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Closing Comments

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Closing Comments

Corn continued to trade in the middle of the congestion area that the market has been stuck in since mid-March closing -2 at 3.69 ¼ (July) and -2 ¼ at 3.87 ½ (Dec). The cold wet trend that we’ve been experiencing is expected to continue into early June which may hold conditions down. No matter the weather conditions, three day weekends in the growing season tend to be volatile! It is not probable that there will be a further downtrend at this time with funds very short and so many unknowns about the growing season. In other news, the USDA reported a private sale of 115,400 mt of corn sold to “unknown” destination. Export sales came in at 956,200 mt which is in line with expectations. The next calendar event is the USDA Crop Conditions report due out on Tuesday.

 

Soybeans traded lower for a third consecutive day as the tug-of-war of fundamentals continues, closing -8 ¾ at 9.39 ½ (July) and -8 ¾ at 9.39 ¼ (Nov). The bears won overwhelmingly today, as outside market forces are mixed, with the weak US dollar and some stability in the Brazil currency for the 4th day in a row providing little underlying support. Brazilian soybean offers continue to keep the US competitive with occasional counter-seasonal opportunities, even with 40-50% of the Brazilian crop unsold. Without a significant change in the forecast, the trading volume looks to stay well below average. Export sales came in at 478,200 mt which is in line with expectations. Will soybeans gain more acres as the window is quickly closing on corn plantings?

 

Chicago Wheat closed near the bottom of today’s trading session, -1 ¾ at 4.30 ¾. Kansas City HRW followed suit at -1 ½ while Minneapolis HRS was +1 ¼.  In line with the other grains, weather continues to be a concern that could potentially affect overall production numbers; however, with much larger stock piles than both corn and beans, the concern of under producing is not as worrisome.  Export sales were in line with expectations, coming in at 202 TMT for old crop with an additional 343 TMT of new crop sales for a combined total of 545 TMT. Mexico was the largest buyer taking in over 351 TMT between old and new. Look for more news on wheat quality, as this has been the biggest concern during early harvest thus far.

 

Live Cattle futures continued their climb in spite of concerns that high prices may stunt demand, +1.800 at 123.925 (June). In weekly export sales released by the USDA for the week ending May 18th, cattle is on par with the last four weeks average and 3% over the same period last year. Large supplies later in the summer from placements in April and May could cool things down, as the USDA is estimating 2nd quarter beef production to increase by 325 million lbs. The two most important customers of U.S. beef are Japan and South Korea. As with other commodities, trade partnerships are key to continuing strong trends. Look for the Cattle on Feed report to be released at 11am tomorrow in advance of the holiday.

 

Hogs were up again led by strong cut-out values and healthy packer margins, +.750 at 80.950 (June). It has been a long run for futures without much correction, as yesterday featured trading and closing above the previous high from February, and today added more length. Profit-taking is limiting some of the gains. Exports have been great, with CAFTA and Korean free trade partners heating up the order board by 17% in the first quarter, and Japan was up 8%.  This trend will need to keep growing in order to be able to consume the larger kill later in the year. Mexico and China have also shown strong growth in sales. It is estimated that 24% of U.S. pork production is earmarked for export.

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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