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Closing Comments

Corn reacted positively to the USDA report, +7 ¼ at 3.73 ¾ (July) and +6 ½ at 3.91 ½ (Dec). Although up, it is likely corn will trade in a range for now until more is known about the growing season and upcoming yield. To briefly summarize, U.S. ending stocks are projected to be down from last year by 185 million bushels.  This is based on a trend yield of 170.7 bpa and a reduction of U.S. exports due to large South American harvests. World stocks are also projected to be down significantly  by 28.6 MMT’s compared to last year.  This in spite of increased production, as world corn domestic use is pegged to be at record levels. To re-cap the EIA Ethanol report today, ethanol production for the week ending May 5th was up 2.03% over last week and 4.57% over last year.  Conversely, ethanol stocks were down 0.68% compared to last week, but up 8.48% compared to last year.  So far the corn crop used for ethanol tallies 3.77 billion bushels, with the USDA number pegged at 5.45 billion bushels for the entire year.  This will take usage of 99.397 million bushels per week to achieve. The USDA estimates on farm corn price at $3.40 compared to $3.61 last year.

 

Soybeans were down following the USDA report, as there is nothing that sparked bullish sentiment, -3 ¾ at 9.70 ¼ (July) and – ¾ at 9.66 ¾ (Nov). Looking at the numbers, WASDE has U.S. soybean exports for 2017/18 at a record 2,150 million bushels and upped old crop exports to 2,050 million bushels.  Ending stocks in the U.S. for 2017/18 are estimated at 480 million bushels and old crop at 435 million bushels. Soybean stocks were projected down at the global level, with a prediction of 88.8 MMT, compared to previous of 87.5 MMT. The USDA estimates on farm soybean price to be $9.55 compared to $8.95 last year.

 

Wheat had mixed emotions following the report but all finished in the black: Chicago SRW +2 ¼, Kansas City HRW + ½, and Minneapolis HRS +4. As expected, U.S. wheat is expected to decline significantly on less planted acres, as the USDA pegged production at 1,820 million bushels which is down almost 500 million bushels from last year. Kansas seemed to take the biggest hit, with an estimated 1.3 million acres that will not be harvested, as they are predicted to produce 26% less than last year. The damage from the cold and snow a couple of weeks ago has not been quantified to this point. It is likely there will be further downward adjustments. But on the world stage, wheat stocks are predicted to increase to a record level of 258.3 MMT, which will neutralize some of the U.S. influence on the total. WASDE predicts Russian down, EU up, Indian wheat up and China also up. On farm wheat price is viewed to be $3.90 compared to $4.89.

 

Live Cattle continued their descent away from their recent high, -.775 at 124.200 (June). The market has seen follow through selling, and it is likely that a major top is in place.  Weakening momentum will continue to encourage lower price action. Smaller show lists and light average weights are positive factors to also consider, but short-term the trend looks negative.

 

Hogs traded both sides of unchanged, and finishes slightly negative at -.175 , 77.200 (June). The market is overbought but pork exports have remained strong and there is a large futures’ discount to cash, which could be a limiting factor soon.

 

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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