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Closing Comments

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Closing Comments

 

Corn is down over 20 cents this week, trading at the bottom of the range established this past spring/winter, -5 at 3.57 ¾ (July) and –5 ½ at 3.75 ¼ (Dec). Managed funds have sold a large chunk of contracts the last few days, taking them up near the 100,000 mark again. Watch for short-covering with even the smallest changes in weather forecasts and perceptions. While rains have been spotty, almost 70% of the growing region has received precipitation, with no real threats pending and cooler/milder weather on tap for the next few days. The Acreage Report in conjunction with ending stocks next Friday will be pivotal to confirming whether 90 million planted acres is still the bullseye, or if the target has changed.

 

Soybeans were able to put in a late push in the front month, + ½ at 9.04 ½ (July) and –2 ¼ at 9.11 (Nov). The last few days have featured a sharp decline, as lower lows have been the fare of the week. With improved weather and a lack of fresh news, the market is not able to spur buyers to step forward. On a positive note, Chinese demand for soybeans continues to grow as it was announced that Chinese imports to-date are 20% higher than last year. The acreage report on June 30th will be important for short-term direction until the growing season for beans becomes clearer. Today’s close below 9.09 ½ took out the low on a weekly chart to a level not seen since April of 2016.

 

Wheat is the only grain with a story, as it was able to leverage concerns with drought and quality issues sustain a moderate gain in Minneapolis HRS, +3 ¾ (July). Chicago SRW (-1 ½) and Kansas City HRW (-3 ½) traded both sides of the coin before settling on “tails”. Areas of eastern Montana and North and South Dakota are continuing to see expansion on the Drought Monitor. The wheat harvest is running 3 points ahead of average at 28% complete. Oklahoma and Texas are leading the way at 77% and 74% respectively. Oklahoma is sitting on a good/excellent condition rating of only 47%. As a general trend the early planted wheat is below average and the later planted is above. Wheat quality remains front and center as there is a growing trend of receipt cancellations due to low protein levels. Fifty contracts of HRS were recently canceled out of Duluth. And, world production continues to take a hit due to heat and dryness, with the ARC recently estimating EU to 138-139 MMT, which is down 12-13 MMT from the USDA June forecast.

 

Live Cattle found support in a USDA announcement last night that all fresh/frozen Brazilian beef imports would be suspended, +1.000 at 115.275 (August). In practice it is a small amount of only 6.6 million lbs of the U.S. monthly production of 1.96 billion lbs in April. It was only recently that Brazil had gained entry into the U.S. beef market and they had started to increase shipments. Cash cattle has steadily declined over the past two weeks from $137 to $119. While the general direction of the beef cut-out has been down, overall demand is still good. Key support is around the 113 level. Cattle on Feed report will be released today after the close.

 

Hogs saw long liquidation selling today, to a much greater degree in the deferred months, with July +.275 and August and October –1.225 and –.675 respectively. The Cold Storage report was slightly bearish, and yesterday featured a downturn in the market from a high level not seen since 2014. The USDA pork cut-out values were down $1 from Wednesday to Thursday to $98.97 but still up from last week’s $94.23. Packer margins were lower at around $21.22/head. Look for the Hog & Pig report next Thursday.

 

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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