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Closing Comments

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Closing Comments

Corn extended last week’s lower market, finishing 3 lower in December. Weighed down by the stronger US dollar, curbing in China of commodity speculation, favorable South American planting conditions and the continued absorption of last week’s big USDA supply numbers.  USDA weekly export inspections were also disappointing at 618,155 mt vs. the expected 1,000,000.  It is reported that South Korea bought 63K mt of optional origin corn at a tender that closed today. December is now entering ‘over-sold’ territory on the chart indicators and should find longer term support near today’s low. 

 

Soybeans finished 1 ¾ lower in Jan to start the week – well off from the session lows on help from higher soy meal. The dollar rallying to new highs, the Chinese market regulatory crackdown on speculative trading, and weaker veg oil markets dampened buying.  NOPA’s crush report tomorrow will be watched by the trade.  USDA weekly inspections were very impressive at 2.785 mln mt, significantly over the expected 2.650 mln mt.  Chinese crush margins hovering at their highest level in two years continues to provide support.  Today the USDA announced two new private sales, one to China for 324K mt and another to “unknown” for 132K mt.  Look for range bound trade between 9.50-10.20 for the foreseeable future, barring a South American weather event.

 

Wheat led weakness in the grains, with Chicago -9, KC -7 ½, and MN -8.  This was no doubt influenced by the USDA weekly wheat inspections, which were sharply lower than expectations at 191,062 mt for week ending Nov. 10th, compared to 500K projected and amplified by the higher US dollar.  Domestically, the market continues to monitor conditions in the Plains as the HRW approaches dormancy and the extreme dryness in the southern SRW belt. Drought regions in the Plains and Southeast continue to grow on a weekly basis.

 

Cattle were higher today, but struggled to hold on to strength in to the close as Dec cattle closed slightly lower.  In cash cattle, most sales were made at $105 on Friday.  Sales earlier in the week had ranged from $103-104.  Packers have a full inventory and slaughter volumes will continue to be large.  Cattle owners will be feeling optimistic after the steady market last week, and should get an opportunity for higher prices post-Thanksgiving, when attention turns from bird to beef.  The carcass report last week focused on steer weights, which showed 2# lower than last year.  However, ignoring heifer weights misses a couple key components.  First, with increasing numbers of heifers in the slaughter mix, the lower the carcass weights of all cattle slaughtered (not to mention heifers are under-weight this year).  Secondly, more heifers increases the turnover of feedlot cattle, which could indicate less replacement cattle left than previously thought and that herd rebuilding is over.  Export business has been very good compared to last year but keep an eye on the rising Dollar.

 

Hogs are at a juncture where the trend of the next 4 weeks will likely be set by the early part of this week.  Today’s trade was generally lower, but December ended up closing back in the trading range that has been set now for 12 sessions.  Overwhelming the positive investor optimism of late is the sheer weight of over-abundant supplies.  The USDA estimated last week’s slaughter at 2.452 mln head, up 2.5% over last year.  Hopefully retail sales will be strong through the holiday season, as poultry and beef will be formidable competitors in this space. 

 

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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