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Closing Comments

 

Corn continued to build on gains from last week in active trading as the weather forecast is starting to take on an ominous tone, +9 ½ at 4.02 (Sept) and +10 at 4.14 ¾ (Dec). Corn gapped higher to a new high, with corn crop conditions expected to decline by a couple of points when announced later this afternoon. It is feared that the hot and dry extended forecast will likely extend into and through the critical pollination timeframe. One would be hard-pressed to find many years where weather reversed course in the Central U.S. during the middle of July. USDA weekly corn inspections also did not disappoint, coming in at a strong 1.010 MMT for the week ending July 6th compared to expectations of 900K MT. Wednesday will feature the USDA Supply & Demand report, so keep a close eye out for adjustments by WASDE to corn feed/residual, exports, and corn use.

 

Soybeans exploded out of the gates, gapping sharply higher on the charts, +23 ¾ at 10.30 (Sept) and +23 ¾ at 10.39 ¼ (Nov). Like corn, the hot and dry weather forecast extending out to late July is leading the markets. Additionally, the American farmer is very forward sold on beans, leaving less of a check and balance to stymie rallying. Funds have been very short beans this late in the season, and are trying to cover their short positions. Also adding support is the soy meal sector, up in $8/ton area. More positive news this Monday included the USDA announcing soybean weekly inspections at 475,157 MMT vs. estimates of 300K. Look for a decline in soybean crop conditions later this afternoon. If the market can close above 10.43 November, there is not much in the way of resistance until 11.35.

 

Wheat has been producing fireworks for the last couple of weeks, and today was not any different as Minneapolis was back to its volatile ways, +30 ¾ at 7.97 ½ (Sept). Chicago and Kansas City followed at +15 and +14 ¼. Demand rationing is likely to come into play, as the world can ill afford to lose anymore spring or durum wheat. What will NASS have to say on Wednesday when they announce yield estimates? And, one cannot ignore the growing dryness in Canada and Europe. So far, the soft variety wheat has been able to tag along for the rally, as declining world wheat crops may give the U.S. additional opportunities. According to AgResource, outside of Argentina, nearly every major world wheat producer will endure a smaller wheat crop harvest. Watch for an expected additional decline in spring wheat crop conditions later today.

 

Live Cattle was down today led by the front month, as August lost -.950 to 113.825. Both cash and beef trends are down along with supply fundamentals. Traders are very net long, and the market is susceptible to selling if support levels are breached. Boxed beef cut-out values continue to plummet, to the lowest level since April 24th.

 

Hogs fell sharply, breaking and closing through key support in both August and October, finishing -1.225 at 82.000 and -1.025 at 69.950 respectively. High pork values have supported packer margins and the cash market, with the pork cut-out at the highest level since October of 2014. However, some are wondering if today is signaling the start of bearish seasonal fundamentals changing the tide of momentum?

 

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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