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Closing Comments


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Closing Comments


Corn waffled back and forth on both sides of unchanged before finishing with a small gain, + ½ (Dec). Any positive gains are welcome news, as corn does not have much fresh fodder to digest until harvest numbers start to roll in. Preliminary results from Central IL are better than expected, but more results should be available following the weekend. While traders in the more bullish leaning camp believe that NASS overinflated the yield numbers in the last report, one must also consider the undersold U.S. farmer, level 2017/18 world demand compared to large gains last year and the slowdown in exports from a year ago due to the large South American crop.


Soybeans got a bump from another sale to China and a strong August NOPA report, but still could not find a way to finish the week on a positive note, -7 ¼ (Nov). The NOPA crush was an all-time record for August and soybean oil stocks were near expectations, indicating better demand than anticipated. The crush was tallied at 142.4 million bushels, well ahead of market projections of 137.5 million. The USDA reported another private sale to China of 132K MT of soybeans for 2017/18. In South America, traders are closely monitoring the weather as farmers are firing up their planters. Currently, Brazil is trending very dry and Argentina very wet – but it is too early to draw conclusions.


Wheat was the leader today, as the winter varieties both posted nice gains, Chicago +6 and Kansas City +4 (Dec). Market fundamentals providing support today include a weak U.S. Dollar and the Taiwan Flour Millers Association signing a letter of intent to buy 1.8 million tons of U.S. wheat in 2018 and 2019. Worldwide, U.K. wheat protein levels are looking very good, with samples showing 13.2% compared to the 3-year average of 12.1%. Strategie Grains upped their E.U. wheat production forecast to 1.5 MMT, but downgraded export estimates by 1.3 MMT due to competition from Russia and the Ukraine. Russia has some logistical issues to address in order to be able to maximize their export capability. In Argentina, The Buenos Aires Grains Exchange is reporting that recent rains may have resulted in the loss of 370K acres of wheat. Minneapolis spring wheat continued to exhibit weakness, finishing –10 ¾ (Dec).  


Live Cattle exhibited volatility today, making a late surge, +1.050 (Dec). The beef market has seen a large decline of 25% from the highs achieved in June. Beef prices are now back down in an area that should boost demand. Both retail and packer margins are solidly in the black. With all the power outages from the two hurricanes, there is likely a stockpile of meat in fridges and freezers that has spoiled. As folks get back home and the power is restored, a spike in buying for restocking purposes could result. Long-term, supply issues could be a concern as beef production is expected to fall by a record 785 million lbs. from the 4th to the 1st quarter. The short-term trend is for higher.


Hogs were able to turn back positive, with solid moves in all contracts. December finished a strong +1.950. As with cattle, production is expected to drop significantly after the 1st of the year by a record 510 million lbs. China’s Ag Ministry reported their hog herd is 5.6% lower than last August. The large discount of October futures to cash has also been playing a supportive role. On average this time of year the discount is 120 points, while this year it is at 730 points. On the bearish side, the pork cut-out continues to drop to lows not seen since early May, which will influence cash lower. Bellies have dropped an astonishing 50% in the last few weeks. Stay tuned to see if hogs have been able to find a short-term bottom.


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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