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Closing Comments


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Closing Comments


Corn returned to the doldrums today after a big move yesterday, -2 ½ at 3.55 ¼ (Dec). The rally a day ago was not based on a single market-moving event, but thought to be a culmination of several factors including an oversold market, seasonal bottoming, end of month fund movement and some minor stories to add to the optimism. Weather has been benign, but forecasters are watching possibilities of early frost potential and another building hurricane in the Gulf. FC Stone came in with their adjusted corn estimates, pegging corn at a yield of 166.9 bpa and an overall harvest of 13.94 bbu. This is in comparison to the USDA’s first stab of 169.5 bpa yield and 14.153 bbu production. Informa also released their latest U.S. yield estimate, increasing from 165.9 last month to 169.2 bpa this month. They see corn production at 14.123 bbu. Allendale followed up at 166.7 bpa and 13.920 bbu production, clearly the most optimistic. Look for trade to likely be in a sideways mode until the September 12th USDA report.


Soybeans were able to keep the momentum going, +4 ¼ at 9.49 ½ (Nov). Like corn yesterday, there was not a bullish story that rallied the market other than enough downside has been built in to the mix. Chinese demand is continuing to provide underlying support to the market, but is being wooed by lower Brazilian offers the past couple of weeks. Production and supply are keeping things in check and putting a damper on rallies. The USDA consensus crush came out this afternoon with a supportive bent, up a million bushels over trade estimates. Soybean oil reached into new highs as a result, with oil stocks tightening by nearly 200 million lbs. Informa released their latest estimate, as they see bean yield increasing to 49.4 bpa from 47.3 bpa last month and overall production at 4.384 bbu. FC Stone is at 49.8 bpa with a 4.418 bbu production, while Allendale followed up at 47.1 bpa and 4.179 bbu production.


Wheat continued the divergence of spring and winter wheats, as the winter wheats are now leading and spring wheat continues to lag after yesterday’s losses. IKAR gave Russia’s estimated wheat production another boost, increasing it from 79-82 MMT to 81-84 MMT. Russia has been a big cloud casting its shadow over the market, although no matter how big their crop, they have limitations logistically that will affect how much they can actually export into the world market. This year, they are 11% ahead of last year’s exports to-date. It is thought Asian countries will be taking more business to the Russians in the coming year. Minneapolis HRS -8 ¾, Kansas City HRW +2 ½, and Chicago SRW +4 ¼ (Dec).


Live Cattle was down in the front month, unable to overcome the steady drop in cash markets, -.250 at 105.150 (Oct). There is chatter that packer demand may be down next week post-holiday, which is only adding pressure. Beef exports to China are showing sluggishness, but the export market in general has been strong.


Hogs achieved a high for the week in the October contract but finished timidly, +.050 at 61.450. The market has been oversold and the futures discount to cash too wide, as today saw a market correction. USDA pork cut-out values continue to plummet, down $1.09 from Wednesday and over $3 from last week.


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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