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Closing Comments

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Closing Comments

 

Corn demonstrated indecisiveness related to weather in anticipation of the acreage report on Friday, -2 ½ at 3.56 ¾ (July) and –1 ¼ at 3.76 ¼ (Dec). The EIA Ethanol report released today for the week ending June 23rd was positive, showing production up over last week while stocks were down. Ethanol production for the week averaged 1.015 million barrels/day, which is 2.53% over last week and 1.20% over last year. Ethanol stocks were down 1.98% compared to last week, but up 3.17% over last year. Related to the acreage report, a survey of Wall Street Journal analysts is expecting corn acres to tally 89.82 million acres compared to 94 million last year. Will predictions match the USDA’s thoughts or are we in for a surprise?

 

Soybeans found strength in a weak Dollar and the positive action of wheat, +2 ¾ at 9.14 (July) and +4 ¼ at 9.21 ¾ (Nov). Most of the bearish fundamentals regarding acreage and stocks have been built into the equation, and there is anticipation surrounding the EPA’s pending announcement on biofuels very soon. How much will this positively impact domestic soy oil and the soy complex? It will definitely be positive, and tariffs that will be levied against Indonesia and Argentina imports have yet to be enacted, so between the two soybeans should have some positive ahead. A little trivia to consider – the average daily price range the last 10 years on stocks and acreage report day is 51 cents, with the average close up 31 cents. So, needless to say, this will be a pivotal report on Friday at 11am.

 

Wheat is being driven by poor conditions and expectations of more dry weather ahead in spring wheat growing areas. Minneapolis had another breakout day, as its lower quality siblings were able to piggyback for the ride. Minneapolis finished +24 ½ (July), while Chicago and Kansas City finished +4 and +4 ¼ respectively. How long can MN keep up this torrid pace? Yield predictions for spring wheat continue to fall, the latest at 34-35 bushels/acre. Also, Canada, planted more canola than spring wheat and their conditions are also causing concern, and tomorrow morning will feature final Canadian planting estimates. It is likely when the spring wheat runs its course, the winter wheats will follow, as their fundamentals have improved. There are still global weather and dryness concerns that are looming in the background, but also an abundance of stocks to chew through.

 

Live Cattle was able to grab on to hog’s coattails and bounce back from a rough start, finishing positive, +.600 at 115.625 (August). Packer margins are turning heads at $229.25/head. Boxes are lower with both Choice (-$2.30) and Select (-$1) down. The Fed Cattle Exchange will be closely monitored with 2,500 head on the sale block – will sales be higher than last week’s cash? Also, carcass weights will be released tomorrow, and traders will be looking for any changes in the underweight status compared to last year that has been demonstrated by both steers and heifers.

 

Hogs are not giving an indication that they are done yet, as the front month led the way +1.450 at 87.925 (July). August ended +.925 while October was at +.525. Like cattle, packer margins continue to increase ($28.19/head) and carcass values were up $0.96/cwt. The Hog & Pig report tomorrow will be looked to as a barometer for direction, as the U.S. breeding herd is expected to increase 1-2% over the same period last year, and animals kept for marketing are estimated to increase by 3-4% over last year.

 

In Other News, the Brazilian Real has stabilized but is expected to continue to weaken with upheaval in the country. It is thought that President Temer will be tried for impeachment in early July, with the JBS meat scandal looming in the background. With Brazil’s large crop yields this year, the weak Real will make it harder for U.S. exports to be competitive on a global basis.

 

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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