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Closing Comments

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Closing Comments

Corn traded 2 cents lower overnight, but made a nice rebound for a gain of 3 ¾.  The market is getting more comfortable trading in a range, with Dec support technically at 345-350, and resistance being the 100 day moving average at 360.  EIA reported ethanol production increased to 998K barrels/day from 962K bpd from the prior week. This is in line with what would be expected as the start of a seasonal increase. Ethanol stocks declined to 800 million gallons from 815 mg, the lowest level since November, 2015. The USDA announced it is working on ways to increase farmer participation in agency surveys, after response rates declined from 79% to 66%, compared to a decade ago.  County level crop yield data is an essential factor to figure compensation payments in the 2014 Farm Bill.  A report released by UN weather forecasters indicates they expect a 50-60% chance for weak La Nina conditions to form in the coming months. 

 

Soybeans were unchanged in overnight trading and had a nice run up 9, despite a substantial drop in CIF basis and reports of soy crushers overflowing with harvest beans.  As farmers close in on the final leg of bean harvest under clear skies, the cash markets are showing weakness, particularly at the Gulf.  USDA announced another “unknown” buyer has added another big batch of 185,000 mt of beans.  The outlook for South American planting appears quite favorable at the present. It is also reported that Argentina soybean growers may plant more this season than originally projected, prompted by a tax rebate announcement earlier this month by President Macri.

 

Wheat traded moderately lower overnight and also ended up positive today with MN Wheat leading the way, up 3 ½.  There has not been much in the way of export activity to report this week, with news relatively quiet and no big tenders on the radar.  Egypt’s Supply Minister indicated today that the country has adequate Wheat and Vegoil reserves for 5 months. The country’s Central Bank has allotted $1.8M for strategic buying of six months of reserves of important goods.

 

Cattle Feeder contracts fell $3.00 today pressured by firmer corn prices and the live cattle sell off. All eyes were on the internet auction today, as the online fed cattle exchange offered almost 13,000 head for sale.  If the exchange continues to draw cattle for auction, we may have a new tool for cash reporting. Smaller show lists will encourage negotiations and asking prices should move back to $100 and higher. This past week took prices down to a level not seen since 2010. The cash markets will be the driver for some indication of price direction before the futures redirect.  The USDA reported the daily slaughter at 115,000 cattle.

 

Hog processors are continuing to see a trend of more animals than plants can handle nationwide, resulting in lower prices and the packers controlling the margins – front month ended near unchanged while the back months were down.10-.30 points. The USDA reported the daily slaughter at 441,000 hogs.

 

Other news include the dollar’s downward trend over the last several days against its peers following a core U.S. inflation gauge rising less than forecasted in September.  Even though a hike on 12/14 seems likely, this would suggest more of a gradual interest rate increase by the Federal Reserve.  Oil has risen on indications that the world’s largest producers will honor a deal to reduce surplus.  Additionally, the American Petroleum Institute announced that U.S. crude inventories dropped 3.8 million barrels last week.

Closing Market Snapshot

 

*Prices may not represent final settlements

 

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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