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Closing Comments


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Closing Comments

Corn ground lower from the report to the close despite the fact that today’s neutral corn report nearly matched trade expectations. USDA said corn production is forecast at 15.1 bln bu, up 11% from last year but slightly off from September. Based on Oct 1 conditions, yields are expected to average 173.4 bpa, down a bushel from September and matching trade expectations. If realized, this would be the highest yield and production on record. Area harvested for grain was raised 200k to 86.8 mln acres. Global stocks for corn are still at a record high, but were revised down 2.7 mln tons to 216.8 mln. Of note in the state-by-state yields; WI, SD, ND, MN, IA and IL all increased from September while yields in IN, KS, MI, NE, OH were all lowered. Technically the recent weakness from the Oct 5th high has been a 50% retracement from the Sept 30 swing low – this is allowable but Dec needs to hold support going forward in the 3.33-3.34 zone. Upper zone resistance continue to be in the 3.60-3.75 area.


Soybeans rallied immediately off a somewhat friendly report but couldn’t hold gains as the global soybean balance sheet came in bigger than expected. USDA noted production forecast at 4.27 bln bu, up 2% from September and 9% from last year – but almost exactly at the average trade guess. Based on Oct 1 conditions, yields are expected to average a record 51.4 bpa, up 0.8 from Sept and up 3.4 bu from last year’s record. Harvested acres were up slightly to a record 83.0 mln acres. While production was up 68 mln, it was partly offset by an expect increase in exports of 40 mln. The lack of bearish surprise in soybeans was tempered by an increase in global stocks – estimated 1% higher than last month. From September, yields in NE, NC, ND and SD all were increased by more than a bushel while AL and TN lost more than a bushel. Technically Nov closed below the 9.50 level which opens up the next downside target around 9.30 and 9.15 below.


Wheat found sellers after the Chicago contract was able to post a six week high and proceeded to weigh on corn despite a neutral report. The WASDE report noted an increase in US ending stocks due to lower projected use being greater than the reduced supplies. Export estimates were bumped up by 25 mln on better competitiveness, but domestic feed and residual use was lowered 70 mln bu. Global wheat supplies were lowered 1.6 mln tones due to generally lower production. Global supplies continue to be a very large 248.2 mln tonnes. December Chicago closed at 3.96 3/4 today – closes below 3.90 would open up a breakout for lower – but the large fund short position should provide support at these levels. Spring wheat tried challenging recent highs and the 200 day moving average today before failing to get follow through again – closing 4 lower in Dec.


Cattle couldn’t hold midsession bargain hunting as cash cattle bids in TX emerged at $98 vs $102 asking. USDA raised beef production on higher expected slaughter, although carcass weights are down slightly. Beef imports and export forecasts for 16 and 17 were raised as slightly larger supplies of beef in a number of exporting countries support higher imports and lower US beef prices make the US more competitive.


Hog futures traded higher on continued short covering and technical buying while the cash traded mostly steady. USDA said pork production for 2016 is raised on the pace of third quarter slaughter. For 2017, the total red meat and poultry forecast was raised, primarily due to higher pork production. The pork export forecast for 2017 is raised on expectations of higher sales to Asia.

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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