Home Market Market Watch Closing Comments

Closing Comments

SHARE

https://www.hoosieragtoday.com//wp-content/uploads//2014/11/image00923.jpg

Closing Comments

Corn

USDA’s weekly crop progress report indicated that 80% of the nation’s corn crop was harvested as of November 9, up 15 points on the week and matching the five-year average for the week. The most notable delays were in Wisconsin and Michigan, where just 50 and 43% of the crop was harvested respectively. The five-year average for the same week is 68% for Wisconsin and 63% for Michigan. Moderate to heavy snow in some of these areas to start the week added to the delays.

This week’s market action confirms that soymeal and soybeans remain the leader of the grain complex. Corn futures were soft today, until the soy complex found renewed energy. Even then, corn was a reluctant follower, with sellers waiting to sell the rally. Upward movement gained a momentum of its own as soymeal and soybean prices surged higher, producing a rally to $3.745, with the December contract settling just below that at $3.7375.

The December contract could uncover more speculative buying if the price were able to push above $3.81, but it also remains at risk of breaking if/when the soybean complex breaks. Monday’s crop report wasn’t as bearish as expected, but surplus stocks above 2 billion is still fairly substantial, with export demand weak at current price levels.

Soybeans

USDA reports that the soybean harvest was 90% complete as of November 9, up from 83% the previous week and just below the five-year average for the week of 91%. The most notable delay was actually in Kentucky, where 64% of the crop was harvested, down from the five-year average for the week of 80%. The bottom line is that the bulk of the soybean crop is now in the bin.

Soymeal exerted its leadership once again today. One trader said he was anxious to see analyst comments this afternoon try to give a rational explanation for an irrational market. There’s some truth to that, but there’s still a fundamental factor beneath the rally.

We still have not reached that tipping point of supply exceeding demand. Soymeal basis firmed by $2 to $3 per ton today in Iowa and was largely unchanged across most of the rest of the Midwest. That supported early strength in soymeal, which then strengthened soybean prices as well. Eventually, the market started to feed on itself as chart signals were tripped, increasing the flow of money into the market.

December soymeal settled above $400 per ton at $400.60, with the next objective being the October 30 high of $408.50 per ton. January soybeans pushed through resistance at $10.5925, trading to its highest level since August 15. First significant resistance is at today’s high of $10.735, followed by $10.82 and the $10.97 to $11 range. Nobody can tell you precisely where the high will be, but I can say that the long-term fundamentals remain bearish, as long as the rains continue in South America. Furthermore, this market is behaving like one that would collapse rapidly once things do tip over.

Wheat

USDA reports that 93% of the winter wheat crop was planted as of November 9, matching the five-year average for the week. Delays continue to be a concern in the Midwest amid talk of lost acres. However, most of the states with significant delays have caught up and are relatively close to the normal planting pace. Illinois and Missouri have the greatest delays from normal of 7 and 4 points respectively.

That left an estimated 118K Illinois and 229K Missouri acres unplanted as of November 9, along with 35K Indiana, 23K Michigan and 31K Ohio wheat acres. All totaled, we were looking at just under a half-million acres. Most of that would likely have been planted had it not turned so cold. Some will still be planted, but will lack development going into the winter, leaving it vulnerable should harsh cold spread over the region this winter at a time when snow cover is lacking.

USDA reports that 83% of the winter wheat crop had emerged as of November 9, up 6 points from the previous week and up 4 points from the five-year average. However, cold weather drove the crop into dormancy earlier this year, so many areas still will not have the preferred root development needed to survive harsh cold, should it arrive without snow cover.

Twelve percent, or 1.15 million acres of Kansas had not yet emerged due to dry weather, but most of the rest of the Plains was in better shape. However, much of the focus will be in the Midwest soft red winter wheat belt, where just 52% of the Illinois and 43% of the Missouri crop had emerged as of November 9, down from 74 and 58% respectively that is normally seen at this point. Estimated acreage not yet emerged in Missouri, Illinois, Michigan, Indiana and Ohio totaled 1.254 million acres or roughly 15% of the soft red winter wheat acreage.

Minneapolis wheat continued to push higher today, grounded in yesterday’s USDA report that slashed hard red spring wheat stocks by 30 million bushels. However, Chicago and Kansas City struggled through most of the day, at least until soybeans pulled corn higher, igniting short-covering in the wheat pits as well.

