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Closing Comments


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Closing Comments


Corn was able to make a nice gain, but not with the same level of enthusiasm as wheat, +3 at 3.59 ¾ (July) and +3 ¾ at 3.80 (Dec). Corn is swinging back and forth between uncertain weather and the bullishness of the wheat complex. USDA export sales today were not particularly inspiring, just below the expected range of 400K-800K MT. For the year, exports and corn for ethanol usage has kept a torrid pace. Exports last year from March to May were 561 million bushels and are estimated this year to be 694 million bushels. March to May ethanol usage is up 7% over last year. Stats Canada showed a small reduction in their corn acres. The weekly EIA ethanol report was near expectations with increased production and a 2% draw down on stocks. With expectations for the report tomorrow pretty well ironed out, a bullish surprise could be interesting. Managed funds were estimated to be positioned about 140K contracts short heading into today’s session.


Soybeans continued to experience some short covering leading into report day tomorrow, as the bullishness of the wheat complex also was influential, +1 ½ at 9.15 ½ (July) and +3 at 9.24 ¾ (Nov). Managed funds are net short close to 100K contracts, which is not typical for this time of the year with the entire growing season ahead. There is a measure of uncertainty with weather that is also keeping traders on the edge of their seats. On the one hand there have been plentiful rains, but on the other is concern of a building ridge that could bring high temps and less precipitation later in July, depending on where it sets up camp. The USDA announced weekly export sales of around 314K MT (312K old crop), coming in on the low end of expectations of 300K-700K MT. Buyers included Bangladesh, Netherlands, Indonesia, Malaysia and Mexico. There is still no word from the EPA regarding a biofuel mandate announcement, so suspense is continuing to build around that pending release.


Wheat had a trifecta of bullish news with lower than expected Canada spring wheat acres, growing dryness in the Dakotas and a warmer/dryer tilted forecast for the Northern Plains, and a weakening Dollar. Minneapolis continued its meteoric rise with another huge move to the upside (up 50+ points at one time), +36 ¼ at 7.41 (July) . Chicago and Kansas City could not resist the pull of their high quality wheat sibling, as they both jumped to solid gains, +23 at 4.80 ¼ (July) and +19 at 4.80 ½ (July) respectively. How long will this ride last? Stats Canada announced spring wheat acres at 15.791 million acres compared to the April intentions of 16.64 million acres. All wheat acres was also down significantly as April intentions were 23.18 million acres and trade was expecting 22.7 million acres. The actual Stats Canada number came in at 22.361 million acres. At these levels, some are mulling thoughts of 2018 pricing strategy.


Live Cattle experienced another solid gain, with the market at a large discount of futures to cash, +.875 at 116.500 (August). Rising pork values have also helped to keep the market in check from big declines. However, boxed beef cutouts were down $4.48 yesterday to a low not seen since May 1st, as they lost almost $10 in two days. Packer margins remain extremely high, in some cases over $300/head.


Hogs gained in the front months on support from healthy domestic consumption, +1.275 at 80.750 (August). The pork cutout is up $1.23 to $103.54, led by bellies. The Hog & Pig report will be released this afternoon at 2pm CDT. Estimates are for the hog herd to grow by 3-5% and the sow herd to be up 2-3%.


First Notice Day is tomorrow along with the USDA Planted Acreage and Grain Stocks reports.


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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