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Closing Comments

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Closing Comments

 

Corn limped in today with a double-digit loss for the week, but the market was able to turn the tide with balancing of positions heading into the weekend, +3 at 3.66 ½ (Sept) and +3 ¼ at 3.81 (Dec). We have seen fireworks following the weekends, mostly negative as of late. Friday afternoon Commitment of Traders reports on fund positions, Sunday weather forecasts and Monday afternoon crop condition reports have been very influential. While weather continues to trend favorable for crops, a lot of the damage has already been done to corn plants that is not reversible compared to beans that could improve yield prospects. It has been a story of the “haves” vs. the “have nots” this year, with some areas receiving generous precipitation while others have suffered under drought. Will the USDA reduce their production estimate from 170.7 to the 166 bpa or lower area? Most analysts feel that the market should be below 166, with estimates ranging from 162.8 (FC Stone) to 165.9 (Informa and AgResource).

 

Soybeans have had a rough week, losing 51 points leading up to today. While the USDA report on the 10th is important, the timing is more impactful for corn, as estimates will not be nearly as accurate for beans with most of August ahead. Current thinking says that bean yield estimates may be reduced by the USDA from 48 to 47.5. Will the USDA adjust the soy carryover down by over 30 million bushels due to better than expected Chinese imports for the 2016/17 crop? The benign forecast with cool temps and rains to come is favorable to bean yield. In currency, the Brazilian Real continues to trade near recent contract highs, while the Dollar hit a 15-month low this week but rebounded for a large gain today as traders bought into its oversold condition. Futures were –1 ¾ at 9.52 ¼ (Sept) and –3 ¾ at 956 ¾ (Nov).

 

Wheat has experienced a significant break across the complex this week, and finished with mixed results heading into the weekend. There is not a lot of news for the market to latch onto, as attention is now squarely on the next USDA report on Aug 10th. Rolling of contracts will start on Monday, which may spark some movement. Informa released their latest U.S. crop estimates yesterday and it showed all wheat production at 1.690 billion bushels compared to the latest USDA estimate of 1.760 billion bushels. Spring wheat also was lower in Informa’s view at 360 million bushels vs. the USDA’s 385 million bushels. It is worth noting that Informa is not looking to predict what the final number will actually be but what the USDA is going to say. The FSA acreage report on the 10th will bring more clarity to abandoned acres in the Northern Plains. The rallying Dollar on a positive Jobs Report this morning provided a measure of weakness. Minneapolis HRS +2, Kansas City HRW – ¼, and Chicago SRW -3.

 

Live Cattle is carrying the weight of large supply for the foreseeable future, as the market finished mixed +.225 at 115.450 (Aug) and –.725 at 114.100 (Oct). Earlier this week the strong cash market provided support, but today’s trade was much more non-committal to long positions. Also adding to the narrative is cheap corn and cooler weather in the Plains, which could translate into extra weight and more supply.

 

Hog cash prices are holding firm on pork demand, particularly for bellies. The futures market was not expecting these high cash levels to maintain and has responded by rallying to narrow the gap. In addition, packer margins have remained very respectable, enough to keep production at a good pace. The market once again made a strong showing today with August +1.250 and October +1.275 on the session.

 

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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