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Closing Comments




Closing Comments


Corn traded seven cents higher led by strength in soybeans today as we continue our back and forth trade this week.  Overall, light news in the corn market.  The trade continues to square up positions into month end and into the historically light volume and sometimes volatile Thanksgiving holiday week.  We have first Notice Day for December futures on Friday.  Gulf bids were mostly firmer today along with interior basis holding strong.  Ethanol plants are holding firm as well with good margins, especially in the nearby contracts driven by the strong ethanol exports.  Corn exports remain slow with the USDA confirming a private sale of 116,000 metric tons of US Sorghum to “unknown destination” for the ‘14/15 crop year.


Option volatility fell again today in corn, beans and wheat as interest and volume in options lower the “fear” in the marketplace during holiday trade prior to January USDA report positioning.


US September to February corn demand is near 7,015 million bushels versus 7,759 million last year with lower exports having the biggest impact. Current demand projections for corn show that carry outs may have to grow beyond what the USDA has penciled in at 2,008 million which is already significantly larger than last year’s ending of 1,235 million.


December to March spreads are holding in the 12 ½ to 13 cent carry they have been holding through the month of November. December of 2014 gained just slightly to December of 2015 is holding at 43 cents carry. Dec 2014 today settled up 6 ¾ at 3.74 ¼, March up 7 cents at 3.87 ¼ and December 2015 up 6 ¼ at 4.17 ¼ .


Relatively light holiday volume this week and slow news don’t stop the soybean and meal complex from leading the market higher from the morning open. Record US soybean demand pace in soybeans coupled with slowdown in farmer selling supported the soy complex today. U.S. September through February total soybean demand is estimated at a record 2,595 million bushels versus last year of 2,520 million bushels. However, even in the light of the strong demand 14/15 carryout projects more than 40 days of supply.

US soybean harvest is approaching completion at 97% vs 94% last week with the remaining acres being in NC, KY, TN as well as some in ND, WI, OH, IN and MI.

Board crush margin continues to maintain excellent profitability over $1.60 / bushel continuing to support soy crush demand and prop the cash and board price of beans.

The November 2015 contract spread with January 2015 gave up many of the recent gains in the spread, losing 3 ¾ today and more than 20 cents in the last seven sessions.

January contract held resistance at the underside of the up-trend line and has support in the $10.05 area. The chart potentially forming a head and shoulders pattern with indicators and moving averages mixed with January closing up 17 ½ at 10.51 and November ’15 up 14 cents at 10.23 ¾.  


Lower dollar and some fund concerns over 2015 world crop offered support in the wheat complex with Kansas City and Minneapolis continuing to strengthen the spread with Chicago. The recent strength in the complex is in the light of US June to Feb total wheat use estimated near 1,665 million bushels versus 1,922 million last year. Most of that drop is attributed to poor export pace and lower feed use. Current usage pace suggests US ending stocks as higher than the current USDA projection, but the strength today points to concern domestic weather concerns and world projections.

After early strength, the market was weaker into afternoon until finding buying to help close wheat at its session highs. December Kansas City put in its highest close since September 10th up 13 cents at 6.17 1/4, Minneapolis December up 13 ¼ with December Chicago up 9 ¼ .


While live cattle opened up weaker at the start this morning, seeing follow-thru selling from yesterday’s poor performances, futures were able to stage a recovery throughout the day. The front-month December contract led the way higher initially as it’s been trading at a $4-$5 discount to the cash markets. February soon followed suit, seeing support around the $170 area, while the back months were mixed throughout most of the session.


Mid-day boxed beef prices were higher with choice at 256.17, up .47 on the day, and select at 244.58, up 2.25 on the day with 68 loads traded. Cash trade will be eyed closely this week as fund managers and packers alike could back away from the market if they believe a near-term or intermediate-term top is in place. This could lead to increased liquidation and weakness in the near-term as funds still hold a sizable long position of over 130,000 contracts. Currently, cash bids are posted at $173 live in Kansas with a lower show list and better demand anticipated into next week.


While the live cattle worked higher most of the day, the damage on the charts yesterday is noticeable after December squeaked out a new high before posting a sweeping reversal for lower. This high will be critical now, especially at a time where very slow marketings in October and heavier-weight feeder placements are helping to pressure the market. 800+ pound placements were reported up 10% in last Friday’s Cattle-on-Feed report.


Feeder cattle futures acted similar to that of live cattle, experiencing sharp weakness early on after a gap lower. But futures tried to pare those losses into the afternoon, and could be poised to fill the gaps left on the charts this morning. A failure to do so would leave a meaningful gap to be filled, or not to be filled. Strength into the close for corn helped keep pressure on the feeder futures into the close.


As of this update, the pork complex has set back from some of its recent gains with deferred months performing the weakest today. The market looks set to see a much less than normal decline in production into the first quarter from a seasonal 4th quarter peak. Yesterday’s USDA pork cutout values came in at $93.16, down 30 cents from Friday and down from $95.48 the previous week. The CME Lean Hog Index as of November 20th was $88.86, down 9 cents from the previous session but up from $88.25 the previous week.

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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