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Closing Comments

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Closing Comments

Corn

Exporters shipped 16.8 million bushels of corn in the week ending October 30, down from 28.9 million the previous week and down from the five-year average for the week of 25.9 million bushels. The decline comes as U.S. prices rise above world levels, the dollar makes us even less competitive and as exporters put a priority on pushing soybeans through available port slots.

Marketing year corn shipments total 270 million bushels, up 63 million or 30% from the previous year. Shipments to date fall short of the seasonal pace needed to reach USDA’s target for the year ending August 31 by 8 million bushels, after exceeding it by 6 million the previous week.

Shipments of grain sorghum totaled 5.3 million bushels in the week ending October 30, down from 6.5 million the previous week, but up from the five-year average for the week of 1.2 million bushels. Marketing year shipments total 61.2 million bushels, up 33.7 million or 123% from the previous year, largely due to China. The past week’s total included another 2.2 million bushels of U.S. grain sorghum destined for China. Shipments to all destinations for the marketing year exceed the seasonal pace needed to hit USDA’s target by August 31 by 20 million bushels, up from 18 million the previous week.

USDA is scheduled to release its weekly crop progress data at 3 p.m. CST this afternoon. The trade expects it to show corn harvest at 60% complete as of Sunday, up 14 points on the week, but still 15 points below the five-year average for the week.

The focus is starting to shift to next Monday’s USDA crop report, with private estimates beginning to be released. The Linn Group started the chatter today, with its corn production estimate of 14.842 billion bushels on a yield of 178.6 bushels per acre. USDA’s October estimate was for a crop of 14.475 billion bushels on a yield of 174.2 bushels per acre.

The dollar rallied to fresh four-year highs today, with money generally flowing out of the broader commodity sector. That helped to accelerate losses in the corn and soybean pits, where an active weekend of harvest activity increased supplies. Corn garnered some support from a late surge in wheat, but longer-term the feed grain is vulnerable if the soybean market continues to tip over. Big crop years usually do not confirm a bottom until the farmer turns bearish, which hasn’t happened yet.

Soybeans

Exporters shipped an all-time weekly record of 101.8 million bushels of soybeans in the week ending October 30, up from 83.2 million the previous week and up from the five-year average for the week of 67.2 million. The past week’s total included 78.6 million bushels destined for China.

Marketing year shipments since September 1 total 405 million bushels, up 60 million or 17% from the previous year. Exporters typically ship 20% of final soybean shipments in the first couple months of the marketing year, whereas they had shipped 21% the previous year. However, this year they have already shipped 24% of USDA’s target for the year ending August 31. As such, shipments to date exceed the seasonal pace needed to hit USDA’s target by 73 million bushels, up from 40 million the previous week.

A Reuters’ survey of trade participants revealed expectations that this afternoon’s crop progress report will show that 81% of the soybean crop was harvested as of Sunday, up 11 points on the week and very close to the five-year average for the week.

The Linn Group pegged this year’s soybean crop at 4.064 billion bushels on a yield of 48.7 bushels per acre. That compares with USDA’s October estimate of 3.927 billion on a yield of 47.1 bushels per acre. More private estimates will be coming out in the coming days, including FC Stone later this afternoon.

Supplies increased over the weekend, with soymeal prices leading the way lower overnight. The oilseed complex remained weak throughout the day, with losses accelerating late in the session as December soymeal broke below support at $373. January soybeans were over-bought and in need of a correction. It’s too soon to declare a near-term high behind us, but this market once again looks vulnerable if it can’t quickly recover. Private production estimates are starting to refocus the trade on the big supply side of the balance sheet.

Wheat

Exporters shipped 7.7 million bushels of wheat in the week ending October 30, down from 7.8 million the previous week and down from the five-year average for the week of 14.7 million bushels. The past week’s total included another million bushels destined for Brazil. However, the overall total was weak as U.S. wheat remains expensive on the global market, while exporters are also focused on using available slots for shipping soybeans.

Marketing year wheat shipments total 402 million bushels, down 198 million or 33% from the previous year. Shipments to date fall short of the seasonal pace needed to reach USDA’s target by May 31 by 37 million bushel, versus falling short by 29 million the previous week.

The trade expects USDA to peg winter wheat planting at 90% this afternoon, up 6 points on the week, with the greatest delays still in the Midwest soft red winter wheat belt. The industry also expects the crop to rate 60% Good to Excellent, up 1 point on the week. I’m looking for a two-point increase in the ratings.