Beef

Live cattle futures traded both lower and higher the previous day’s trading range today as the market seeks to discover the balance between supply and demand. Supplies are tight, but demand has shown signs of waning. Trade chatter suggests that a couple of the packers may not have enough cattle to meet their needs and may have to be more aggressive to seek their needs, but there are doubters as well.

Regardless, the current sentiment is that we will see cattle trade this week at $167, unchanged from last week, and possibly $1 to $2 higher. Yet, it’s still early in the week. Packers continue to lose roughly $100 per head, but they don’t want to back down and lose market share, especially with pork prices trending lower.

Product movement was typical for a Monday at 128 loads, down from 131 loads on Friday, but up from 125 loads the previous week. Choice cuts were up $0.03 to $249.14 per cwt, while Select cuts were up $1.08 to $239.15. That dropped the Choice/Select spread to $9.99 per cwt, down from $11.04 on Friday and down from $11.33 the previous week. Movement at mid-morning today was good at 103 loads. Choice cuts were up $1.08, while Select cuts were down $0.14 per cwt.

Feeder cattle futures played more of a follower role, with the direction of both the corn and fat cattle markets in question. However, demand at the sale barn remains strong. The latest CME cash index came in at $241.69 per cwt, up $1.15 on the day and its highest since October 20. The cash index is just over $2 below its record high and trending higher.

Pork

December lean hogs were unable to push through the top of the recent trading range near $90 on Monday, resulting in a modest pull back. However, modest strength returned for another test today when product demand strengthened, lifting prices. That left the market again probing the top of the range, but at press time the overhead resistance was still holding.

Product movement Monday dropped to 272 loads, down from 328 loads the previous day and down from 278 loads the previous week. The composite pork product price dropped to $93.79 per cwt, its lowest level since February 11 and down $0.95 on the day. However, prices for all cuts were higher this morning, led by belly demand. Movement at midday was good at 226 loads, with the composite pork product price up $2.97 to $96.76 per cwt.

The stronger product market provided a boost for optimism in the futures market, but gains were limited somewhat by the cash market. Today’s cash market was again mostly steady, although the closely watched Iowa/Southern Minnesota market was steady to 50 cents weaker. The latest CME 2-day cash index came in at $87.92 per cwt, down $0.09 on the day and at its lowest level since February 17. The index has been lower the past 22 straight trading days, with losses over that period totaling $22.68 per cwt, but the rate of decline has slowed dramatically, as the cash market stabilizes.

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.

https://www.hoosieragtoday.com//wp-content/uploads//2014/11/image01023.jpg

https://www.hoosieragtoday.com//wp-content/uploads//2014/11/image01123.jpg

https://www.hoosieragtoday.com//wp-content/uploads//2014/11/image01223.png

www.waterstreet.org 
or 1-866-249-2528

 

 

https://www.waterstreet.org/s/ws-80x70.png

Arlan Suderman | Senior Market Analyst
WATER STREET ADVISORY® | www.waterstreet.org
(316) 729-4599 | asuderman@waterstreet.org

Past performance is not indicative of future results. The information contained in this report is intended for informational purposes only and is the opinion of the writer and may change at any time. This information was compiled from sources believed to be reliable but accuracy cannot be and is not guaranteed. There is no warranty, expressed or implied, in regards to this information for any particular purpose. There is SIGNIFICANT RISK involved in trading futures and or options on futures and may not be suitable for all investors. Investors should consider these RISKS and evaluate their suitability based on their financial conditions. No one should ever consider trading futures or options on futures with anything other than RISK CAPITAL. This information is provided freely and is NOT in the capacity of a trading advisor. NO LIABILITY on the part of the author exists for any trading loss you may incur in the use of this information. Information provided is not to be construed as an offer to sell or solicitation to buy any commodity or security named herein.

The information contained in this e-mail message is intended only for the personal and confidential use of the recipient(s) named above. This message may be an attorney-client communication and/or work product and as such is privileged and confidential. If the reader of this message is not the intended recipient or an agent responsible for delivering it to the intended recipient, you are hereby notified that you have received this document in error and that any review, dissemination, distribution, or copying of this message is strictly prohibited. If you have received this communication in error, please notify us immediately by e-mail, and delete the original message. Water Street Solutions is an equal opportunity provider. Water Street Solutions is an equal opportunity employer.