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Closing Comments

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Closing Comments

 

Corn managed to emerge from the report with a head of steam, in spite of being the only grain to receive bearish news, +10 ¾ at 3.70 ½ (July) and +12 at 3.92 (Dec). It had been estimated that corn acres would be in line with the March planting intention report of 90 million acres. However, the USDA thought otherwise and pegged corn acres a surprising 90.886 million acres – let us not forget that this is still 3.118 million acres off from last year. The state of Illinois had the biggest reduction year-over-year, with 500K less acres of corn. U.S. corn stocks were also seen higher, coming in at 5.222 billion bushels compared to estimates of 5.123 billion and last year’s 4.711 billion. The trade seemed to shrug its shoulders today, as weather is still a big wildcard, with recent models showing heat and dryness, causing concern for parts of the western Corn Belt in the July timeframe.

 

Soybeans got the best of corn on paper today, as the USDA report was of a bullish slant for beans, +26 ¾ at 9.42 ¼ (July) and +30 at 9.54 ¾ (Nov). Soybean acreage was pegged at 89.513 million acres vs. estimates of 89.75 million and last year’s 83.433 million. States with the biggest increases in planted soy acres include Minnesota and North Dakota. U.S. soybean stocks were reduced from 0.983 billion bushels to 0.963. This combined with weather uncertainty and poor Dakota conditions (13.7% of beans are planted in North Dakota) is a volatile combo. Soybeans also have the EPA biofuel mandate announcement to look forward to in the very near future, which could boost domestic soybean oil demand significantly.

 

Wheat continued its torrid pace, once again led by Minneapolis, +35 ¼ at (July). Chicago and Kansas City were not far behind, +30 ¾ and +30 ¾ (July) , and both hitting limit up in September. The USDA report showed acres at a mere 45.7 million, the lowest planted acres since record-keeping began in 1919. U.S. stocks were seen to be 1.184 billion bushels, higher than expectations of 1.137 billion and last year’s 0.976 billion. Wheat has become the talk of the trade due to dry conditions worldwide and big concerns over spring wheat as crop conditions have continued to deteriorate. The Dakotas and eastern Montana are a big concern with drought-like conditions, with some farms indicating they will have zero yield. The EU wheat crop suffered its second downgrade in two days, as the EU commission slashed its estimate of the crop by 2.42 MMT to 138.86 MMT. Technically, wheat is pointed up on the charts and has not shown signs that it is done climbing yet.

 

Live Cattle and feeders made a strong comeback into the close. August cattle was the only contract to finish slightly in the red, -.200 at 116.300. Packers have their short-term needs met. Beef cut-out values are lower in both Choice and Select.

 

Hogs traded up to the limit in August, boosted by speculative fund buying, +3.000 at 83.750. Great demand both domestically and abroad has continued to drive the market. Fundamentally, the timing was counterintuitive, as The Hog & Pig report yesterday confirmed record supply levels, but were within the range of expectations. As of June 1st, all hogs and pigs increased 3.4% over last year at this time. Other categories included Kept for Breeding 102% and Kept for Marketing 104%, both ahead of the average trade guess.

 

The Chicago Board of Trade will close at noon on Monday and be closed Tuesday in observance of the July 4th Holiday.

 

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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