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Closing Comments


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Closing Comments

Corn is trading weather and planting, and today improving weather in the west is driving the market, -4 ¾ (July) and –4 ¼ (Dec). The eastern part of the corn belt has been hit the hardest with rain and flooding and now the concern is over frost and freeze warnings for northern IL, eastern IN, Michigan, Ohio and Wisconsin. There should be a dry window coming up for the Eastern Midwest from the middle of this week extending into the 6-10 day. The crop always ends up getting planted, but this year has definitely gotten off to a less than desirable start, with wet and cold being the story across a good portion of the Corn Belt.  It is evident from the Commitment of Traders report last Friday afternoon, that managed money is still holding a large short position of 184,630 contracts. This is important to keep in mind – what will it take to move the shorts to cover their positions? The USDA weekly inspections announced this morning were well below expectations, coming in at 720,586 MT vs. 1.150 MMT. Look for the USDA report on Wednesday to provide some direction.


Soybeans are tempering any optimism in front of the USDA report on Wednesday, as July ended –8 ¼ and November -5 ¼.  It is expected that soybean planting numbers released this afternoon will range from 15-19% complete, compared to 23% last year and 16% on average. Soybean inspections did nothing to help produce optimism this Blue Monday, as they also came in under expectations, as the USDA penciled them in at 349,385 MT vs. thoughts of 480K MT. On Wednesday, it is expected that the USDA will release a very large soybean stocks number, at around 584 million bushels, which could grow even larger if more corn acres are moved to beans and yield is above trendline.


Wheat is seeing improved weather conditions and the market is reflecting the sentiment: Chicago SRW -8 ¾, Kansas City HRW -5 ¾, and Minneapolis HRS -9 ½. Temperatures dipped down into the 20’s and 30’s in soft red winter growing areas, where up to 25% of the crop is in the reproductive phase. How much damage will be sustained in addition to the HRW out west from a last week? Producers are hoping for the best, but will not know for sure until later. Wheat was the lone over-achiever on the export inspections front this week, as the USDA announced them at 615,029 MT vs. ideas of 475K MT.  Traders said that Algeria is seeking 50K MT of mill grade wheat and 50K MT of barley in a tender to be culminated on May 10th, with a planned shipping date in July. A big key for wheat is global demand, as about one-half of U.S. production is exported. So, the fact that our production will be down this year is only half the story.  Keep an eye on other key producers, such as Australia and Europe and the Black Sea region, which so far are looking like they could help a less bearish narrative.


Live Cattle continued the wild ride of the bucking market, as front month was down marginally –.525, but the deferred months were up over +2.000 in most cases, with feeders up +3.225 in August and up to +5.775 in November.  Trade has been chaotic over the last several sessions, but look for possible continued correction in the market as it is possible the June contract topped out last week.


Hogs had another strong day in the front month, with June futures +1.050 at 77.375. The market is overbought with a large premium on futures vs. the cash index. Although demand has been good, supply is also abundant, and buyers may want to proceed cautiously as technically the market is due for a correction.


In Crop Progress, the weekly report will be out at 3pm this afternoon.  Look for an update in tomorrow morning’s comments.


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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