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Closing Comments



Closing Comments


Exporters sold 19.9 million bushels of corn in the week ending November 6, up from 18.8 million the previous week, but down from the five-year average for the week of 20.3 million. Marketing year sales total 777 million bushels, down 135 million or 15% from the previous year. Sales to date exceed the seasonal pace needed to reach USDA’s target by August 31 by 12 million bushels, but that is down from 19 million the previous week and is trending lower.

Exporters sold a robust 13.7 million bushels of grain sorghum in the week ending November 6, up from 7.1 million the previous week and up from the five-year average for the week of 2.1 million. Sales to Chinese buyers comprised 11.2 million bushels of the weekly total, with sales to Japan making up most of the rest.

Marketing year sales to all destinations total 137 million bushels, up 71 million or 107% from the previous year. Sales to date exceed the seasonal pace needed to hit USDA’s target by August 31 by 55 million bushels, up from 45 million the previous week, largely due to buyers from China.

Informa reportedly estimates next year’s corn area at 88.3 million acres, identical to its estimate for soybeans. The number is up 560,000 acres from its previous estimate, but down 2.6 million from 2014. There has long been an industry expectation that farmers would shift large numbers of acres from corn to soybeans in 2015, but now some farmers are starting to see the potential benefits of being a contrarian. That’s what often happens when big predictions are made early. The market has a way of changing things in the meantime.

December corn finished the week 4 cents higher than the previous week’s close, but more than 7 cents off the week’s high posted on Thursday and just fractionally above the old resistance at $3.81. Much of the feed grain’s strength this fall has been from the soymeal market, which is one reason it pulled back when meal broke hard to close out the week.

Farmer selling remains slow ahead of the new tax year, keeping basis relatively firm, with a few processors actually pushing their bids. Ethanol and livestock usage combined require more than 200 million bushels per week, on top of exports and food usage. The bushels are out there. Eventually they’ll come to market, unless 2 billion bushels evaporate somehow. However, the basis market should see support in the meantime as farmers delay marketing this big crop.


Exporters sold 39.5 million bushels of soybeans in the week ending November 6, down from 59.2 million the previous week. The total was up from the five-year average for the week of 31.2 million bushels, but it was a four-week low, suggesting slowing demand. Sales to China accounted for 26.9 million bushels of the week’s total, while “unknown destinations” reduced previous purchases by 3.8 million bushels.

Marketing year sales to all destinations total 1.349 billion bushels, up 100 million or 8% from the previous year. Exporters typically have sold 56% of final soybean shipments by this point in the marketing year that ends August 31, whereas they had sold 76% by this point last year. However, this year they have already sold 78% of USDA’s target for the year.

Sales to date exceed the seasonal pace needed to hit USDA’s target by 390 million bushels, up from 389 million the previous year. That doesn’t mean that USDA’ export target is 390 million bushels too low, as we should see things adjust rapidly before spring, but history would suggest that USDA’s target still needs to be revised another 40 to 50 million bushels higher.

However, the trade was particularly interested in the soymeal sales data, after the previous week’s weekly data included the cancellation of more than 300,000 metric tons of sales already on the books. USDA reports that net sales totaled just 21.3K metric tons in the week ending November 6, which included more cancellations by “unknown destinations” totaling 172.3K metric tons. The five-year average for sales during the week is 190.2K metric tons. Actual shipments during the week totaled 153.3K tons, down from 307.6K the previous week and down from the five-year average for the week of 182.4K tons.

It as a wild week for the soymeal market, with similar implications for the soybean market as well. December soymeal rallied off the previous week’s close of $390.40, reaching a mid-week high of $417.60, which was a new contract high. However, the market showed signs of tipping over at that point, ending the week at $379.90 per ton.

The break came on rumors of Argentine soymeal making their way north to the United States. That still can’t be confirmed, but the math works, as Argentine farmers increase cash sales to processors there after months of holding out. It also comes as export buyers cancel large volumes of purchases, likely to take advantage of cheaper prices in Argentina.

Logistics problems will likely be with us for quite some time. However, cancelled export orders can dramatically ease stress created by logistics problems. One thing that I have been watching is soymeal basis. It is still holding. Futures traders are anticipating this market falling over, but we haven’t seen the break in basis yet to confirm it. Of course, rapidly falling futures mitigate basis weakness to some extent.


