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Closing Comments


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Closing Comments


Corn was able to turn positive, led by a strong move forward in wheat, +1 ¾ (Dec). Traders do not have much impetus to take risks with a big USDA report on Friday, and with the mood leaning bearish on overall world grain supplies. EIA Ethanol reported production for the week ending September 22nd to be down 3.58% vs. last week, but up 0.71% compared to last year. Ethanol stocks were down 1.88% vs. last week, but up 0.79% over last year. Corn used for ethanol was estimated at 102.34 million bushels, which is below the 104.89 million bushels needed on a weekly basis in order to hit the USDA’s overall annual projection of 5.475 billion bushels.


Soybeans found support in Chinese buying and strength in the wheat complex, +2 (Nov). The Chinese took a pause from their holiday week festivities to put in an order this morning, as the USDA reported a private sale to the PRC for 132K MT for 2017/18. Soybean yields coming in from the fields continue to be above expectations, and the market is keeping a watchful eye on whether the later planted crops will be able to do the same. Other market factors weighing on soybean futures today included a rising Dollar index and an improved forecast for both Brazil and Argentina that includes a normal outlook for rain into mid-October. It has been reported that the EPA is considering altering its mandates that could reduce biodiesel demand. However, they would have to overcome a history of Federal Court Rulings that have prevented them from doing so in the past. The first major line of defense on the charts is around 9.50 Nov, while a violation of this area would lead to resistance in the 9.20-9.30 area.


Wheat led the grains higher today, as anticipation grows for the Grain Stocks report this Friday – this is a key report for the wheat complex. Wheat may have the most potential to lead, and corn will likely be influenced. All eyes will be focused on the size of the spring wheat crop, as many are anticipating a sizable reduction by the USDA. In the last report, the USDA penned in spring wheat production at 401 million bushels, which was 10 million higher than the average trade estimate and 50 million more than many anticipated. With the crop now harvested, the USDA should have a much better handle on the actual number. Minneapolis HRS +3, Kansas City HRW +6 ¾ and Chicago SRW +7 ¾.


Live Cattle had a small gain in the front month, +.300 (Oct), while Dec and Feb had much larger gains, +1.425 and +1.225 respectively. There is plenty of short-term supply, but demand is a supportive factor long-term. While the Cattle on Feed and Cold Storage caused a sharp decline on Monday and into Tuesday, the market rebounded today. USDA boxed beef cut-out was up $2.82 yesterday to the highest level since August 16th.


Hogs had a break-out day in the deferred contracts, with Dec +1.550 and Feb +1.250. October was up a modest +.150. The Hogs & Pigs Report tomorrow will be looked to as a barometer for future price action. Expectations are for inventory to grow by 2.5%, but there is disagreement on the size of inventories. Look for answers to – how big is the supply of 120-179 lb hogs? Will the Jun-Aug pig crop show an increase, as this will affect the Feb contract? How much will the size of the breeding herd be up, which would affect the spring and summer contracts?


In Other News, AgResource reported that the Dollar’s sharp rally is tied to President Trump’s Tax Plan being leaked to news organizations. U.S. corporate taxes are expected  to drop to 20-25%, among other changes. But, the tax reform will be a long-term process, and could spur inflation along with higher interest rates, if the U.S. budget deficit grows at a faster pace.


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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