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Closing Comments

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Closing Comments

Corn closed incrementally lower with some minor bull spreading with Sept -¼ lower and Dec -½. Weekly export inspection came in at a solid 51.43 mln bu this past week, continuing the trend of 50+ mln per week pace as the US continues to be the most competitive source for corn. A survey of trade participants expects a 1% decline in Good/Excellent ratings in this afternoon’s release off hotter than normal temps (specifically in the lower half of the US), but still at a seasonally high rating of around 75%. Over in China, flooding looks to have damaged about 15% of the corn, but the rains should abate and limit further damage. Funds are now net short corn and like the balance of the trade will be deciding between how big the crop is going to be (balancing good moisture in many areas with the potential for yield trimming warm nights) with how large demand will become (the US is the cheapest source and exports are running above the 20 year pace and ethanol printed its largest grind in history last week). Look for choppy trade over the next four weeks as the trade continues to wrestle over their assumptions.

Soybeans pressed into three month lows on continued fund liquidation to start the wee. The larger than expected Soybean net fund long position seen in Friday’s COT report weighed on soybeans today as funds continue their liquidation process on the prospect of more cooperative than expected August weather. Weather models are starting to build in some more heat for mid to late August but continued showers are expected to alleviate much of the potential reproductive stress. Export inspections were huge this morning at 25.7 mln bu, more than 50% above the market expectations and the best inspection since March 10th. River basis has been steady to higher on good demand and slow farmer selling. Technically, the soybean daily charts have moved most indicators into the oversold mode which should provide some stabilization in this area but may require funds to reduce their liquidation pressure.

Wheat closed higher across the complexes on short covering on EU wheat concerns. The EU crop monitoring service, MARS, raised its expectation for Bulgarian production of soft wheat, helping to offset their cut in the weather affected French production. Their EU estimate right now is a yield below last year but above the 5 year average. The concern in France is not only a drop in yield from the expectation but low quality wheat that won’t make contract spec. Paris futures closed lower on profit taking with the MARS news after putting in new highs for this run. In Chicago, the carry from Sept to Dec grew to a contract spread high of 27 ¼ cents as the market continues to encourage farmers to store wheat.

Cattle futures gapped higher and didn’t look back after the COF report Friday came in friendlier than expectations and the price strength tripped buy stops closing limit up in cattle and feeders. Futures were supported by their discounts to last week’s cash cattle trade that in the southern US came in mostly around $115 per cwt. Cold Storage on Friday was a bit bearish, but not significantly enough to matter to the market. Boxed been traded lower this morning by -$1.43 in choice and -.17 in select.

 

Hogs gapped higher to start the trade this morning, but quickly filled the gap before closing higher on the day on good packer margins and an oversold condition of the futures. Cash hogs around the Midwest sold mostly 50 cents per cwt weaker on pressure from ample packer coverage. Three packer facilities closed last week for maintenance issues as added to the lack of recent packer demand. Some in the trade are looking to the potential for slower gains from the higher heat indexes and for grocer demand to get coverage in place to avoid potential shortages. Last Friday’s cold storage report showed total pork inventory at 585.9 mln lbs, down 5% from the previous month and down 8% from the previous 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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