Short-covering continues to provide support for Chicago wheat, with fundamental support from expectations that soft red winter wheat acres will decline this year due to planting delays. The next significant resistance for Chicago December wheat is the 100-day moving average at $5.4375. Kansas City remains a reluctant follower, which is not a recipe for a strong wheat market. U.S. wheat is over-priced on the world market and the disadvantage is getting worse as the dollar rallies.

Beef

Last week’s cash cattle trade in the Plains came in at primarily $168 per cwt on a live basis, down $2 from the previous week. Packers broke the cash market by contracting enough cattle ahead of time to minimize their need to rely on the negotiated market. They’ve also been quite active in recent weeks buying cattle and then turning around and putting them back on feed in some cases, to increase the supply at heavier weights in the weeks ahead, just as the holiday-shortened slaughter schedules arrive.

Last week’s slaughter is currently estimated at 553,000 head, down 23,000 on the week and down roughly 70,000 or 11% from the same week last year. Meanwhile, carcass weights are up 24 pounds or 3% from the previous year, with additional gains possible as the packers do what they can to fill the deficit with heavier cattle. Last week’s beef production is estimated at 456 million pounds, down 8.6% from the same week last year.

Yet, December live cattle bounced off support at $165 today. Today’s bounce wasn’t enough to suggest that we are going to new highs, but traders were wary of pushing prices too low too soon. Feeder cattle futures found renewed strength in the fat cattle market, along with cheaper corn prices. The latest CME cash feeder cattle index came in at $239.95 per cwt, up $0.65 on the day and the fifth trading day of the past six that the index has posted a higher value.

Last week’s boxed beef dropped to 735 loads, down from 939 loads the previous week and a three-month low. Choice cuts finished the week at $251.20 per cwt, up $3.79 on the week, but down $2.43 from their mid-week high. Select cuts finished the week at $238.63 per cwt, up $5.92 on the week, but down $1.14 from their mid-week high. The Choice/Select spread finished the week at $12.57 per cwt, down $2.13 on the week. Strong cash prices amid soft product prices meant that packers were losing an estimated $102.05 per head at the end of the week, compared to losses of $76.50 the previous week.

Boxed beef movement at mid-morning today was routine at 72 loads, but at firmer prices. Choice cuts were up $0.12 to $251.32, while Select cuts were up $0.56 to $239.19 per cwt.

Pork

Today’s cash hog market was mostly steady, although the Iowa/Southern Minnesota market was steady to $1 lower. The market remains soft, but the rate of decline is slowing. The latest CME 2-day lean hog index came in at $91.38 per cwt, down $1.65 on the day. It was the 16th straight trading day with a lower index, with losses over that period totaling $19.22 per cwt. The latest index is the lowest since February 20.

Slaughter numbers are trending higher, rather than lower as expected due to the PED virus. Furthermore, weights are trending seasonally higher as well. However, weights are only running 2.5 to 3% above year ago levels, after being 5 to 6% above the previous year this past summer.

Product movement last week totaled 1,763 loads, down slightly from last week’s 4-1/2-month high of 1,774 loads. The composite pork product price finished the week at an eight-month low of $97.51 per cwt, down $0.74 on the week, but prices were much choppier over the past week, showing some signs of slowing decline. Unfortunately, we haven’t seen strength in the holiday ham demand to raises hopes of stabilizing the product market. Movement at midday today was sluggish at 141 loads, with the composite pork product price down $0.83 to $96.68 per cwt on a big drop in bellies.

December lean hogs rallied off the old support at $88 today, but the move was less than enthusiastic. It’s difficult to argue supportive fundamentals near-term, although the outlook is a bit better as we look to next spring if we fail to see a big rise in PED virus losses as temperatures drop. Nearby futures remain vulnerable to a return of selling on the board.

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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Arlan Suderman | Senior Market Analyst
WATER STREET ADVISORY® | www.waterstreet.org
(316) 729-4599 | asuderman@waterstreet.org

Past performance is not indicative of future results. The information contained in this report is intended for informational purposes only and is the opinion of the writer and may change at any time. This information was compiled from sources believed to be reliable but accuracy cannot be and is not guaranteed. There is no warranty, expressed or implied, in regards to this information for any particular purpose. There is SIGNIFICANT RISK involved in trading futures and or options on futures and may not be suitable for all investors. Investors should consider these RISKS and evaluate their suitability based on their financial conditions. No one should ever consider trading futures or options on futures with anything other than RISK CAPITAL. This information is provided freely and is NOT in the capacity of a trading advisor. NO LIABILITY on the part of the author exists for any trading loss you may incur in the use of this information. Information provided is not to be construed as an offer to sell or solicitation to buy any commodity or security named herein.

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