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Closing Comments

 

Corn traded both sides of unchanged before settling in the red, -1 ¼ at 3.68 ¾ (July) and -1 ¼ at 3.86 ¾ (Dec). EIA Ethanol reported ethanol production down 1.2% compared to last week, but up 2.91% compared to last year. Ethanol stocks were down 1.16% from last week, but up 5.54% compared to last year. Corn used for ethanol so far this year is 4.41 billion bushels, with the USDA estimate a target of 5.45 billion bushels for the entire year. Ethanol blending margins are now negative and ethanol exports are slowing due to Brazil becoming competitive from a pricing standpoint. The 6-10 day weather outlook is very good over much of the Corn Belt, making it difficult to sustain any kind of a rally. Managed funds have rebuilt a portion of their net short position, as it was estimated going into today’s session at 70,000 contracts short. Important dates upcoming include option expiration this Friday (for July contracts) and the highly anticipated June 30th acreage report.

 

Soybeans continue to trade fundamental weakness along with weather, -9 at 9.18 ¾ (July) and –11 at 9.27 ¾ (Nov). There is continued chatter about the EPA biofuels mandate announcement which is thought to be soon. Keep an eye on Trump’s appearance this evening in Cedar Rapids, IA, to see if the President addresses the topic and outlines a proposal. Expectations are for the new mandate to increase demand for soyoil by up to 350 million lbs. Additionally, the tariff to be announced on incoming biodiesel due to dumping by Argentina and Indonesia into the U.S. market should further amplify domestic demand. As with corn, the next big date on the calendar is June 30th, featuring the June quarterly stocks report along with acreage report, which is expected to tend bearish for beans.

 

Wheat trended lower on profit taking, after leading the grain complex of late: Chicago SRW -8, Kansas City HRW –6 ½, and Minneapolis HRS –9 ¼ (July). With relatively quiet news it makes one wonder – are rains forecast for Europe expected to be more impactful than anticipated? The chatter has been above average temperatures and below average precipitation for Europe and the Ukraine. According to Ag Resource, HRW early harvest results are less than stellar, with fields offering yields of 20-32 bpa with test weights of 56-59 and low protein levels expected. This is resulting in old crop KC wheat receipts being canceled as industry is looking for protein in the upcoming season. At this point, until spring wheat can show improvement, it is likely wheat will continue its ascent up the charts.

 

Live Cattle had a setback, not able to build off yesterday’s selling exhaustion, -.550 at 115.350 (August). The market is still overbought and 2nd and 3rd quarter cattle production, estimated at 415 million lbs, is dragging down the market. Trade is expecting the cash price to come down to around $120. The Cattle on Feed reports will be released this Friday at 2pm. Expectations are for On Feed at 102% of last year, placements in May at 110% of last year, and marketings at 109% of last year’s level.

 

Hogs experienced more of the same, with the front month leading the deferred, +1.075 at 86.075 (July) and +.575 at 82.225 (Aug). July futures gapped higher from the opening bell. Belly prices are driving the pork cut-out prices and the short-term surge in the cash market.

 

In Other News, Sonny Perdue, U.S. Ag Secretary, is scheduled to meet today in Savannah, Georgia, with his Mexican and Canadian counterparts in order to lay the foundation for talks later this summer to re-negotiate NAFTA. Mr. Perdue indicated changes are needed to the 25-year-old agreement regarding changes in global production, changing consumer tastes and technological changes. Robert Lighthizer, U.S. Trade Representative,  is also going before the Senate and the House to talk export trade as concerns are mounting regarding Mexico shifting to alternative sources. For example, U.S. soy meal trade with Mexico this year is down 15% and corn exports down 6%.

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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