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Closing Comments

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Closing Comments

 

Corn was up today on news of less rain falling in Iowa than predicted and a dry extended outlook into August, +1 ½ at 3.74 ¼ (Sept) and +1 ¾ at 3.87 ¾ (Dec). The market is losing confidence in weather model predictions, particularly the GFS, and is taking a more measured approach this time around. Will crop conditions see another drop on Monday afternoon? It is estimated that 32 million acres of corn has been planted in the dearth areas of the Northern Plains and NW Midwest, with Western Iowa getting the most attention. According to AgResource, the Des Moines area has only received 40% of normal July rainfall and 17 days of temps over 90 degrees. USDA weekly export sales were within expectations at 584,600 MT compared to estimates of 400K-900K MT. Exports were heavy on new crop as they made up 486,600 MT of the total. Customers this week featured Mexico and Japan.

 

Soybeans built in more premium today as traders are concerned over long-term models showing dryness in August, ending the session +6 ¼ at 10.00 (Sept) and +7 ¼ at 10.07 ½ (Nov). Weekly export sales reported by the USDA were right on track with expectations of 400K-1.2M MT at 835,200 MT. Of that total, 303,400 MT was for 2016/17 and 531,800 MT was for 2017/18. Buyers of old crop soybeans included Netherlands, China, Thailand, Japan and Egypt. In the same vein, the USDA announced a private sale of 264K MT of soybeans to “unknown” destination, with 198K MT for 2016/17 and the rest for 2017/18. It appears beans are establishing a trading range while the market gets a better feel for production. It is still too early to predict with certainty, as August is the key month for beans and there is plenty of time for them to improve their prospects.

 

Wheat was up today on U.S. dry extended weather forecasts and European concerns, with both the German and Polish crops receiving daily downgrades. Also, today is the last day of the Spring Wheat Tour, and the results have been less than stellar, with abandoned acres hard to quantify. The markets have reflected the sentiments this week, with Minneapolis leading again today, +6 ¼ at 7.36 ¼. Chicago and Kansas City followed the customary pattern of gains but at a lesser pace than spring wheat, +2 at 4.79 ¾ and +5 ½ at 4.81 (Sept). USDA weekly wheat export sales did not disappoint as they were at the higher end of the range of expectations, coming in at 498K MT vs. estimates of 300K-600K MT. The U.S. is 5 million bushels ahead of last year in sales.

 

Live Cattle was able to hold steady after yesterday’s gains, finishing even at 114.300 (Aug). According to Hightower, October cattle normally trade at a premium of $1.30 futures to cash at this time of year, so the discount of $7.25 left the market feeling cheap. Long-term fundamentals are weakening, so keep an eye on whether technical support levels are violated as an indicator that more selling may be ahead.

 

Hogs saw short-covering early as the discount of futures to the cash index weighed on trade, but rallied to finish +.250 at 82.250 (Aug) and +.025 at 67.675 (Oct). Bellies continue to be a bright spot at unprecedented highs. Factors providing market weakness include growing supply, declining pork cut-out prices (down $1.96 from Tuesday to Wednesday) and slowing Chinese demand.

 

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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