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Closing Comments

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Closing Comments

Stocks were higher on good earnings while crude oil surged higher on hopes of economic growth. The Climate Prediction Center is maintaining its forecast of a 55 to 60 percent chance that La Nina will develop during the fall and winter of 16/17.

Corn finished lower on continued “big crop” pressure from traders ahead of tomorrow’s much anticipated USDA August report. Analyst guesses are coming in a narrow range with an anticipation of a bump in 2016 corn yield of 2.6 bushel from the July estimate of 168. The tight grouping of expectations could set the market up for a bigger reaction if the number comes in as a surprise. Of the last 10 years, corn traded higher on the August report day seven of them. The “big demand” side of the equation came back in front of the market today with 594,900 tonnes of old crop and 1,015,600 tonnes of new crop export sales came in above the trade expectations. China sold 213k tonnes of corn from 2013 today of the 3.2 mln tonnes made available.

Soybeans edged higher on excellent export sales this morning coming in at more than 3 million tonnes – topping the trade expectations. Support in the energy sector provided general commodity support, but the bearish sentiment ahead of tomorrow’s USDA report kept buying at bay. Analysts are expecting the USDA to raise their yield estimates but also will need to increase export demand, limiting the potential for an actual increase in ending stocks. The average trade guess for soybeans is 47.5 bpa vs the 46.7 bpa from the July USDA report. Six of the last 10 August reports saw higher trade that day, the most notable exception being last year’s -0.61 ½ lower day. A final US yield will likely need to be 48+ bpa to quell balance sheet concerns in light of the excellent export demand. Strong Gulf demand continues to support basis for soy.

Chicago Wheat finished lower on technical selling while KC and Minneapolis were able to close incrementally higher. European wheat futures traded to their highest level in 11 sessions on continued firming in global wheat prices and the worst French wheat crop 30 years. Farmers globally are reluctant sellers at these price levels.

Cattle and feeders were lower on concern ahead of tomorrow’s cash trade. Some smaller auctions yesterday signaled for the potential of weather cash trade despite lower numbers for sale and the anticipated grocer demand ahead of Labor Day.

Hogs exploded out of the gate this morning from its oversold condition, but steady to weaker cash trade and ample supplies sent the buyers scrambling out of the market before closing lower on the day. Peoria hogs were steady at $39.

The Midwest Regional Climate Center tracks several climate trends. One topic of late in the market has been working to understand what impact high temps and low temps will have on final corn yield. The map to the left shows deviation from the long term mean of minimum temps in the central US. While most of the Central US is running minimums above normal of 2 to 3 degrees, it’s also significant to note that during the same period in 2014 much of the central and eastern corn belt was averaging 2 to 5 degrees below mean minimum temperature.

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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