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Closing Comments

 

Corn was down on recent rains over the weekend and a longer term forecast with normal to below normal temps, but showed scrappiness in battling back from session lows, -2 ½ at 3.77 ¼ (Sept) and –2 ¾ at 3.90 ¾ (Dec). Even though the market is attempting to price in the favorable weather shifts, there is still plenty of uncertainty with soil moisture levels in many areas still inadequate. The key will be where future rains fall and in what amounts. Western Iowa in particular is being closely watched. The USDA reported a private sale to start the week of 135K MT of corn to “unknown” destination for 2017/18.  Weekly corn inspections were pegged at 935,262 MT, basically in line with the expected 960K MT. The crop condition rating report later this afternoon will be closely watched, as the trade is expecting an overall 1% decline. Will yield achieve the 165 bpa level that the market is now expecting? It is likely going to take fears of 162 bpa or below to help encourage the funds to continue to defend their long position.

 

Soybeans traded lower on evolving predictions of less heat stress on crops entering the August time frame, -11 ¾ at 10.02 ½ (Sept) and –12 ¼ at 10.10 (Nov). Soybean crop condition ratings this afternoon are expected to show a slight decline from last week. There is still a lot of important weather ahead in August for beans, and the market may be heavy to the downside. The USDA announced soybean weekly inspections at 596,920 MT for the week ending July 20th, well over expectations of 325K MT. Dicamba drift continues to be a big topic of discussion this year, as multiple states are reporting injury to crops in nearby fields. Symptoms of exposure do not show up until 14-21 days after many times, so could be mid-August in some cases before it becomes apparent. The higher the temperature, the higher the volatility of dicamba. How extensive will this problem turn out to be this year? It will not be evident until harvest.

 

Wheat was lower today on market selling and news of weekend rains across a swath of the Dakotas: Chicago SRW –10 ½ at 4.88 ¾, Kansas City HRW –8 ½ at 4.87 ½. Minneapolis HRS saw the biggest correction, dropping below previous July lows, -13 ¼ at 7.52 ½ (Sept). USDA weekly wheat inspections came in below expectations of 525K MT at 451,665 MT. The Spring Wheat Tour will be in full swing this Tuesday to Thursday, and should shed some light on how bad the situation stands. Crop condition ratings this afternoon are expected to continue to decline, with possibly a 1% decline overall in good/excellent and 2% in the poor/very poor category. Winter wheat harvest should now be around 80% complete.

 

Live Cattle experienced a steep sell-off after the “bearish” Cattle on Feed report’s numbers came out Friday afternoon. Feeders were lock limit down in the near month while Live Cattle was lock limit down in October and December, with August finishing –2.550 at 113.875. The biggest surprise from the report was the increase in Placements to 116% of last year and well ahead of the predicted 106.1%. On Feed and Marketings were in line with estimates. Steer and heifer weights will be important to watch as weights have been down this year and could make the number of placements look worse than reality. Will cattle be able to shake off today’s action and return to a more positive trend?

 

Hogs were down on technical selling and bearish fundamentals, -.725 at 80.375 (August) and –.775 at 66.450 (October). Hog supplies in the 3rd and 4th quarters are predicted at record levels, and this against a backdrop of slowing Chinese demand. Cash pork prices have continued to hold their value as well as the cash index is holding a significant premium to futures.

 

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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