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Closing Comments

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Closing Comments

 

Corn benefited from soybeans’ rise and a positive EIA report but still could not finish out of the red, -1 ¼ (Dec). Ethanol production for the week ending September 29th was up to 1.010 million barrels/day from last week’s 996K bpd. However, it only made up for less than half of last week’s decline over the previous week. Nevertheless, it was 3.1% above last year’s same week production and weekly ethanol is on target to eclipse the USDA annual estimate of 5.475 billion barrels. On the flip side, ethanol stocks also gained 6.8% over the same time last year. Keep an eye on this metric as continued growth of stocks could indicate a slowdown of ethanol exports, especially to Brazil, due to changes in their tariff structure.

 

Soybeans were able to find buyers in this very quiet news environment, also showing strength in  oil futures, +3 (Nov). There were no new sales announcement this morning, as China continues their holiday week. Look for a strong rebound in exports the second half of October. Brazil’s Abiove, soybean crushing association, gave new soybean estimates showing next year’s crop at 108.5 MMT compared to the USDA’s estimate of 107 MMT and soybean exports of 65 MMT, one MMT over the USDA. Continued rains in the Midwest will slow harvest progress through the weekend, but should help restore river levels and resumption of barge traffic.

 

Wheat corrected yesterday’s bounce, settling safely below resistance at the moving averages. On Monday, wheat received supportive news from a positive export inspection figure. Unfortunately, the U.S. has not been able to compete with Russia for the coveted Egyptian cargoes. Wheat plantings are running 8% behind the 10-year average, and may be slowed by snows in Kansas. Chicago SRW -6, Kansas City HRW -5 ¾ and Minneapolis HRS -1 ¾.

 

Live Cattle added more points to yesterday’s gains, +.025 (Dec). It is a duel of strong packer margins and rising beef values against large supplies of market ready cattle. The 1st quarter of 2018 looks more favorable, and this is evidenced by the February cattle holding a $10 premium to the cash market. The Fed Cattle Exchange today will be a closely monitored barometer for price direction for the remainder of the week.

 

Hogs showed indecision today, -.175 (Dec). December futures hold a large premium to the cash index, which may cause producers to feed hogs out to higher weights and increase the overall tonnage, according to Hightower. This would be potentially bearish to the market, as normally this time of year, the December contract is showing a $9 discount to cash. Recently the market has shown technical prowess on the charts, but will new buyers wane with recent lows in pork product prices?

 

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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