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Closing Comments


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Closing Comments

Corn managed to eke out a small gain heading into the weekend, +1 ¾ at 3.71 (July) and +1 ½ at 3.88 ¾ (Dec). Corn has traded in a range this week, despite it being a USDA report week and uncertainty regarding weather/ talk of re-planting, etc. A new item of interest that popped up on the radar is chatter around ethanol and a possible announcement regarding a RVP waiver.  Why would this matter? This has been an idea the ethanol industry has pushed for a while, as a RVP waiver would allow retailers to sell E-15 fuel to all consumers during the summer months. Any changes that are ethanol-usage related are sure to raise a few eyebrows. Managed money has continued to sell corn this week, bringing their position back into the area of 195K+ contracts short. Sellers may want to proceed with caution as there are bullish ingredients with any news that could affect trendline yield and usage.


Soybeans finished the session poorly, finishing –3 ¼ at 9.63 (July) and –4 ¼ at 9.59 ¾ (Nov). Fundamentals are bearish, assuming a “normal” growing season, with large stocks and a huge South American harvest to contend with. However, demand is strong and there is potential for more with the EPA expected to announce shortly their biofuel mandate for 2018. Also, the recent anti-dumping ruling by the U.S. against Indonesia and Argentina on biofuels will have an impact limiting imports, which could increase soyoil domestic demand by up to 4 billion lbs. Brazilian farmers have also tightened up selling of their beans, as the Real is back up into its upper range and putting price pressure on the Brazilian market. This could open the door once again for counter seasonal U.S. sales off the PNW with China, as was seen a couple weeks ago.


Wheat is caught between large supplies and the uncertainty of yield based on recent weather events, as the entire complex was down modestly: Chicago SRW -1, Kansas City HRW -1 ½, and Minneapolis -1 ¾. With harvest only two weeks away in the South, it may be hard for the market to rally. But, on the other hand, evidence of broken stems in the Western Plains could cause many to question whether the USDA numbers may be over-stated. It appears the U.S. is well positioned for an order of 50K MT from Iraq, as they are the lowest priced compared to competing offers from Australia and Canada. The deadline was Thursday for the offer, but it is reported Iraq is still negotiating with sellers. In Europe, weather systems with mild temps have improved the dry landscape, prompting France AgriMer to up their wheat conditions by 2%. To the south of our border, Mexico continues overtures with South America as they have continued to attempt to improve trade relations with both Brazil and Argentina. Mexico imports 4.5 MMT, with around 3 MMT coming from the U.S., who is the target of their shopping for alternative sources.


Live Cattle was able to reverse course to regain some of the losses experienced over the past several sessions, +1.250 at 125.175 (June). Bullish news from Asia helped lead the optimism as it is reported that the U.S. and China reached an agreement that will allow the U.S. to import more beef and poultry by July 16th. This is a big deal as it will be the first time since 2003 that China has allowed U.S. beef to enter the country.  Since that time, Chinese demand has grown substantially and this could be a big boost to exports.


Hogs continued their strong recovery into the close yesterday with more positive momentum today, as pork cut-out values are up $1.28 to the highest level since March 15th.  The result should be to help raise packer margins and also the cash market. The cash market has been at a significant discount to futures with the Lean Hog Index at 67.640. June futures closed +.900 at 77.950. The market is overbought technically, so some caution is warranted.


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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