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Closing Comments

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Closing Comments

 

Corn made a recovery off of overnight lows, receiving support from solid weekly inspections, but still finished slightly down, -1 ¼ at 3.75 (Sept) and -1 ½ at 3.88 (Dec). The USDA announced weekly corn inspections at 1.109 MMT for the week ending July 13th compared to expectations of 950K MT. The Commitment of Traders report Friday afternoon, showed that managed money had increased their corn net long position to 100,964 contracts, a shocking amount considering last week’s position of net short 46,715 contracts. Of this, 110,000 were short-covering and 38,000 were new longs in the market. While lower prices were a negative for most in the trade, ethanol producers benefited handsomely with estimated Midwest margins of 25-35 cents/bushel. It is all about weather, and continue to expect day-to-day volatility with important pollination windows on the line. Models continue to show drought in the Northern Plains while Southern Minnesota, Northern Iowa and parts of Nebraska will be wetter in the near-term.

 

Soybeans bounced back from lows in the overnight, but the momentum was stifled by a slightly bearish NOPA report and subpar inspections, -3 ½ at 9.89 ¼ (Sept) and –4 at 9.97 ½ (Nov). The USDA announced weekly soybean inspections lower than expectations, as 350K MT were estimated and actual was 285,972 MT. The Commitment of Traders report on Friday showed soybeans going from net short to long (as of July 11th). A lot of contracts have changed hands, which has contributed to the wild swings and volatility. Beans are expecting a decline in crop conditions this afternoon by a point or two. Will beans be able to achieve trendline yield with 14% of the crop planted in the drought-stricken Dakotas? As they say, beans are made with August rains, so there is still a lot to be determined at this point. June NOPA Crush numbers were unimpressive, as the soybean crush was estimated to be 143.1 million bushels but limped in at 138.07 mb. Prior month crush was 149.25 mb. June NOPA soyoil stocks were 1.703 billion lbs, lower than the estimated 1.710 billion lbs and prior month’s 1.749 billion lbs. NOPA showed soymeal exports to be well below last month’s 592,924 tons at 562,684.

 

Wheat is following Minneapolis’ lead, as the story lies in the high quality spring variety and the anxiety surrounding the crop this season. Hard Red Spring futures were up double digits, +11 ¾ at 7.69 ¾ (Sept). Chicago and Kansas City continued to slip lower on plenteous supplies, returning after the weekend break to register losses, Chicago SRW –4 ¾ at and Kansas City HRW –7 at (Sept). USDA weekly export inspections were bullish for wheat, as they exceeded expectations with 578,627 MT announced compared to thoughts of 500K MT. The Commitment of Traders report on Friday showed managed funds had continued to build a long position in wheat, at 44,685 contracts. Will spring wheat show another decline in crop conditions this afternoon? If so, this may help to level off selling, and help get things pointed in the right direction for the entire complex. Global weather overall has become more favorable with the exception of Australia and parts of the FSU (Former Soviet Union). Australia is the world’s fourth largest wheat exporter and they are on pace to miss the mark on yield by up to 20%.

 

Live Cattle declined today in the near month but gained in the deferred, as prices for beef are falling, -.850 at 116.950 (August). Beef demand is expected to decrease with hot weather forecasted for the next couple of weeks. Will packers hesitate to pay up for cattle this week? It appears packer margins are coming back into line with normal levels, as they have been enjoying very profitable $200-300 margins. Carcass weights are catching up as they were as much as 30# behind last year and that number is now reduced to 9#.

 

Hogs saw correction after experiencing a degree of selloff last week, +.875 at 80.775 (August). Although pork prices have recovered a bit, there are concerns that hogs may have peaked and started the trek down with seasonal trends. Big supply is ahead, so a degree of caution is warranted.  However, demand for pork continues to grow – for example, Americans purchased 14% more bacon in 2016 than just three years earlier in 2013.

 

In Other news, Steve Censky, CEO of the American Soybean Association, has been nominated by Sonny Perdue to be his Deputy Ag Secretary. This is viewed positively by the industry as Mr. Censky has extensive experience with trade and exports, and will be a strong advocate for maintaining trade agreements and relationships with key nations. American farmers and ranchers have been big beneficiaries of trade agreements, and it is essential to negotiate prudently.

 

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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