Exporters sold 15.3 million bushels of wheat in the week ending November 6, up from 9.8 million the previous week and above the five-year average for the week of 15.0 million. There were no new sales to Brazil during the week, which is focused on harvest of new-crop supplies there.

Marketing year sales to all destinations total 581 million bushels, down 198 million or 25% from the previous year. Sales to date exceed the seasonal pace needed to reach USDA’s target by May 31 by 7 million bushels, but that is down from 10 million the previous week.

Wheat futures rallied sharply through the week as Arctic cold swept across the Plains and Midwest. Overnight lows dropped to -10 to -20F in western Nebraska Thursday morning, with sub-zero readings also recorded in northeastern Colorado and northwestern Kansas, encompassing about 15% of the Southern Plains hard red winter wheat belt. About a third of this region had snow cover, but some damage was likely done.

The cold also cast much of the Plains and Midwest wheat belt into dormancy before much of it had time to develop a root system, and in some cases emerge. That doesn’t guarantee a short crop. As a result, weather-related rallies tend to be very short-lived in November. Rather, the damage tends to get traded in February-March. In the meantime, U.S. wheat is one of the higher-priced sources on the global market.


This was a week for strength in the live cattle futures market. The Goldman roll saw fund managers roll their December contracts forward, pushing strength into the February contract, which reached new contract highs. The December contract trended higher as well on expectations that cold weather would hurt gains, while removing weight from cattle in some areas, but it failed to test its previous contract high of $171.975.

Gains were limited by the history of the past several weeks, when packers showed that they had an ability to manage supplies with advanced contracts, avoiding fighting over limited numbers in the negotiated market. The product market showed signs of stability, but it wasn’t able to sustain gains in light of cheaper pork with holiday hams and turkeys providing competition.

Feeder cattle futures struggled between opposing forces over the past week. Firming fat cattle prices provided support, along with strong demand at sale barns, especially in the Northern Plains where corn prices are cheapest. However, resistance came from much stronger corn prices of late, along with questions over the sustainability of strength in the fat cattle market. The latest CME cash index for feeder cattle came in at $240.38 per cwt, up 2 cents on the week and less than $4 below the record high.

Cash cattle trade emerged late in the week at mostly $170 to $171 per cwt in Kansas and $170 to $172 in Nebraska on a live basis and $264 to $266 per cwt on a dressed basis, setting new records. Cash trade the previous week was mostly at $167 per cwt on a live basis.

USDA reports that exporters sold 8.0K metric tons of beef in the week ending November 6, with South Korea the primary buyer, up from 6.9K the previous week, but still a disappointing total. Actual shipments totaled 12.6K tons, down from 13.9K the previous week and a nine-week low.

Product movement over the past week totaled 903 loads, up from 830 loads the previous week and a three-week high. Choice cuts finished the week at $252.16 per cwt, up $3.05 on the week. Select cuts finished the week at $238.29 per cwt, up $0.22 on the week. The Choice/Select spread ended the week at $13.87 per cwt, up $2.83 on the week.


It was a weak of money returning to the lean hog futures market on signs that both the cash and product markets were carving out near-term lows. The question is, can both of those market sustain gains to justify the higher futures trade?

The cash market traded near steady for most of the week. The latest CME 2-day lean hog index came in at $88.16 per cwt, down $0.09 on the week. The index broke a streak of 22 straight trading days of declining values in which the cash market lost $22.68 from its high. That market has stabilized, but carcass weights are turning lower in recent days, suggesting that producers are pulling hogs forward in fears of even lower prices.

The lead December lean hog futures contract rallied to more than a $5 premium to the cash index in trade on Friday, although it pulled back a bit from that high. February lean hogs traded to five-week highs, with a similar premium to the cash market.

Packer margins are good, at an estimated $13.75 per cwt, but thus far they haven’t had to use those profits to chase the market as hogs have been coming to them. Slaughter totals for the first full week of September were up 9.4% from mid-September, which was a period when the industry expected a hole in supplies due to PED virus earlier in the year.

Product movement over the past week totaled 1,778 loads, down from the previous week’s impressive total of 1,905 loads, but still a decent total. The composite pork product price finished the week at $95.93 per cwt, up $1.19 on the week. It was the first time in six weeks that the composite price gained on the previous week. Ultimately, we need to see the composite price be able to sustain gains in order to push the cash market higher and to justify sustained strength in the futures market.

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

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