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Closing Comments

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Closing Comments

Corn was steady today with little change, up 1 ¼, harvest is in full swing under favorable skies, with 46% of the US crop completed (3% behind last year) and trade expecting 60% by Monday.  Sources familiar with Informa’s latest report indicate they have forecast 2017 corn production at 14.242 bln bushels based on acreage of 90.97 mln (3.7% lower than 2016) and an average yield of 170.4.  September EPA data shows 1.25 bln ethanol and 395 mln biodiesel credits were written compared to August’s 1.33 bln and 401 mln credits, respectively. US Grains Council is working with Vietnam after they announced a plan to ban US DDGS, beginning in mid-December, following the discovery of beetle contamination in a recent shipment.  Exports to Vietnam had been sharply increasing in 2016, prior to the announcement.

 

Soybeans finished on a strong note, up 8 ½ , as November options expired today (November options at the start of today represented 75% of open interest).  Harvest continues to progress at a consistent pace, at 62% completed (1% below the average) and trade expecting 70% complete by Monday.  Sources familiar with Informa’s latest report indicate they have forecast 2017 soybean production at 4.15 bln bushels based on plantings of 88.487 mln acres (a 5.7% increase over 2016) and expected yield of 47.2 bpa.

 

Wheat has come down 2 ½ from previous highs earlier in the week. Sources indicate Informa’s latest report has 2017 US total wheat acreage at 48.925 mln acres, of which winter wheat comprises 35.42 mln acres.  Effective today, the CME Group lowered first position Chicago wheat futures outright maintenance margins from $1,090 to $1,000 per contract, and the second position Chicago wheat futures margin from $1,020 to $1,000 per contract. Egypt announced a purchase of 120,000 mt of Russian wheat at an average price of $179.70/mt fob.  Russia cannot ship out its bumper crop fast enough though, and is sitting on a record stockpile which has increased by 22% over last year, in part due to increased valuation of the ruble negatively affecting exports.

 

Cattle were up today, as traders anticipated the USDA cattle on feed report this afternoon. Cattle on feed are expected at 101%t, September placements 104%, and marketing in September at 106%, much less bearish numbers than last week’s report. Fundamentals and technicals both point to potential bottoming action but follow through above $104 in the Dec contract will be needed before momentum can be established. This action would represent the first higher high since the market began to slide in mid-August.

 

Hogs showed a little life today, up .75.  There continues to be a glut in the market with processing plants having more animals than they can handle, and slaughter at record levels.  While we could be seeing the makings of a double bottom, the market needs to exceed $45 in the front month to gain any upward momentum at all.

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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