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Closing Comments

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Closing Comments

 

Corn experienced long liquidation selling on improved weather forecasts with cooler temps, -8 ½ at 3.68 ¾ (Sept) and –8 ½ at 3.82 ¼ (Dec). Corn crop condition ratings fell 2% to 62% good/excellent. Last year was at a lofty 76% good/excellent at this same time. Iowa was down 3% and Nebraska was down 4%. However, the market does not view corn stocks below a 1.8 billion bushel reserve with current conditions, which is deemed plenty in combination with record South American crops. With regard to rain, it is the “haves” vs. the “have nots”, as many areas that have been well supplied with precipitation got more rain while those that really need it did not have such luck. The crop needs soaking rains and not scattered tenths of an inch. The weather ridge is moving back West which will allow cooler temps across the growing region, at a critical time post-pollination. China is looking to clean out its bins as it is offering 537,400 MT of 2013 and 800K MT of 2014 reserve corn on Thursday and 3.65 MMT of 2013/14 reserve corn on Friday.  

 

Soybeans confounded conventional wisdom and plunged lower (after being up over 10 overnight) in spite of a large drop in weekly crop conditions as weather trumps all, -16 ½ at 9.86 (Sept) and –17 ¼ at 9.92 ¾ (Nov). Soybeans had the largest drop in crop condition ratings, at 57% good/excellent, with Illinois showing the biggest decline, off 8%. Illinois soybeans are also estimated to be a month behind in maturity. Last year at this time, the crop condition rating was 71% good/excellent. However, beans are at a point in the growing cycle that yield could be greatly improved with good weather. How the month of August sets up will shape their destiny. Traders are wary of soybeans’ history of showing the ability to recover yield potential late in the growing season. In Brazil, the Ag Ministry is estimating the 2017/18 crop to be down from this year’s 113 MMT to 110.7 MMT. A story that has been on the back burner relates to Argentine and Indonesian biodiesel exports into the U.S. The Department of Commerce is expected to report the results of their investigation on dumping into our market. If action is imminent to penalize the offenders and the imports are shut off, this will lead to increased demand for domestic soyoil and biodiesel production.

 

Wheat shed some length today led by Minneapolis, as funds liquidated a batch of the long positions they have built recently. Like the rest of the grains, the improving weather outlook seems to be pushing the declining crop conditions to the side. Will the Spring Wheat Tour add any fuel to the fire? The tour starts in North Dakota today, with the results scheduled to be released at its conclusion on Thursday at 1:30pm CDT. The Dollar is at a low level, so this should be supportive to the U.S. competing for tenders on the global stage. Egypt is back in the market for a tender of three cargos of wheat for September – offers will be in today and results later today. Minneapolis HRS –35 ¾ at 7.14 ¾, Kansas City HRW –14 ¾ at 4.72 ¾, and Chicago SRW –14 ¾ at 4.74 (Sept).

 

Live Cattle saw technical selling as traders balanced their large net long positions, -1.625 at (Aug). Beef cutouts were up to begin the week, with yesterday penciling in Choice cuts up $.55 and Select up $3.09, and today with more of the same. The Cold Storage report yesterday showed beef stocks at the end of June at 101% of May and 90% of last year. Stocks are at a three month low and June is the second month in a row that is at least 10% under last year. Cattle inventory is at the highest level in a decade at a 103 million.

 

Hogs gapped higher at the open and were able to forge gains, +1.075 at 81.450 (Aug) and +.400 at 66.850 (Oct). News of very sluggish Chinese demand is not helping the export story. The pork cut-out is at its lowest level since June 26th, at $101.27 ($1.13 lower than Friday). The June Cold Storage had frozen pork down 4% and pork bellies down 65% – this is the underlying reason bellies have held up in price, as the market is relying on fresh product for bacon demand. Is the high in, and will the cash market fall back into line with 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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