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Closing Comments


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Closing Comments


Corn had another small downgrade in crop conditions but still managed to lose ground in the markets, -8 ¼ at 3.62 ½ (Sept) and –8 ¼ at 3.76 ½ (Dec). The USDA pegged crop condition ratings at 61% good/excellent, down from 62% last week and well behind the lofty 76% posted last year at this time. It is noteworthy that Iowa, the largest corn producing state, decreased by 3% from last week. And, the poor to very poor category went up 1% overall. However, until the trade perceives a significant change in a yield production below 165 bpa, other indicators do not seem to be registering with the same impact. With the future looking favorable for cooler weather during grain fill, the big question is – how much irreversible damage has been already done in July? The next big date on the calendar is the 10th of this month when the USDA will give their Crop Production and Supply & Demand reports. In exports, the USDA announced a private sale of 100K MT of corn sold to Colombia for 2017/18.


Soybeans fell hard today on long liquidation selling as continued improved weather forecasts and an upgrade in crop conditions provided weakness, -35 ¼ at 9.64 ¼ (Sept) and -35 ½ at 9.71 ¾ (Nov). The USDA bumped up soybeans to 59% good/excellent from 57% last week, with IL showing a 7% improvement and Indiana up 4%. However, the crop is still well behind last year’s 72% G/E. And, it is worth noting that 35% of beans in South Dakota were rated poor to very poor. However, the market has thoughts of large carryout and record South American crops on its mind. And, a rumor of the Chinese possibly auctioning 2-3 MMT of soy did not help positive sentiments. What will the crucial month of August bring in the way of new developments? In outside markets, the Dollar continues to provide support to U.S. pricing, as it is now below 93, from its high of over 103.


Wheat had a hard time getting going with soy being down sharply. Crop conditions were supportive to wheat yesterday, as they showed spring wheat declined another 2% from last week to 31% good/excellent compared to 68% last year and 69% average year-to-date. Of the spring wheat crop, 43% is considered poor to very poor, an increase of 3% from last week. And, there is growing concern about stress on the crops in Canada. It is thought by some that the Canadian wheat crop could be down as much as 4 MMT from the last WASDE report. The USDA crop progress yesterday pegged winter wheat at 88% harvested, which is 2% above the five year average. Export loadings/inspections were solid this week, 670K MT over this time last year. Ending numbers showed Minneapolis HRS -14 ¾, Kansas City HRW -9 ½, and Chicago SRW -13 ¼.   


Live Cattle was led by feeders to a strong close on the day, +.800 at 112.800 (Aug) and +.925 at 112.875 (Oct). Export demand will be a big key to help balance looming large supplies. With a new open door to China, the long-term outlook has upside. However, withdrawing from TPP is costing U.S. producers, as they have been hit with a big tariff increase from Japan due to a lack of a bilateral trade agreement.


Hogs have experienced less than stellar technical action on the charts, -.500 at 79.800 (Aug) and –1.625 at 64.400 (Oct). The pork cut-out was at $99.09 after the close yesterday, which is up from Friday but down from $101.27 the previous week. The big appetite for bacon has been the driver behind pork belly demand this year and has kept the cut-out at very high levels late in the season. The large cash premium to futures is encouraging producers to move hogs as soon as they can get packers to take them. Packer kills are up 9K over last week.


In Other News, it was ruled by the courts that the EPA’s methodology on determining how much biofuel is blended into gasoline was flawed (for 2014-2016 calculations). Hearings are being conducted for 2018 and 2019 to set RFS levels. This developing story could be a win for farmers if ethanol demand is increased as a result.


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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