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Closing Comments

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Closing Comments

Corn traded in a small range today closing +1 ¾ at 3.71 ¼ (July) and +2 at 3.89 ¾ (Dec). With rain in the forecast for the next 10 day to 2 weeks across much of the Midwest, both planting and replanting challenges are likely to continue for the near term. EIA Ethanol report released today showed production down 17K bbl to 1.01 million bbl/day. Ethanol stocks were down 730K to 22.68 million bbl. Refinery capacity of 93.5% was over last week (93.4%) and expectations of 93.6%. This report was considered friendly as inventories of crude, gasoline and distillate were whittled down a combined 6 million. Next week, the USDA will release their first crop condition report, with last year’s initial rating at 72% good/excellent and the ten year average at 72% good to excellent.

 

Soybeans traded on either side of unchanged throughout the day closing flat at 9.48 ¼ (July) and – ½ at 9.48 (Nov).  Too much rain and cool temps continue to have a negative effect on crop conditions in the E Midwest. The longer that farmers are unable to get corn planted (or replanted), the higher probability that some of those acres shift to short season beans. On the plus side, with the stabilization of the Brazilian real over the past few days, the onslaught of Brazilian and or Argentine selling has slowed. The market is likely to chop sideways for now without a new story.

 

Wheat does not have a bevy of news to digest as chatter centers around wheat conditions, protein levels and weather. All the grains rebounded this morning from lower trading in the overnight, as wheat battled for modest gains: Chicago SRW +3, Kansas City HRW +2 ¼, and Minneapolis HRS +5 ¾. Lately we have seen the U.S. become more competitive on the global export stage, with a weaker Dollar. Will the U.S. be able to consistently vie with Russia and the Black Sea Region for Egyptian business, etc? Russia is still working out issues with Turkey, as Turkey has removed import tariffs but is still limiting Russian imports to 20-25% of all licenses issued. China is importing a solid amount as their wheat imports are up 99% over April of last year. Australia is getting the lion’s share of the Chinese orders, but the U.S. shipped 227,213 MT which is the highest monthly total shipped to China since February 2014. Wheat has upside potential brewing along with corn, so keep an eye on future developments.

 

Live Cattle was down today in the June contract, -.950 at 122.125. Opposing forces of climbing beef prices at the meat counter vs. more bullish large basis and low cattle weights attempting to get the upper hand. The market is also hoping for a bounce from new open doors to China, that will allow U.S. beef across the border starting July 16th. Pork prices are low in relation to beef, and this is swinging the demand needle hogs direction heading into the holiday weekend. Look for the Cattle on Feed report due this Friday to provide some clarity. The market is overbought, leaving it susceptible to selling pressure.

 

Hogs gapped higher out of the 8:30am starting block, but pulled back under the downward pressure of cattle, +.050 at 80.200 (June). The story remains the same for now as seasonal solid demand both domestically and abroad continues to drive the market. Developing trade negotiations with NAFTA and China will be key to continued export growth, with 23% of pork sales beyond U.S. borders.

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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