chicago contract should give the September CBOT wheat contract an opportunity to run into the 4.70 resistance area. Sustained rallies will require more headlines or a confirmation of La Nina setting in as we move into fall.

The forecast for total red meat and poultry production for 2016 is raised from last month. Beef production is forecast higher largely on the pace of slaughter in the second quarter, but also as feedlot marketings during the second half of the year are expected to remain relatively high. No change was made to the 2017 production forecasts for beef or poultry.

Pork production for 2016 is also raised, based on second quarter slaughter and larger expected slaughter in the fourth quarter. For 2017, pork production is reduced from the indicated intentions from producers to have fewer sows farrow in the second half of 2016 compared to 2015.  

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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