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Closing Comments


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Closing Comments


Corn, after three down days in a row, was able to eke out a small gain, even at 3.42 (Sept) and + ½ at 3.56 ¼ (Dec). The Pro Farmer Tour is finishing up this afternoon, and the final tally is expected to be neutral to bearish for corn. Results from IL yesterday showed 180.7 bpa with last year being 187.3 bpa. Western IA was at 178.6-179.3 bpa compared to the USDA’s prediction of 188 bpa. More results from IA will come today. The tour has gotten a lot of attention this year, with competing views on yield prospects from the USDA, farmers and traders. USDA weekly corn export sales were on the low end of expectations of 500-950K MT, with 2016/17 at 102,400 MT and 2017/18 at 423,300 MT. On the charts, corn looks to be in position to put in a seasonal low soon, as last year saw the Dec contract bottom out on August 31st.


Soybeans had a nice gain today on positive news related to multiple factors, +6 ¼ at 9.41 ¼ (Sept) and +8 ½ at 9.46 ½ (Nov). The biodiesel preliminary ruling that was announced yesterday did not move the markets, but its impact is still to be felt. It may take some time for cash vegoil to lead the way, but this may be a bigger deal than traders realize, as the demand increase for domestic soyoil could be substantial. The Pro Farmer tour is continuing this week, with results out of IL showing less pod counts than last year. The bigger issue may be crop maturity, as development is behind and the clock could run out on completing the maturation process. USDA weekly export numbers came in strong. While 2016/17 was a net negative 400,300 MT, 2017/18 showed 2.008 MMT, well over expectations of 650K-1.1 MMT. The USDA reported a private sale this morning of 132K MT of soybeans to China for 2017/18, as Chinese buyers are taking advantage of low U.S. prices and the weak Dollar.


Wheat was able to achieve some short covering of its extremely oversold condition and bounce across the complex. Minnesota HRS led the way +10 ¼, while Kansas City and Chicago were not far behind, +7 ¾ and +5 ¾. The focus has been on Russia’s huge crop, but they have logistical limitations when it comes to exports, and the U.S. is hot on their heels from a competitiveness standpoint. U.S. wheat is priced  as some of the cheapest in the world right now, with the weak Dollar also providing support. USDA weekly export numbers were at 386,400 MT vs. expectations of 300-600K MT.


Live Cattle reached down to a new low, but was able to bounce for a nice recovery, +.300 at 105.950 (Aug) and +.650 at 106.825 (Oct).  Short term supply fundamentals are weighing on the market, but demand also typically picks up this time of year. The Fed Cattle Exchange had no sales yesterday and negotiated trade was at $107. There has been quite a decline from beef’s 2nd quarter high and the 3rd quarter low – almost $60, which is a record. Slaughter and production are moving higher and retail margins continue to grow. But, overall fundamentals are bearish with very large production expected later in the year.


Hogs were also able to reverse course, after a sharp drop over the past several sessions due to long liquidation selling, +.225 at 63.775 (Oct) and +.400 at 59.250 (Dec). Have hogs achieved a short-term low and now ready for a bounce? The USDA cold storage report indicated that frozen pork reserves declined by 1% from June and 7% from last year. This is due mostly to the high demand for pork bellies. Exports, especially to Mexico, are also very strong, as their expanding middle class clamors for more. USDA pork cut-out values have continued to decline, down $.73 from Tuesday to $87.47 and compared to $91.17 last week. Stay tuned


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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