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Closing Comments

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Closing Comments

Corn

Corn futures spent most of the overnight session in a quiet, slightly higher fashion. The open of the pit session began the same way, but futures strengthened throughout the session, erasing all of yesterday’s losses, and closing above yesterday’s highs. This leaves the futures in a bullish posture into the trade tomorrow, right up against a short-term trend line from the recent highs. A lower open tonight, with follow-through into tomorrow could negate this; if this does not happen, then the next area of resistance for March corn is around $3.90.

The strength today stemmed from better-than-expected corn exports, which has not been the trend as of late. The USDA reported sales in the week ending November 13th totaling 35.8 million bushels, with an additional 4 million bushels reported this morning to “unknown” destinations.

The market was also oversold going into today after 4 consecutive sessions experiencing losses, stretching back to last week. Strength in the rest of the Ag complex helped fuel the rally, along with a farmer that remains a slow seller to meet the buying.

For the day, December corn finished up a dime at $3.73 1/4, while the new crop December 2015 contract gained .09 ¼ cents at $4.16 ¼.

Soybeans

The USDA reported 17.7 million bushels of soybeans sold for the week ending November 13th. In addition to this, the daily reporting system also advertised an additional 5.1 million bushels of soybeans sold to “unknown” destinations, presumably China.

Soymeal basis continues to hold steady, indicating that supplies remain tight amid strong demand. Some suggest, however, that the near-term needs have been met and were looking for cancellations in this morning’s export sales report for soy meal. The positive export number helped to strengthen the meal market throughout the session, but unlike corn the soy complex was contained underneath yesterday’s highs.

Readily available soy meal stocks are tight enough, that additional price surges can’t be ruled out. We still haven’t seen confirmation of the supply overwhelming the demand in the basis market yet, leaving the possibility open. However, rallies are still becoming more difficult to sustain as traders don’t love the idea of buying soybean futures above $10.00 when the carry-out for soybeans is being advertised at 450 million bushels, and the World carry-out is swelling to record levels. South American weather still looks benign at this point, pointing to the possibility of another big crop down there.

The activity, or lack thereof in the soy meal market will remain in focus. Yesterday’s lows will act as support, around the $10.00 area versus January futures, while resistance will be seen towards $10.45.

Wheat

Wheat prices seems to be along for the ride today, experiencing some short-covering throughout the session. The only fundamental factor to fuel the buying was a concern that nearby Argentine wheat shipments to Brazil would be delayed, and could lead to increased business to the U.S.

Exports were poor again this morning as the USDA reported sales for the week ending November 13th at 13.3 million bushels. This was right in the middle of the anticipated range. Yesterday, Egypt passed on U.S. wheat in their latest tender, suggesting that the U.S. is still priced out of the market compared to Black Sea and French wheat supplies.

Kansas City wheat led the way throughout the session. This is the second day in a row the KC/Chicago wheat spread has strengthened after a severe slide in the spread dating back to mid-October. The higher closes in such an oversold condition could spur further strength in the spread, despite concern regarding the Chicago wheat crop on lower acres and cold winter weather.

For the day, December Chicago wheat settled up .09 ½ cents at $5.47 ¼, while Kansas City December finished up .16 cents at $6.02 ¼, and Minneapolis December finished up .13 cents at $5.84 ½.

Beef

Much of the same today in live cattle. Cash trade is un-developed this afternoon with asking prices around $174 in the South, and bids at 167-168 in Kansas. Traders await the cash market direction, along with the Cattle-on-Feed Reports tomorrow. Cash trade may not develop until after that. Expectations are to see placements 4% year ago levels and marketings 2% lower than last year.

All week the market has seemed content with starting lower, and strengthening throughout the session. While that did happen again today, the recovery was not as noticeable into the close. The cold weather has added to the supportive tone as daily weight gains are in question; however no severe winter storms are on the horizon as this juncture.

Wholesale beef prices are also supportive as choice and select boxed beef were both higher at mid-day. Choice was seen at 255.63, up .84 on the day, while select was up 1.58 at 243.63 with 72 loads traded.

Feeder cattle opened lower and remained that way throughout the session as the sharp gains in corn kept a lid on prices, in addition to some noted profit-taking ahead of the Cattle-on-Feed numbers. The front-month November contract went off today at 240.40 with the index trading most recently at 240.10, and the new lead January contract at 235.55.

The cattle and feeder cattle charts remain in a positive posture going into Friday’s reports with the back months leading the way higher for live cattle.

Pork

Lean hogs also opened lower today and remained that way throughout the session. The weakness in wholesale pork prices continues to act as a lead weight on futures, and without any positivity in the cash market, futures are left floundering for direction. The lead December contract remains at a premium to the cash index, so traders aren’t encouraged to bid the market up until they see some sort of strength in cash.

Late in the session, it seemed like a reversal of the trend as it was reported that packers backed away from their bids and pork prices strengthened. Nonetheless, futures experienced near triple-digit losses across the board, through the April contract.

With the forecast warming some, traders don’t see as much near-term risk-premium needed in the market, so some liquidation was noted on that factor as well.

December hogs closed at 90.625 today with the most recent cash index at 88.13.

Closing Market Snapshot

*Prices may not represent final settlements

 

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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Samuel Hudson | Market Strategist
WATER STREET ADVISORY® | www.waterstreet.org
(309) 680-1200 | shudson@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.

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