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Closing Comments

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Closing Comments

 

Corn continues to plod along, waiting for the all-important Thursday USDA report, – ½ (Dec). Weekly crop progress numbers are delayed until tomorrow due to Columbus Day. With recent rains, barge freights (and the resulting basis bids) should continue to improve as river transportation resumes its normal flow. The Commitment of Traders report on Friday showed funds adding to their short position, which is now estimated at around 175K contracts. This is the largest short position in four months. On the world stage, Brazil has been delayed by rains and is reported to be 29% planted in central/southern region, while Mato Grosso is too dry. The French are seen as 15% complete with harvest, while Ukraine is seeing their yield prospects decline. Ethanol margins have declined modestly to 5-10 cents/gallon.

 

Soybeans traded in a range before closing sharply lower into the close, as traders jockey for position ahead of the high risk October 12th Report, -5 ½ (Nov). Crop progress will be out tomorrow and soybeans are estimated to be in line with the average year-to-date of 45%. South America weather is being closely monitored, as areas of Brazil in the center and north are too dry and not expected to change to a wetter bias in the short-term. This in conjunction with solid demand underlying the market, are providing support and not allowing the bears to get much of an upper hand. Brazil’s soybean crop is 6% planted, according to Safras and Mercado, which is slightly above the average of 5%.

 

Wheat continues to struggle post-September 29th Crop Report: Chicago -7 ½, KC -6 and MN even. In global news, both Brazil and Argentina are concerned about wheat quality, with all the rain in Southern Brazil and Argentina. Will this give the U.S. an opportunity to supply Brazil with HRW, with Russian wheat not approved for import? The market has been watching Russia, which has shown through October 5th to have harvested 127.6 MMT of grain, of which 85.4 MMT is wheat. This is well ahead of last year same time when they had harvested a total of 112.3 MMT of grain, which was comprised of 75.2 MMT wheat. Yield is also up by 17%. Look for weekly inspection numbers tomorrow, as the U.S. is trying to find an upper hand on the export scene.

 

Live Cattle traded both sides of unchanged before ending even (Dec). Similar to hogs, it is a war of large supply vs. strong demand. August was the largest month for beef exports since July 2013, with a year-over-year increase in beef tonnage of 14.7%. Countries showing increasing sales include Canada, Hong Kong, Japan (biggest foreign market), and Vietnam. China continues to grow as a U.S. beef destination, from zero imports as of May, to 1.1 million lbs in August.

 

Hogs fought an overbought condition, rising supply and a weak cash index, +.025 (Dec). The market knows where it stands with regard to supply, but demand is the key, especially foreign demand. Pork shipments were up in August, pegged at a mere 0.7% year-over-year increase, but well over July. Mexico was the largest customer, followed by Japan. However, sales to China fell 27.3% from last year.

 

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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