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Closing Comments


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Closing Comments


Corn was not helped by rains over the weekend, even though rains at this point post-pollination are of less consequence, -3 at 3.49 (Sept) and –2 ¾ at 3.63 (Dec). December corn is at the lowest level since September 1st. The Pro Farmer Tour kicked off today, and this is getting a lot of attention, with the market starving for more information to stack up against the USDA’s August report numbers. Crop conditions will be announced again this afternoon and expectations are for steadiness and improvement in spite of the seasonal trend to decline at this point in the season. USDA weekly inspections announced this morning were lower than expectations of 850K MT at 691,442 MT. Brazil’s safrinha corn crop is now about 89% harvested with large yields expected, which will weigh in on the export scene. Taiwan is tendering for optional origin corn, and it is thought to likely go the South American route. The market is looking for its pre-harvest bottom, and could see a bounce this week due to the oversold condition.


Soybeans were down on news of rains in Iowa and the possibility of more on the way, -5 at 9.32 ½ (Sept) and –1 ½ at 9.36 ¼ (Nov). The recent precipitation is likely going to result in improved crop conditions later today, getting the week off to a bearish start. The five-day forecast is rain-friendly for Iowa and the northern 2/3 of IL. China is taking advantage of low bean prices and the weak Dollar, as the USDA reported a private sale to the PRC of 198K MT for the 2017/18 timeframe. Also reported was a large private sale to “unknown” destination of 463K MT of soybeans for 2017/18. USDA weekly export inspections were announced above expectations this morning at 665,283 MT compared to estimates of 525K MT. For the market to make meaningful progress to the upside, yield results are the key.


Wheat was not able to take advantage of the weak Dollar, Minneapolis HRS -14 ¼, Kansas City HRW -6 ¾, and Chicago SRW -6 ½. USDA weekly inspections were pegged at 583,126 MT compared to expectations of 560K MT. On the world scene, Russian wheat export expectations continue to rise, with SovEcon estimating an increase to 32 MMT vs. 29.5 MMT previously. The USDA also sees Russia with a tally of 31.5 MMT of wheat exports. However, that is Russia’s max export capability with current logistical infrastructure limitations, and until they solve that problem it will not matter how much they grow from an export standpoint. Technically, the market is very oversold – what kind of demand news will cause short-covering to ensue? U.S. wheat is believed to be the lowest priced in the world, putting it in good position for opportunities that may lie ahead.


Live Cattle gapped lower at the open, trading both sides before finishing, -.375 at 106.000 Aug) and –.050 at 105.850 (Oct). Friday saw boxed beef values fall to $194.29 from $199.60 last week, the lowest level since February 21st. Long liquidation selling is weighing on the market as traders seek to balance large net long positions.


Hogs pushed lower nearing key support at 64.125, -1.450 at 64.675 (Oct). Futures are still running at a large discount to cash, as the CME Lean Hog Index is at 83.70. Normally at this time of the year, the five-year average shows a 14.00 discount to cash, and by the end of August dwindles to under 4.00. Higher slaughter numbers will be needed to maintain the big discount. In addition to large supplies, also providing weakness is the idea that traders are apprehensive about trade negotiations with NAFTA, as any interruptions could have a large impact on pork exports to Mexico.


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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