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Closing Comments

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Closing Comments

 

Corn was able to fight back to a minor setback, -1 ½ at 3.90 ½ (Sept) and -1 ¼ at 4.02 ¾ (Dec). Corn is battling constantly changing weather forecasts and aggressive South American selling. The USDA surprisingly gave corn a 68% good/excellent rating. A lot of growers are in disagreement and feel this year’s crop is well below last year – will the USDA do a “make-up call” next week and lower ratings? The EIA Ethanol report showed production down slightly from last week by 0.10%, averaging 1.014 million barrels per day. However, once again it is up year-over-year by 3.05%. Ethanol stocks were down 1.22% compared to last week and up ever so slightly over last year by 0.06%. Corn used for ethanol last week was 106.47 million bushels and needs to average 93.423 million bushels for the rest of the year to hit the USDA target of 5.45 billion bushels. Will WASDE raise the corn used for ethanol by 15-25 million bushels in July? The U.S. and Argentina may get a shot at some of Europe’s import business as they are very dependent on Ukraine, who according to analysts is experiencing heat and dryness that is causing a reduction in yield estimates.

 

Soybeans were able to rise above the other grains, with a boost from a weakening Dollar and the GFS midday weather forecast model showing hotter and drier weather moving into the Midwest, +4 ¼ at 9.90 ¾ (Sept) and +5 at 9.99 ¼. This in spite of heavy selling by South American farmers, which is applying a degree of pressure to the market. The ridge that has been closely monitored looks to be expanding east over the Central Midwest next week. This will potentially pose a threat to corn pollination, and the market is watching with a wary eye. Soybean crop conditions also provided support, as they were reduced by the USDA this week from 66% to 64%. This is not surprising, considering almost 14% of the crop is planted in North Dakota, and the Northern Plains have had a rough go from a lack of precipitation. Yesterday’s EPA biofuels intentions did not provide the spark expected, but the market is still awaiting the impact of biodiesel dumping tariffs and the resulting increase in domestic demand.

 

Wheat has taken a breather from its torrid pace, based on technical correction and profit-taking. With all the problems experienced with heat and dryness, poor crop conditions, and less acres planted, it is unlikely the highs have been reached for the year. Minneapolis had a bad day in the pit, down -52 ½ at 7.67 ¼ (Sept). It is likely spring wheat conditions will decline further next week. Chicago and Kansas City could not resist the pull of their all-star sibling, finishing down –21 at 5.39 (Sept) and –23 at 5.46 ½ (Sept) respectively. Due to all the interest in wheat, Chicago traded about three times the number of contracts as normal today. The USDA once again downgraded spring wheat conditions this week, from 40% to 37%. Keep an eye on Minneapolis HRS as the key driver to further wheat rallies.

 

Live Cattle tested support from yesterday’s new low and reversed course for a solid gain, +1.400 at 114.950 (Aug). The deferred months also put up some nice numbers on the board, with October +1.050 at 113.875. Packer margins have continued to tighten, pegged at $185.85/head.  Boxes were both lower with Choice down $1.49 and Select a negative $1.51.

 

Hog futures gave back a chunk of recent gains, but was able to close above key support from recent highs in June (around 82.00 Aug), -1.925 at 82.650 (Aug) and -1.400 at 70.725 (Oct. The pork cut-out is the driving force supporting the market. It was down 8 cents from Monday but still over last week’s $101.90 at $103.54. The Monday cut-out was the highest level since October of 2014.

 

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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