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Closing Comments


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Closing Comments


Corn saw traders maneuvering for position in anticipation of the big USDA report tomorrow, +2 ½ at 3.72 ¼ (Sept) and +2 ½ at 3.86 ¼ (Dec). To what extent will bushels/acre be reduced from the previous report’s 170.7? It was reported that the input data from the Wescott-Jewison model came in yesterday at 166 bpa. The government will utilize this data as part of their calculation in addition to farmer surveys and ear counts. The wild card this year is the ear count, and if this comes in 3K below normal (like some in the seed business are claiming), sub-166 could be a reality. Another component to tomorrow is the USDA’s FSA early a.m. release of their monthly acreage numbers which will give more clarity to prevent-plant and failed acres ahead of the 11am WASDE report. EIA weekly ethanol production was reported up 1% compared to last week and down 0.59% vs. last year. Ethanol stocks were also up, building to 21.347 million barrels, up 2.37% compared to last week and 4.34% over last year. Corn used for ethanol continues to chug along at a solid pace at 106.26 million bushels, while needing to produce only 76.811 million bushels/week to keep pace with the USDA overall annual estimate of 5.45 billion bushels.


Soybeans moved back and forth from positive to negative, as traders idle their engines waiting for tomorrow’s results, -1 at 9.66 (Sept) and even at 9.73 ¼ (Nov). The weather forecast is basically unchanged, with a drier bias for the coming week and possibly more precipitation thereafter. The crops in western Iowa and the Dakotas have rain in the 6-10 and 8-14 day forecasts, which is prompting thoughts of recovery. Cooler temps will also continue to prevail. The focus is on dry areas of IL and IA, as both are heavyweight corn and bean powerhouses. It was reported by the USDA that a private sale of 130K MT for 2016/17 was canceled by an “unknown” destination. China’s record import data is continuing to support the market though, and is serving as a counter-balance to bearish supply. Even if soybean yield is pegged at 47.5 bpa or above, the trade may buy anyway as concerns regarding late planting, drown outs, under-sized plants, dicamba drift and pervasive dryness may win out.


Wheat diverted from the recent pattern of spring wheat leading as Minneapolis brought up the rear, while Chicago and KC led with modest gains, MN +1 ½, KC +3 ¼ and Chicago +2 ½. Wheat is expected to see some reduction in world stocks in tomorrow’s report, with less than optimal growing conditions in Australia, Europe, China and the Ukraine. In the U.S. the reduction will come almost entirely from the spring wheat and durum sector while the winter wheats should be similar to July’s report. Some are skeptical of the USDA at the present, as previous estimates have seemed out of touch with the reality of the crop problems that have been experienced. Look for some volatility in the markets tomorrow.


Live Cattle moved sharply lower today, -2.475 at 110.000 (Aug) and –2.550 at 108.050 (Oct). Big supplies are influencing mindsets, as improved demand will be needed to keep pace. Technically, the market is weak and managed funds are holding a very large net long position, which could open the door for more long liquidation.


Hogs once again managed to forge decent gains in the face of bearish supply fundamentals to come, +.600 at 84.125 (Aug) and +.500 at 68.250 (Oct). It will be difficult for the market to maintain strength if slaughter numbers and weights gain simultaneously. The pork cut-out value continues to decline, as it was at $94.68, down $2.32 from Monday and at the lowest level since June 15th.


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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