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Closing Comments

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Closing Comments

 

Corn was not able to overcome favorable weather forecasts and improved crop conditions, -7 ½ at 3.55 ¼ (Sept) and –7 ¾ at 3.68 ½ (Nov). The spec buyers seem to be biding their time to see how weather turns out before adding more length. The USDA announced an increase in corn ratings from 60% to 62% good/excellent with IL, NE and MN all showing improvement while IA declined 3%. Iowa corn conditions have dropped nine straight weeks. Corn silking is at 97% compared to 99% last year, dough progress is 61% complete vs. 70% last year and dented progress is seen at 16% complete compared to 19% last year. On the world scene, South Korea announced a snap tender for 70K MT of corn, but nothing has been finalized as they are still looking for the lowest offer. The Pro Farmer tour begins next Monday and ends Thursday – this will be closely watched for actual field results.

 

Soybeans continued their descent, in spite of a reduction of 1% to 59% good/excellent soybean ratings, -11 at 9.21 ¾ (Sept) and –14 at 9.24 ¼ (Nov). Illinois and Iowa both saw reductions in their crop conditions. But, with weather showing more favorable at this critical juncture, no one is counting out this bean crop yet, in spite of the ratings. If rains materialize this week, November beans are well on their way to challenging the 9.07 low put in on June 23rd. Buyers are taking advantage of attractive pricing, as two orders were reported for the 2017/18 timeframe – 132K MT sold to “unknown” destination and 132K MT sold to the Chinese. The Brazilian Real is at a low which is encouraging the Brazilian farmer to hold onto his crop, and is likely to benefit U.S. exports. The NOPA report offered some positive news, as July soymeal exports were up to 596,767 MT compared to last month’s 562,684 MT, soyoil stocks were lower than the expected 1.62 billion lbs. at 1.558 billion lbs., and the soybean crush was pegged at 144.72 mbu vs. the estimated 143.0 mbu.

 

Wheat found weakness in a stronger Dollar and bearish picture for all the grains, -11 ½ at 4.29 ½ (Chicago Sept). Kansas City and Minneapolis were right in step at –10 ¼ and –11 ¾ respectively. While the market rebounded later in the session yesterday, wheat had a tough time doing a repeat performance, as investors look to shed length. Is speculative liquidation in MN and KC futures done yet? Winter wheat was reported to be 97% harvested by the USDA. Spring wheat’s good/excellent rating went up to 33% but is still well behind last year’s 66%. It is also worth noting that 42% of the crop is rated poor/very poor. Is the wheat market too cheap? One must remember when looking at world fundamentals, that even though Russia is expected to have such a large crop which will offset other dry areas of the world, they are only able to export 29-30 MMT due to infrastructure challenges.

 

Live Cattle rallied sharply late in the session to finish, +1.000 at 110.050 (Aug) and +2.450 at 109.050 (Oct). This in spite of multiple factors working against the cash market. Corn is cheap, there is a hefty slaughter pace, the weather has been nice and the beef market is the lowest that is has been since February. And, managed money was last seen holding a net long position of 94,768 contracts. The USDA estimated cattle slaughter came in at 119,000 head yesterday. That is up from 118,000 last week and up 112,000 from a year ago this time.

 

Hogs made positive gains today closing +1.350 at 70.525 (Oct). Cheap corn and cooler weather are two factors that could cause weights to turn up soon. If the slaughter pace returns to running 3.5% – 4.0% above last year, the market may have difficulty absorbing the large supply flow. Yesterday’s USDA pork cutout values came in at $93.59. That is 7 cents lower than Friday and down from $97.00 the previous week.

 

Other News There has been quite a disparity between crop conditions and yield predictions, as crop conditions are significantly lower than last year while yields have not reflected in kind. NASS Chief, Lance Honig, explained to Ag Day that crop conditions and crop yield estimates are two different reports collected by two different groups within the USDA. Crop conditions are put together at the county level by a list of reporters based on what they see and hear, which is different than asking for an estimate of what yield will be.

 

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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