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Closing Comments

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Closing Comments

 

Corn could not find any positive momentum as the story continues of a normal forecast for the Corn Belt featuring cooler temperatures and average rainfall into the July 4th timeframe, -6 at 3.62 ¾ (July) and –6 at 3.80 ¾ (Dec). USDA weekly export sales had corn within the estimated range, pegged at 528,800 MT for old crop and 124K for new crop. And, corn basis has been weakening due to Tropical Storm Cindy impeding grain loadings in the Gulf region. Argentina is emerging as a threat to U.S. corn exports as their peso is just below a record low and their July corn is within 2 cents of Chicago. According to Ag Resource, both Argentina and Brazil are offering FOB corn cheaper than the U.S. well out into October. This is the result of their large exportable corn surplus and currency valuations.

 

Soybeans experienced a sharp drop, taking out key resistance, based on a lack of a story, normal weather patterns and poor export numbers, -14 ¾ at 9.04 (July) and –14 ½ at 9.13 ¼ (Nov).  The Dollar was up today and the Brazilian Real has been weakening, adding to the bearish tilt. In that vein, it was reported that China had purchased 9-10 cargos of Brazilian beans, which is much higher than the assumed 1-2 cargos. The USDA announced weekly export sales at 111,200 MT of 2016/17 and 3,800 of 2017/18 compared to expectations of 350K-750K MT. Other stories to monitor include the impending EPA biofuel mandate announcement, action on proposed tariffs on Argentine and Indonesian biodiesel dumping into the U.S. market, as well as the June 30th acreage report. The acreage report is not expected to be bullish beans, as the market is expecting a bump in acres if anything. Other news included Egypt looking for 30K MT of soyoil for August shipment.

 

The Wheat complex took a different approach, finding strength in a more bullish fundamental story, and scrapping to a strong recovery into the close: Chicago -3 ¼, KC even, and MN +7 ½. Wheat was the standout on the USDA weekly export sales report, as numbers well exceeded the estimated range of 300K-500K MT at 542,900 MT. Egypt reported that they were in today for 175K MT of Romanian and Ukraine origin wheat. The global drought monitor has some hot spots that require a close eye. However, recent weather improvements across European growing areas and a rising Dollar added a measure of weakness today. Minneapolis is once again leading the pack on un-improving drought concerns in both North and South Dakota.

 

Live Cattle picked up where it left off yesterday, gapping lower at open and continuing to give up gains throughout the session, -1.075 at 114.275 (August). The market is overbought and expectations tend bearish for the Cattle on Feed report tomorrow afternoon. However, packer margins are still very profitable.

 

Hogs filled the gap on the way down today in the front month, -1.050 at 85.025 (July), while the deferred showed larger moves negative. It has been a steep climb the last several weeks for hog futures, and the seasonal nature of the selling cycle may be starting to influence direction. Keep an eye on exports and domestic demand, as they have been key drivers of this recent rally. The Hog & Pig report will be released a week from today.

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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