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Closing Comments

 

Corn futures experienced a setback, with pressure from rains overnight in dry areas of Iowa, the Dakotas and Nebraska, -11 ¼ at 3.79 ¾ (Sept) and –11 ¼ at 3.93 ½ (Dec). The rains were considered “spotty”, varying from .5” to 1.5”, but were still welcomed by anxious farmers. The inconsistent nature of the weather models has made for volatile markets this season. The placement of rains the next few days will be key during this critical pollination phase. As of now, the outlook is tending toward more dampness and less intense heat than previous forecasts. On the global scene, keep an eye on eastern Ukraine and Europe, as they have been trending too hot and dry. The Commitment of Traders report will be released later this afternoon, and this will be closely watched as a barometer of managed funds’ sentiments. And, the On Feed cattle expansion expected to be announced is also supportive to corn. Look for a 1-2% reduction in crop condition ratings again on Monday.

 

Soybeans were down also with news of rains across parts of Iowa and the Northern Plains, -4 at 10.14 ¼ (Sept) and –4 ¾ at 10.22 ¼ (Nov). The rains were localized and still below normal for the week, but influenced market action nonetheless. It looks like the extreme heat will be abating, but the big story for soy is still over a week away. August rains will make or break the bean crop. What will the weather runs on Sunday tell us heading into next week? Export demand is being helped by a weak U.S. Dollar (8% decline, extended into new lows) and an improving Brazilian Real. Seasonal soybean export demand rose 100% in a week.

 

Wheat did not have a lot of fresh news heading into the weekend. The spring wheat tour begins next week – two opposing factors that will be considered are the more fruitful Red River Valley crops vs. abandonment of acres in the western Dakotas (some are expecting up to 30%). With spring wheat positions held by funds extremely long, today featured a shift with shedding some market length. All wheat classes bled red today: Chicago SRW -6 ½ at 4.99 ¼, Kansas City HRW -7 ¾ at 4.96 and Minneapolis -8 at 7.70 (Sept). Other positive factors for wheat this week included strong weekly export sales and a weak Dollar. Monday afternoon will feature another crop condition ratings report, and it is expected to show another decline in spring wheat conditions from last week.

 

Live Cattle shrugged off a weaker beef trend and hot weather, +.550 at 116.425 (Aug). The drought in the Dakotas has likely added to the increasing, recent national cow slaughter numbers, as overall they are up 6% in the last three months. More feeders may also have gone to the feedlots early. Look for Cattle on Feed results later this afternoon. Estimates are: On Feed 102.9%, Placements 106.1% and Marketings 104.7%.

 

Hogs have experienced some technical weakness, and this was most apparent in the deferred months’ trading, as August was even on the day and October -.625 at 67.225 (Oct). U.S. pork exports for the week ending July 13th were down sharply from the previous four week average of 18,450 MT to 11,700 MT. And, 3rd and 4th quarter production lends a bearish mood with very large output expected. The Cold Storage report is on Monday – expect low belly stocks as they are selling briskly into new price highs (up $4).

 

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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