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Closing Comments

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Closing Comments

Fed chair Yellen’s comments indicated the possibility of a US rate hike thanks to improving fundamentals. This brought a round of commodity selling and reversed early losses in the US dollar. The market is still skeptical of the Feds ability to follow through for a September rate hike though.

 

Pro Farmer released their adjusted yields this afternoon showing a US corn yield of 170.2 bpa to produce a 14.728 bln bu. This is under the August USDA estimate of 175 bpa. Soybeans are estimated at 49.3 bpa vs the USDA August estimate of 48.9 bpa.

 

Gulf storm “Invest 99-L” is expected (60% chance) to develop into a tropical storm this weekend. Currently moving over the Bahamas, the most likely path is into the Gulf and gaining strength as it encounters the warm waters. If it can develop into a Gulf hurricane, it would be the first since Ingrid in 2013.

 

Corn fell today from pressure in wheat and aggressive fund selling on the expectation of record US supply to reach the market in the next few weeks. CFTC data showed mixed activity as of Tuesday, speculators increased their net short position in corn by -9k contracts while Managed Money with options trimmed their net short corn position by 7,538 contracts, leaving them still large net short of -153,942 contracts. Regardless, funds have been sellers since then with an estimated sale of 15,000 contracts today. Felt like today was emotional liquidation selling from the funds and they should get their wits about them next week. It’s a big crop, but we’re getting a bit over done without more confirmation.

 

Soybeans extended yesterday’s losses on fund selling and lack of supportive news. November soybeans traded back to and closed above the 200 day moving average today after taking out the low from the August 12th USDA report. CFTC data showed as of Tuesday funds had added again to their long position (a decision undone the last half of the week.) The demand picture continues to warrant proof of a huge crop. There is a big one coming, but will disease and wet weather begin trimming it back?

 

Wheat collapsed today on technical and fund selling, taking the Chicago market to 10 year lows. Large US winter wheat supplies and global stockpiles continue to compete lower for demand. Russia adjusted their wheat export tax earlier this week and has garnered the business out of the recent Egypt tender. The Intl Grains Council raised its world wheat production forecast for 16/17 to a record high. Paris futures traded lower on the weakness in Chicago. The rally in the US dollar following Fed comments added to the market anxiety.

 

Cattle traded lower on plentiful supplies undercutting cash prices. This week packers have paid $114 to $116 for cash cattle vs last week at $117 to $118. October cattle filled the open gap on the chart from July without hesitation today, August still has a gap at $110 open below the market. The charts have moved into an oversold condition which should help to stabilize price on this recent run.  

 

Hogs futures were higher but cash hogs continue under pressure on ample supplies on good fall weather and fear of demand slowdown after Labor Day. Lower cash prices have helped packer margins which are estimated at just over $20/head. Futures have found support on the discount to the lean hog index and technical trading.

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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