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Closing Comments

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Closing Comments

Corn had a mixed day of trade with most of the day spent lower despite exceptional export demand early in the session. Today’s action erased yesterday’s gains with limited changes to the forecast hopefully allowing the western corn belt to advance on harvest. This morning’s sale of corn to Mexico totaled 1.577 mmt, over 1 mmt of which is set to ship in this crop year. South American planting is under way with Safras Mercado reporting this morning that Brazil is 16% planted on corn as compared to the 5-year average of 21%. EIA stocks report today showed a build in both barrels of ethanol produced per day by 8k barrels to 989k barrels per day and also an increase of stocks by 562k barrels to 20.58 mln barrels. All eyes are awaiting Friday’s stocks report, which seasonally is a negative report almost 80% of the time.

 

Soybeans fell back to yesterday’s support at 9.45 despite decent action during the session. Market feels as if it is squaring ahead of Friday’s report, with positive export news out of China this morning as they purchased nearly 350k mt of soybeans in two flash sales. River bids, a primary driver of value in the soy complex, continue to weaken as issues with excess rains have slowed and even closed river traffic in some areas across the Northern Midwest. Meal was stronger today, but could not hold up in the face of bean’s late session slide. Beans sat back to key support, a violation of which could signal new lows near $9.00, while support here could signal another bounce to the high $9 area to come in beans.

 

Wheat continues to build a case for the value of protein this year, with Chicago closing mostly unchanged and KC / Minneapolis closing 2-5 higher. Heavy rains and cool temps continue to damage the crop in Australia, while Russian wheat acres are expanding to offset any potential global decrease in production. Very little in the way of new news in wheat, with expectations of a large 2.4 bil bu carryout on Friday.

 

Cattle had a wild session after yesterday’s limit day: gap open lower, rally $2.50, break $2, stabilize and finish stronger. Technicals would lead you to believe that a double bottom could be in, supported by action, but we need a violation of the $109 area in Dec fats to feel comfortable that this assumption is correct. Supply outpacing ability to slaughter is a distinct issue within the meat complex, as plants closed in the past two years have severely limited ability to process the amount of meat coming out of feedlots. As a result, carcass weights continue to grow, with last week’s steer weight of 903 lbs the first carcass weight north of 900 lbs this marketing year. Meanwhile, boxed beef prices continue to strengthen, resulting in improved packer margins.

 

Hogs stopped the slide from yesterday’s session but still look weak on the chart, and fundamentals are not much better. Slaughter numbers continue to increase with 2.4 million head slaughtered last week, and very little ability to expand on that number even under a small incremental increase of even 100k pigs. We are currently matching lows from late 2015, with the only the 2009 wash-out remaining as a potential downside target.

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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