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Closing Comments

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Closing Comments

 

Corn is trading in a range established by August 31st, with no bullish story to provide a way out, -1 ½ (Dec). South American weather is trending benign, with potential rain relief on tap for Brazil and Argentina’s forecast looking good. EIA Ethanol data released today for the week ending October 13th showed production up solidly over last week by 5.38%, and 2.10% over same week last year. Ethanol stocks were down slightly from last week by 0.20% but a whopping 12.80% higher than last year. Corn used for ethanol needs to pick up the weekly pace as it was announced at 104.75 million bushels, while usage of 105.041 million bushels needs to be achieved weekly to hit the overall yearly USDA estimate. Ethanol margins are still profitable, with IL and IA plants achieving around 10-15 cents/gallon profit. Midwest Senators met with EPA Head, Pruitt, and it appears that he is backing away from the idea of lowering the RFS mandate, which would be good news for ethanol.

 

Soybeans could not muster a rally, weighed down by U.S. harvest hedge pressure and South American planting, – ½ (Nov). Outside markets are mixed, with crude up and the Dollar down. Brazilian planting conditions are continuing to look more favorable with probable rains ahead. And, Brazilian farmers are looking to plant more bean acres, as domestic corn prices are so cheap. The market needs confirmation that the second half of U.S. soybean harvest will show lower yields, as a national yield of closer to a 47-48 bpa is likely necessary to spur market action. Harvest should make significant progress over the next few days and will be closely watched.

 

Wheat was looking for a story to stimulate buying without success. There has been some chatter about planting delays with HRW, with some speculating that Kansas and Oklahoma farmers are simply deciding not to grow wheat. Weather delays are partly to blame. The soft wheat growing areas are ahead of planting schedule. Russian wheat production estimates continue to get bumped up with IKAR the latest to up their prediction from 82.5-83.5 MMT to 83.2-83.7 MMT.  Look for the wheat complex to continue to be a follower of corn and beans. Chicago SRW -4 ¾, Kansas City HRW -5 ¼, Minneapolis HRS – ¾.

 

Live Cattle bounced back from yesterday’s loss, gaining +.675 (Dec). The Cattle on Feed report is due out on Friday with the following estimates: On Feed 104.6%, Placements 108%, and Marketings 102.6%. With the market overbought, look to see if speculative traders favor long liquidation with technical indicators pointing to sell.

 

Hogs corrected most of yesterday’s sell-off, +1.575 (Dec). On the minds of many is the big supply ahead and whether the market and exports will be able to absorb it. Of particular concern is the fact that China’s pork imports from Jan-Aug are down 8%. Hogs are overbought and looking like they have put a near-term top in place, only to fight off bearish pressure. Stay tuned

 

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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