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Closing Comments

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Closing Comments

Corn has been able to resist extending yesterday’s post USDA report selloff as fresh sellers haven’t appeared and export sales reported at 1.233 mln mt in new sales (1.1-1.5 mln mt expected), coupled with an announcement by the USDA of a private sale of 140K mt of corn sold to Saudi Arabia offered support. In order for corn sales to reach the USDA annual projection, it will need to average 29.8 mln bushels/week moving forward.  South American weather has remained favorable except for some small areas of Argentina that have been very wet. December was able to hold support above yesterday’s lows, a good sign that follow through sellers couldn’t be found.

 

Soybeans saw strong overnight trade, recovering much of yesterday’s losses with help from higher veg oil markets – but wasn’t able to hold on to the strength into the session close. The market seems to be warming to a Trump administration which has rallied most equity markets and sent the dollar sharply higher.  The USDA announced another private sale of 126K mt of soybeans to China. Export sales for the week of Nov. 3rd were 1.001 mln mt, down from high expectations of 1.7-2.1 mln mt. In currencies, the US dollar/Brazil real spread is trading today at its highest level in four months as the USD gains and the real falls. The January chart resisted for a third consecutive day near the 10.20 mark before finishing in the bottom of today’s range.

 

Wheat continues its favorite mode – sideways trade.  All three classes were marginally lower today.  The crop report yesterday showed world stocks to be larger than expected.  This morning’s export sales were a bright spot, tallying 769 TMT, surprisingly strong and significantly larger than last week’s 235 TMT.  The buyers included multiple Unknown, Chinese, and Columbian destinations.  In Russia, total grain plantings for next year are penciled in at 18 mln hectares (45 mln acres), compared to 16.3 last year.  The Russians are reporting the crop for next year already looks to be in better condition leading in to winter. Chicago and KC have consolidated sideways long enough that breakouts should be treated with respect due to the accumulating energy.

 

Cattle futures were higher again today, with feeders +.825 and live cattle +.975.  The online fed cattle auction yesterday brought prices from $103-104 across the board.  Packers have enjoyed wide margins the past several weeks, which has translated into a brisk slaughter rate and good beef demand.  Price direction in the coming week will be influenced by how the decline in beef interest for Thanksgiving is balanced against slaughter rates and price.  Carcass rates will be released today and are a key barometer to pin-pointing the position of feeders in the feedlots nationally. 

 

In Hog futures, the market has continued in a side-ways manner the past several days.  Cash prices remained steady to $.50 per cwt lower due to an overabundance of hogs.  There are several factors which have contributed to this glut of inventory including ramping up of sow production by some farmers in anticipation of new processing plants opening in 2018, less expensive feed, and optimism encouraging producers to add to their herds from solid U.S. pork exports and good grilling demand this past summer.  For the week ending Nov. 3rd, exports were 23,000 tonnes compared to 17,400 tonnes last week.  From Monday to Wednesday this week, 1.328 mln hogs were processed, which was 69,000 more than the same period a year ago. Packer margins continue at record high levels.

 

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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