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Closing Comments

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Closing Comments

 

Corn took a moment to catch its breath with a small setback from profit taking and farmer selling, – ¼ at 4.01 ¾ (Sept) and – ½ at 4.14 ¼ (Dec). The weekly crop condition ratings declined from last week’s 68% to 65%. Silking is about 30% behind last year pegged at a mere 19% of the crop. Even though parts of Central IL and SW IA received .5”-2.0” of rain yesterday and unexpected rain today, the overall picture provided by both the EU and US weather models is of building heat and dryness. The ridge looks to be moving eastward to set up across the South and Central US. It appears there will be a few localized showers but temps will range from the 90’s to over 100 with little precipitation, well into the end of July. In South American news, Brazil’s numbers keep getting better, as CONAB announced estimates of overall 2016/17 corn crop at 96.0 MMT compared to last month’s 93.83 MMT. Second season corn crop is viewed as producing 65.6 MMT vs. last month’s estimates of 63.5 MMT.

 

Soybeans were sharply lower in the overnight in response to profit taking and rains across parts of Central IL and IA, but rebounded strongly, +4 ¼ at 10.34 ¼ (Sept) and +4 at 10.43 ¼ (Nov). Soybean weekly crop condition ratings fell from last week as expected from 64% to 62% good/excellent, with 7% setting pods. Tomorrow will feature a USDA report, and the average trade estimate for U.S. soybean production is 4.243 billion bushels on a 47.9 bu/acre yield. The report will base calculations on the June acreage of 89.5 million acres. Ending U.S. stocks are expected to be around 430 million bushels of old crop and 473 million bushels of new crop. Expect world stocks to be in the neighborhood of 93.12 million bushels old crop and 92.14 million bushels. In Brazil, CONAB kept their estimate for 2016/17 production unchanged at 113.92 MMT.

 

Wheat, like corn, took a breather from its ascent, with mixed results led by Minneapolis Spring Wheat, -3 ¼ at (Sept). Chicago SRW was able to turn the tide, finishing +3 at 5.53 (Sept), while Kansas City HRW followed + ¼ at 5.57 ½ (Sept). Weekly crop condition ratings were not kind to spring wheat once again, as only 35% is seen as good/excellent, which is the lowest rating since 1988. South Dakota stood out in the worst shape, as 72% of their spring wheat is seen as poor or very poor. With 79% of the wheat headed, rain will not be of much help at this point. Winter wheat harvest made up a lot of ground last week, going from 14% complete to 67% complete. Nebraska and South Dakota are bringing up the rear, with SD only 14% complete and not in great shape. Production numbers tomorrow could be interesting, with winter wheats likely similar to last month, but spring wheat estimates are from 416 million bushels to as low as 320 million bushels. “How low can spring wheat production go” will be the talk of the USDA report tomorrow.

 

Live Cattle were up today and able to regain losses from yesterday and hold off the active sellers, +1.050 at 114.875 (Aug). Increased production and bearish fundamentals are on the minds of investors, with boxed  beef values down to the lowest level since April 21st. However, the technicals are running out of steam for the downside, and firm packer margins have continued to support the market.

 

Hogs were able to reverse course and forge out modest gains in the near months after yesterday’s breach of technical support, +.250 at 82.250 (Aug). However, the deferred closed down hard, -.775 at 69.175 (Oct) and -1.025 at 63.775 (Dec). Futures are at a large discount to the cash market, with August hogs at around over a 1,000 point discount in contrast to the 5-year average of 250 points.

 

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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