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Closing Comments

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Closing Comments

 

Corn added to Friday’s losses with continued fund selling taking the December contract into new contract lows on the continued expectation of record harvest supplies and spillover weakness from wheat. Export inspections continued strong into the end of the marketing year at 55.992 mln bu, and increase of 11% from last week and a continuation of the 50+ mln bu trend – highlighting demand structure. This is 2% above last year and at 93.2% of the USDA projection. Crop condition ratings are expected to be unchanged from the USDA this afternoon. Down in Brazil, the lack of corn exports due to the short crop has now yielded higher freight costs for fertilizer due to reduced back-haul opportunities. New corn is now starting in earnest in Brazil and despite the higher fertilizer costs, sales are expected to be higher than last year. For our corn, demand is too good for low prices to sustain themselves, but for now until more actual yields can be realized the next couple weeks – end users are content waiting and funds are continued sellers. Wednesday is first notice day for September contracts.

 

Soybeans traded incrementally lower, but was unable to take out Friday’s low, continuing consolidation at the 200 day moving average. Big yields continue to be expected but the strong current and Oct/Nov demand slots for soybeans continue to underpin the fundamentals. Any threat to record yields being realized will be supportive to price – be it harvest disrupting rains or continued disease – will bring buyers back to the table. Soybean inspections were slightly off last week but still a seasonally strong pace at 33.846 mln bu. This is 1% higher than last year and 98.32% of the USDA projection. Export reporting system this morning noted 400k mt to ‘unknown.’ While end-users haven’t yet been eager to chase rallies, they are stepping in on breaks.

 

Wheat continued the descent today, December Chicago fell to 10 year lows on continued fund selling on ample global supply. The announcement in Egypt that they will have a zero tolerance for ergot fungus added to the concern in the global trade. Export inspections were off last week at 18.8 mln bu, but so far for the marketing year are running almost 27% above last year. Chicago futures weighed on European wheat futures but German output looks to be lower than normal but not as bad as France. Germany looks to be able to have enough quality wheat to serve their immediate needs. Supplies out of Romania will help to serve Western Europe’s quality wheat needs for now. Cooperative rains in Australia are helping vegetative growth there. Aussie prices are searching for bids like the US. Protein scales in hard red winter wheat in KC are inching up on demand for higher protein wheat.

 

Cattle extended their losing streak to 10 days on fear of continued weakness this week in the cash cattle trade and the long weekend shortening packer week. Last week cash cattle traded at $114 to $116 per cwt vs $117 to $118 the week before. Boxed beef values have traded lower this morning. Live cattle weakness spilled over to the feeder market.

 

Hogs futures down on well supplied packers pressing on the cash market. Peoria hogs traded steady today at $37. Packers are well supplied going into Labor Day weekend. Despite profitable packer margins, packers are reluctant to pay up considering the ample supply situation. Last week’s hog slaughter was at 2.266 mln head, up 1.8% from a year ago – resulting in 1.3% more pork thanks to lighter weights.

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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