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Closing Comments

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Closing Comments

Corn traded into new contract lows today with new crop dipping under 3.40 on the board.  Mid-day models continue to show the heat ridge currently stifling the Midwest moving back west and to be followed by more beneficial late July rain. While temperatures are critical to late stage crop development, and high night time temps could deteriorate top end yield, the main consideration has to be where are the top end yields going to be trimmed from? The market clearly feels comfortable that a 1.8 bb+ carry-out is all but assured, with only a rough finish casting that in doubt. Export sales were also not as aggressive as in past weeks coming in slightly below expectations at 33.5 mil bu, but the market was already lower when this was released. The main route for higher corn prices ahead seem to be limited to the recurrence of an early August heat ridge pushing beans higher, and forcefully dragging corn along once the ratio hits 3:1 or greater.

Soybeans had yet another violent trading session with a 20 cent trading range in the first few minutes of trade before strengthening back up and holding gains into the close. Exports were strong at 48.7 mi bu, and taking the overall yearly total to a record of 1.91 billion bushels! Weather continues to be a bigger factor for beans, as the balance sheet cannot afford much less than a record crop with current demand. Clearly the market is pricing something above a 48 bpa yield at this price, which should only be possible with rain and benign conditions in August.

Wheat was handcuffed by negative corn action and continued good yield and quality out of US wheat harvest, but did manage to close positive across the board. The situation in the EU for wheat continues to deteriorate with high end estimates guessing that this year’s crop will be as much as 55 million bushel shy of last year’s large crop. Seasonally, the market would expect a bottom on this time frame, but for now negativity out of the corn and bean market are providing too much head wind.

Fat Cattle continued to leg lower today on expectations of this afternoon’s cattle on feed report showing more placements than a year ago. Marketings should return to pre-2014 levels, which is supported by recent daily slaughter totals. Ultimately, we will continue to experience the painful end of the demand cycle, where expansion is stifled rather than created, until we return to more manageable levels of over-all placements.

Lean Hogs continue to fall, with the deferred months surging into new contract lows in the deferred months. The deferreds are falling at a clip that does not feel sustainable while front months should find near term support in between 72.85 – 73.25.

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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