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Closing Comments

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Closing Comments

Corn closed a little higher helped by a rally in the wheat complex.  Some bargain buying and the positive close gives some signs of at least a near term bottom from the technical side.  Fundamentally, a long term rally may be difficult to maintain under current conditions, however large yield expectations and weather forecast maybe priced in and demand gets stronger from here as bids at the gulf and ethanol plants has firmed in the eastern corn belt.           

Soybeans closed well off of their lows but continue to get liquidated by funds as weather for August looks to be much cooler with decent chances of moisture.  Funds sold a large number of contracts this week as beans were down .66 cents a bushel for the week.  Exports are expected to pick up in the near term and crush margins have moved back to positive territory, and would help to keep beans well supported at these price levels.  The 200 day moving average sits close to 9.52 and maybe an early target next week for fund managers to exit more long positions before moving higher however.         

Wheat closed higher as more stories hit the headlines over EU wheat yields continuing to decline.  Paris wheat futures gained another .24 bushel.  The Matiff wheat contract set a new high today at $189/MT, which is up 13% since July 1st.  Estimates in the Russian wheat crop are rising however and North American crops we know have been excellent this year.  The combination may limit the upside potential for a wheat rally longer term.    

Fat Cattle reversed yesterday’s negative action across the board closing decisively higher in what is hopefully the beginning of a near term bottom. The Cattle on feed report came out bullish and supportive of today’s action with cattle on feed 101% vs expectations of 102%, placements at 103% vs expectations at 106%, and marketings were at 109% verses expectations at 110%. However, cold storage was not supportive showing nearly 23 million more pounds of beef in the freezer than expectations! It is good to see the supply curve starting the necessary trimming, but much like the corn market, ample supply will serve as an obstacle to any large scale corrections higher.

 

Hogs also were well supported from yesterday’s lows, closing higher for the first time since July 1st. Cold storage is not very supportive fundamentally with nearly 586 million pounds of stocks verses expectations of only 559 million pounds. That said with such a deep break, I doubt bearish fundamentals will surprise the market much, and we could actually see a recovery on the face of bearish news.

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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