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Closing Comments

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Closing Comments

 

Corn was able to pare some of yesterday’s losses heading into the weekend, +6 ½ at 3.76 ¼ (Sept) and +6 ½ at 3.89 ½ (Dec). Weather is pulling the strings behind the curtain, as investors watch the monitor for any changes that may lend to bullish or bearish thinking. While there has not been complete consistency, the overall thought is that while rains may persist, it is likely they will be over areas that have already received generous rains, while areas in the Northern Plains and West Midwest continue to languish. Some in Central IL and other areas have already received the “million dollar rain” in conjunction with pollination, while others are sweating it out. The weekend is sure to give more direction one way or the other, making Mondays of late interesting. Monday afternoon will offer another crop conditions update, so stay tuned.

 

Soybeans also showed some regret to over-reacting yesterday, as there is still too much uncertainty ahead to completely wring out all the premium that had been built in. September beans were +14 at 9.92 ¾ while the November contract finished +14 at 10.01 ½. Adding to the positive vibe for beans is China’s trade delegation to the U.S., committing to buy 12.53 MMT of soybeans. While this is not an enforceable agreement, it validates the trade relationship at a critical time between the two super powers. China is the #1 importer of soybeans and the U.S. can ill afford to compromise this relationship. Soybean export sales were a little light this week, but year-to-date they are well ahead of last year at 60.0 MMT compared to 51.7 MMT. Look for the NOPA crush report on Monday, as some feel the USDA is still understating old crop soy exports and may need to adjust accordingly.

 

Wheat was not able to muster the same enthusiasm in the winter varieties, as they finished slightly negative, Chicago SRW -1 and Kansas City HRW -2 (Sept). The wheat market was overbought heading into this week and in need of a technical correction. Minneapolis spring wheat had a solid showing, as fundamentals are just too overwhelmingly negative to allow them to fall off the wagon at this juncture, +8 ½ (Sept). While the USDA report on Wednesday was bearish wheat with plenty of stocks to go around, there is still much uncertainty with dryness around the world in key areas, i.e. Australia, Europe and north of the Black Sea region. Look for results from the Commitment of Traders report later this afternoon to show the latest managed fund positions.

 

Live Cattle showed a measure of indecision between buyers and sellers with a doji on the charts, but maintained the overall uptrend, +.375 at 117.800. While newly opened Chinese markets offer seemingly unlimited opportunity, optimism must be tempered with continued growth of supplies on the horizon, weakening beef prices and higher cattle weights. According to Hightower, fourth quarter beef production is expected to reach an all-time record of 6.970 billion lbs., up 5.2% from last year.  

 

Hogs made a large move to the downside in all contract months, led by August -2.625 at 79.900. The pork cut-out is down sharply. Is the market finally putting in a seasonal peak? Big supply is ahead so it will be critical for exports to keep pace.

 

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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