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Closing Comments

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Closing Comments

Corn trended higher today on anxiety related to a possible pattern of weather that could continue to sporadically drop more precipitation on already hard hit areas and further delay planting, +5 at 3.74 ¼ (July) and +5 at 3.92 ½ (Dec). The window for corn planting is beginning to close, but given some dry days, could still allow for planting to finish on schedule. However, re-plant is the talk at the water cooler, as this figure not accounted for in planting progress report numbers, and is a significant issue this year – may be the biggest re-plant east of the Mississippi ever, according to some seed dealers. The next big event is Tuesday, when the USDA will give its first Crop Conditions report of the season. Keep an eye on 3.88 and 3.90 ½ (Dec) support levels. If we can see consecutive closes above, these levels should provide a good foundation of support moving forward into the growing season.

 

Soybeans were down hard on thin volumes, with no news to change the current bearish outlook and weakness from a strengthening Dollar, -13 at 9.26 ½ (July) and –10 at 9.29 ¼ (Nov). With recent closes below the 9.41 (July) “line in the sand”, the door is open to selling pressure. Not to mention the possibility exists for more acres to be added to soybeans. In the short-term, Chinese demand is adding a bearish tilt as crush margins are way down and meal stocks are up. But, Chinese imports are estimated to be higher for the next couple of months. Continue to watch China – if they keep buying that is a good sign, as it is advisable to watch what they do vs. what they say. China has a good sense of value and acts accordingly. China’s economy seems to be doing fairly well and the hope is that they should generate good demand for years to come. The market is still awaiting the U.S. Department of Commerce ruling on duties to be levied on Argentine and Indonesian biodiesel imports. The delay has not helped the soy complex, as oil has given back April gains. Look for this announcement in June.

 

Wheat was able to leverage the continued uncertainty of wet, cool weather and funds shoring up positions before the long weekend. Results were good across the complex: Chicago SRW +7 ½, Kansas City HRW +6 ¼, and Minneapolis HRS +6 ½. It is not expected that the USDA Crop Conditions report on Tuesday will show much change from last week. On the global scene, Australia is enjoying record exports (mostly to the Middle East and Asia), as last year’s production was a record level 35 MMT and they have plenty to ship. SovEcon analysts are predicting an increase in Russian wheat production by 500 MMT, and the Russians are expecting exports to be above the expected range. On the other hand, acreage and quality is down stateside and Brazil is also expecting to be down 10% on planted acres. Dryness concerns in Western Europe is also playing a factor – will wheat continue to build a story this year that will force managed funds to cover their massive short positions?

 

Live Cattle is coming off one of the largest rallies in history on the heels of great export and consumer demand. However, the tables turned after the 11am report today (especially in the deferred months), -1.225 at 122.700 (June) and -2.450 at 118.950 (Aug). The USDA announced cattle on feed supply at 102% of last year, placements during April 17th at 111.1% of last year and marketings 102.7% of last year. The report was considered bearish with more cattle for late summer, and the market responded accordingly. On a more positive note, Brazil is currently the world’s largest beef exporter. However, with political upheaval and concerns about the future of one of their big packing firms ensnared in the beef scandal (JBS), some traders see the possibility of higher U.S. beef exports ahead, according to Hightower’s analysis. U.S. weekly beef export sales were down quite a bit from May 18th at 7,200 tonnes vs. the prior 4-week average of 14,025 tonnes. But, overall sales for 2017 are up 14.9%.

 

In Hogs, demand continues to impress, and thoughts of a top in place are on hold, +.875 at 81.825 (June). Exports have been very good and will need to continue with big production slated for the rest of the year. Weekly sales announced yesterday showed pork sales up 12.5% over last week and 26.8% higher than last year. May shipments are pointing to continued growth for large markets – Mexico, Japan and China. How much will weekly kills tighten over the 30-45 days, once we get through the holiday and enter the easing demand of early summer?

 

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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