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Closing Comments


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Closing Comments

Corn found support in heavy trading on a stronger Brazilian currency, combined with a declining Dollar, and funds fretting that they may be too short going into the growing season, +6 ½ at 3.72 ½ (July) and +6 ¼ at 3.90 ¼ (Dec). Is the worst behind the two flamboyant Presidents, Temer and Trump? Both are having their challenges, and with market implications. Brazil is expecting a bumper safrinha corn crop, with accompanying low prices to their farmers. This may encourage them to hold onto their grain and not be eager to sell it on the world market.  The U.S. must stay competitive price wise, but the thought is demand globally will continue to remain strong even with the large supplies. The Drought Monitor is at historical lows, except for some areas in the Southeast. If anything, too much wetness is the chatter, with flooded fields and re-plant a prominent issue this season. It is estimated that the upcoming Crop Progress report on Monday will show 83-86% corn planting complete. Additionally, several states will release their crop conditions report, and it is not expected to be pretty. Most agronomists agree that it will be very difficult to achieve better than trendline yields even with a fantastic pollination season.


Soybeans were able to re-gain a footing after the free fall yesterday, +8 ¼ at 9.53 (July) and +7 at 9.51 ¾ (Nov). Corruption in the Brazilian government sent the Real sharply lower yesterday, giving farmers a chance to unload beans into the export market. Will this be a short-term event or will this continue to weigh down the market? Even though Brazil has had a bumper soybean crop, they have not proven to this point that they can be the global go-to supplier that everyone wants them to be. If the U.S. can continue to be a steady supplier at competitive prices, we should see continued strong demand. On Monday, U.S. soybean planting progress is expected to show 55-57% planted.


Wheat was the least affected of the grains from the fallout related to Brazil and the declining Real yesterday. Today featured more optimism as futures rose across all three varieties: Chicago SRW +9 ¼, Kansas City HRW +12, and Minneapolis HRS +11. Also adding support was the declining Dollar and concerns of low protein levels with wheat harvested to-date.  More rain may delay harvest, which only adds to the angst. On Monday, the USDA is expected to show a 1-2% decline in U.S. winter wheat crop conditions, as a result of recent wet weather with colder than normal temps. In global news, France AgriMer adjusted their crop conditions down 1% from last week.  Russia’s Ag Ministry relayed that their planting pace is behind last year. As of yesterday, they pegged planted acres at 5.3 million hectares (13.09 million acres) compared to 6.5 million hectares (16.06 million acres) last year at this time. Look for wheat to take on an important role over the next several weeks.


Live Cattle experienced a moderate gain today, +.525 at 123.450 (June). The cattle market has exhibited volatility this month, as the market corrected its overbought condition. However, a couple of factors that still provide upside potential are the large drop in weights as well as the huge futures discount to cash. For example, the average dressed steer weights (as of May 6th) were 832 lbs compared 847 lbs last week and 868 lbs last year. Watch for technicals to reinforce a move lower if key support levels are taken out.


Hogs continued their seasonal surge with another gain as they ended the session, +.350 at 79.500. Export demand has been solid this year as well as domestic consumer demand, as we head into the Memorial Day weekend next week. The Cold Storage report will be released on Monday and will help give direction.


In Other News, the White House and trade officials have notified Congress they are ready to get started re-negotiating the 25-year-old NAFTA agreement with trade partners, Canada and Mexico. While the U.S. Agriculture industry has benefitted from the agreement, manufacturing has not. Ag officials would like to see a cautious, “surgical” approach to not upset the apple cart, as Mexico is the largest customer of U.S. corn exports. Federal statutes prohibit the talks from getting started before August 16th. Regarding TPP, Japan is really encouraging the U.S. to reconsider joining the negotiations with the other 11 member nations.


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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