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Closing Comments

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Closing Comments

 

Corn gapped lower to start the week and settled the session with modest losses, -3 ½ at 3.70 ¾ (Sept) and –3 ¼ at 3.84 ¾ (Dec). Improved forecasts and cooler temps have put a damper on the market. Not too many traders want to stick their necks out too far before the August 10th USDA report. And, farmer selling has slowed to a halt as many are hoping for a late rally to boost prices. USDA weekly inspections were positive, as they were over expectations at 989,105 MT compared to 950K MT. The USDA announced a private sale of 150K MT of corn sold to Colombia for 2017/18. AgRural is pegging Brazil’s safrinha corn crop 63% harvested and on record pace.  The Commitment of Traders report on Friday afternoon showed managed funds with a solid long position of 106,815 contracts, which was up 2,145 over last week. The bulls will continue to require a steady diet of weather uncertainty to maintain their long stance. Crop condition ratings are expected to improve by 1-2% later this afternoon.

 

Soybeans are likely to keep trading in their established range until August weather has a more definitive impact on yield for better or worse, -6 ½ at 9.99 ½ (Sept) and –5 ¾ at 10.07 ¼ (Nov). It is thought soybeans will have a modest improvement in crop condition ratings by 1-2% later this afternoon due to the improved weather last week. USDA weekly inspections for the week ending July 27th were announced at 476,186 MT vs. estimates of 430K. The Commitment of Traders report on Friday showed managed funds grew their net long position in soybeans by 12,534 contracts to 50,885. As has been previously discussed, August weather will make or break beans, so traders are looking for assurance that they are on the right side of the bull/bear line. It is likely trade will remain in a sideways trend until the August 10th USDA report to see if/how much yield is reduced.

 

Wheat reacted to overall pressure on the grains due to more favorable weather forecasts, as spring wheat is showing signs of having put in its high for now. Minnesota HRS finished –6 ½ while Chicago SRW was –6 ½ and Kansas City HRW was –6 ¼ (Sept). If yield ends up poorly and abandoned acres are a bigger impact than predicted, a demand rationing rally could follow later in the season. In USDA weekly inspections today, wheat came in above expectations at 578,649 MT compared to estimates of 475K MT. In global demand, Egypt’s Supply Minister announced that they expect to increase their imports in 2017/18 from the previous target of 6.2 MMT to 7.0 MMT. As of now, Egypt’s wheat reserves contain about 6.4 months of consumption, and they are very dependent on world supply (as they are the largest importer). The Commitment of Traders report on Friday showed traders covered some of their long positions by reducing them by 8,076 contracts to 27,850.  

 

Live Cattle continued to trend lower on large supplies, -.900 at 112.000 (Aug). On the world market, the weak Dollar is providing support, making U.S. beef more affordable. However, the lack of a bilateral trade agreement with Japan is starting to inflict pain, as they have raised the tariff from 38% to 50% on U.S. beef. Export sales are a critical component and will be vital to helping pare down the large supplies on the horizon, with 3rd quarter up a record over 2nd. The market also needs to see Chinese demand pick up quickly. Keep an eye on cattle weights as they are a barometer to be watched as steers are down 9 lbs and heifers 12 lbs from last year.

 

Hogs were down today but the futures large discount to cash kept selling from getting out of hand, -1.100 at 80.300 (Aug) and –.475 at 66.025 (Oct). Overall, hogs are staring at bearish fundamentals with large supply and weakening demand from China, as well as a negative technical picture on the charts.

 

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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