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Closing Comments

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Closing Comments

Corn finished marginally higher on quiet news.  Yesterday the market received support from the exceptional weekly export report but there were no new USDA announcements on today’s wire. Ethanol futures have traded lower earlier this week, but posted a huge recovery today as the ethanol crush margin continues to be good. The focus now is on next Wednesday’s USDA monthly report where traders are expecting a fractional reduction in corn yield from the October estimate of 173.4 bpa. For the week, December corn lost 6 ¼ cents. For the third day, sellers have been unable to take price below the support level of 3.45.

 

Soybeans followed corn’s sideways pattern today, picking up 1 ¾ in Nov on mixed trade.  As with corn, all eyes are on report next week, which is expected to increase US soybean production to 4.31 bln bushels (October 4.269) and average yield from 51.4 to 52.0.  So far the South American soybean planting is ahead of schedule under favorable weather conditions, which will translate to their harvest being two weeks ahead if able to stay on the current pace.  This could have a significant impact on the U.S. exports, which are the key component to the demand side not allowing prices to dip below $9.40. Seasonally export inspections should begin tailing off from this point, but early indications are for a big Monday inspection again. On the charts, January soybeans are holding onto the 200 day moving average and on technical support. Maintaining closes above the 9.75-9.80 zone will be necessary for the health of the January contract. Seasonal tendencies for soybeans during November are often sideways – the market will continue to take cues from Chinese buying behavior from here forward as supply is now well understood.

 

Wheat has been trading in a sideways mode the past week. Chicago December kept the trend up today – picking up 1 ¼. The headwinds bringing resistance included light export sales, general pressure in grains, and the impending crop report next week.  The head of the Egyptian central bank said that currency floatation is here to stay, which will basically raise the cost of Egypt wheat imports by up to 50%.  This may explain why we saw so much activity over the past six weeks.  Globally, Egypt is the largest importer of wheat. On the charts, Chicago continues it’s slow sideways to higher grind while KC is trading to technical support on the lower end of its two month range.

 

Live Cattle filled the gap on the chart and forged a 10 session low, causing concern for possible continued falling prices next week, with December losing 1.35 today.  Packers have carried adequate inventory to keep the pressure on sellers, and the winners from this week’s increase in box prices is the packers bottom line.  Breeders will be taking a hard look at their financials as they make decisions regarding culling cows this fall. Despite the lower trade, futures were able to close well off from their session lows, suggesting the potential exhaustion of sellers for now. Cues will come from the wholesale and cash market next week.

 

Hogs traded lower today but recovered off lows to close above the middle of the daily trading range.  Turkey and ham will be dueling it out for the coveted Thanksgiving dollar this month.  It will be a bout of the traditional Thanksgiving bird vs. price, with ham being the victor economically, as pork prices have stayed in the vicinity of recent lows.  December contract will need to hold today’s low on a closing basis if it is going to demonstrate chart support.

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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