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Closing Comments


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Closing Comments


Corn continued its free fall that began yesterday after a bearish USDA report, -15 ¾ at 3.69 ¾ (Sept) and –15 ¾ at 3.83 (Dec). However, selling was encouraged mainly by the EU weather model being modified to show a cooler and wetter Eastern Midwest in the 10-day+ outlook. Funds responded in kind by piling on the sales transactions. It is worth noting, that weather threats are not behind us, as the Midwest has not seen complete coverage from the rains and severe dryness is persisting across the Plains and Western Midwest. It is going to take some news on a larger scale to get this market moving positive again. Expect more volatility in the near-term.


Soybeans made an extreme correction today by shedding risk premium in response to improved weather models indicating cooler and wetter across the Eastern Corn Belt, -46 ½ at 9.78 ¾ (Sept) and –46 ½ at 9.87 ½ (Nov). Weather traded markets provide a lot of volatility, and this one is no exception. But, the real weather concern timeframe for beans still lies ahead in August. Of note, China’s return to buying on the world soybean market, as it was reported by the U.S. Soybean Export Council that a Chinese trade delegation just inked deals to buy 12.5 MMT of U.S. soybeans. Will beans be able to stop the bleeding tomorrow heading into the weekend?


Wheat was also on the receiving end of the bears’ wrath, down sharply across the entire complex: Minneapolis HRS –31 ½, Chicago SRW –25 ¼ and Kansas City HRW -28 ½. Wheat has had the biggest story so far this season, with challenges with drought, less acres, and world dryness in areas of Europe, Australia and the Ukraine. But, the recently improved U.S. forecast is ruling the day and overwhelming other bearish factors at this time. The USDA report yesterday was not very friendly wheat, as ending stocks provided the final exclamation point with 2016/17 stocks pegged higher than expected, with the increases coming from HRS and HRW. Keep an eye on wheat as there are still problematic factors yet unresolved.


Live Cattle, after a lock limit up day yesterday, succumbed to market selling while feeders continued to move positive, -.450 at 117.425 (Aug). More moderate weather conditions have encouraged cattle feeders to slow down the push of heavy fed cattle to the market. The cash market is strong (up $2) and thoughts of increasing Chinese demand are providing some support.  Packer margins have also stayed quite profitable.


Hogs were indifferent today showing mixed results, with August –.100 at 82.525 and October +.050 at 69.325. The August futures discount to cash is too wide to allow the market to fall too far. The deferred months had a positive turnaround but are still looking at seasonality and bearish fundamentals. The pork cutout values continue to move higher, up to $104.91 yesterday compared to last week’s $103.54.


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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