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Closing Comments

 

Corn rallied off soybeans’ lead, as the USDA report was neutral to slightly bearish, +3 (Dec). NASS upped the estimated corn yield to 171.8 bpa, while lowering harvested acres by 400,000. The total corn crop is pegged at 14.280 bbu, 96 mbu higher than the last report. This is the 2nd largest corn yield predicted on record, with the corn ear weight the 3rd highest. However, the corn harvest pace is well behind, at its lowest since the 2013 season. The USDA reported a private sale to Mexico of 120K MT of corn for 2017/18. EIA Ethanol numbers were released a day later this week due to the Columbus Day holiday. The report revealed a sharp decrease in production of 43,000 bbl to 0.967 million bbl/day (equivalent to a decrease of 13 million gal/week), and a decrease in ethanol stocks of 22,000 bbl to 21.52 million bbl. Strong ethanol exports are needed to sustain high production as domestic demand alone is not enough. With a higher close today in corn futures, has a major low been achieved?

 

Soybeans left the other grains in its wake post-Report with a large bar to the upside, +26 ¾ (Nov). NASS lowered the soybean yield estimate to 49.5 bpa from 49.9 bpa in September. Notably, Illinois, Indiana and Minnesota all saw decreases in yield. According to AgResource, there is a strong historical case to be made for a further decline in the U.S. soy yield in November based on the trend from September into October. Soybean pod counts saw a mild increase from September while pod weights were down to .335 grams from .340. Ending stocks were reduced from 475 mbu in September to 430 mbu, which was also 22 mbu less than the average estimate. On the flip side, soybean acreage received an increase of 700,000 acres to 90.2 million. Soybeans were able to close above key resistance levels at 9.75 ½ and 9.88 ½, leaving an upside target of 10.02.

 

Wheat was not able to stay in positive territory, despite its effort to follow the lead of corn and beans. World wheat production was bumped up to a record 751 MMT, with both Argentina and Russia up 1.0 MMT. Additionally, world wheat stocks were seen to be at a new record, tallying 268 MMT. The report is bearish wheat and does not leave a lot of room for optimism at this time. Chicago SRW -2 ¾, Kansas City HRW -2, Minneapolis HRS -7 ¾.

 

Live Cattle corrected some of its overbought condition with profit-taking sellers, -1.250 (Dec). Packer margins are down modestly, supplies are plenteous and cash trade is down. On the bright side, China is expected to see a 15% rise in 2018 imports, and this market could be a huge boost if more U.S. cattle becomes eligible to move into their market.

 

Hogs experienced a pullback, but still traded in the newly established range, in line with the 100 and 200-bar moving averages, -.875 (Dec). The next six weeks is expecting to show record pork production of 3-4% growth. This will make it difficult for December futures to keep the $5+ premium to the cash market, when normally this time of year features a $5+ discount to cash.

 

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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