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Closing Comments

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Closing Comments

 

Corn traded both sides before charging to the finish, +4 at 3.72 ¾ (Sept) and +3 ¾ at 3.86 (Dec). Storms across MN, NE and IA have brought a measure of relief, but dryness is expected to follow. Managed funds are still long over 80K contracts coming into today. Is a $3.80 Dec corn price in line if the carryout ends up 1.8 billion bushels? Traders seem mesmerized by short-term weather forecasts more than the effect heat has had on pollination and damage that has been inflicted on the Western Corn Belt. EIA Ethanol released their weekly data, and it showed production was down this week by 14,000 to 1.01 million barrels/day, but still up 1.40% over last year. Ethanol stocks were down 608K to 21.53 million barrels, but 5.59% higher than last year. Corn used for ethanol was well above the weekly average needed (86.687 million bushels) to hit the USDA annual estimate of 5.45 billion bushels, as weekly production was pegged at 106.26 million bushels. Given the condition of the crop this season, is the market under-valued?

 

Soybeans dipped below the 200 day moving average before rebounding for a nice gain, +7 ¾ at 9.93 ¾ (Sept) and +7 ½ at 10.00 ¼ (Nov). While there have been rains and cooler temps in the forecast, long-term there is more uncertainty. There will need to be above average rainfall in August to have a chance at trend yield, as crop conditions have shown to be well off average to this point. Upcoming crop condition reports will be closely monitored and will carry more weight. Some are pondering, is a $9.90 Nov bean price in line if U.S. stocks are above 400 million bushels in the end? Or, will beans rocket higher on demand and a below trend U.S. production?

 

Wheat took a breather from fund liquidation and was up across the complex, led by Minneapolis at +10 ¼. Chicago and Kansas City followed at a more modest pace, +3 ¾ and +2 ¾ (Sept). The Spring Wheat Tour completed their first day, looking at areas in the Eastern Dakotas which were not hit as hard with drought, showing a bpa of 37.9 compared to the five year average of 45.7 bpa. Today, they toured some of the tougher areas, and the results will be reported later today. If anything, it would be expected that price values would increase once these results are tabulated. Abandoned acres may not be properly reflected in the final numbers. Algeria is tendering for 50K MT of wheat for October shipment.

 

Live Cattle is not ready to succumb to the bears, even with weakening long-term fundamentals, +.600 at 113.375 (Aug). Futures are at a discount to cash and boxed cut-out values have remained solid at $207.62, down modestly from last week’s $208.05. If technical support levels are violated, expect more selling as traders are sitting with a large net long position.

 

Hog futures are showing a tendency to want to spike before giving in to seasonal downtrends, +.550 at 82.000 (Aug) and +.800 at 67.650 (Oct). The cash index declined to 91.13 from 92.50 but is still at a large premium to futures. With pork markets and cash bellies still strong, the door is open for recovery bounces.

 

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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