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Closing Comments

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Closing Comments

 

Corn finished the week down another several cents, -4 ½ (Dec). While there is not a lot of fresh news, there are several influential factors to watch: Trump and Pruitt confirming support for the current EPA biofuel mandate, expansion of U.S. harvest, positive South American weather forecasts, and a recent boost in exports. Corn sales were robust today as the USDA announced two private transactions – a sale of 125K MT of corn to “unknown” destination and a sale of 120K MT to Spain, both for 2017/2018. Brazil still has a price advantage over the U.S. to Asian destinations. Related to the EPA, Secretary Pruitt has also indicated an openness to consider allowing E15 gasoline to be sold year-around.

 

Soybeans limped into the weekend fighting against harvest hedge pressure, -7 ¾ (Nov). China was back at the grain counter today with a purchase of 198K MT of soybeans for 2017/18. On the minds of traders, is the long-awaited announcement by the U.S. Commerce Dept. related to the implementation of duties on Argentine biodiesel imports. What could this mean? It is estimated domestic soybean oil usage would increase by 400-500 million lbs – currently NOPA estimated that oil stocks as of September are 1.3 billion lbs. In other news, JCI estimates that China has purchased about 60% of its soybeans for November, 15% for December and less than 5% for Jan-Feb. This is behind last year’s pace, so look for plenty more purchases ahead of both U.S. and South American soybeans.

 

Wheat could not find an impetus to rally, in spite of Egyptian business in the market and a continued lowering of Australian crop prospects. The USDA estimates from an ag attaché for Australia are more in the 20 MMT yield range, which is 1.5 MMT lower than the USDA forecast on October 12th. This on the heels of last year’s record of 35 MMT. Egypt tendering for more wheat for the third week in a row is also supportive, considering their status as the world’s number one wheat importer. Informa released their latest 2018 U.S. all-wheat plantings estimate as unchanged at 45.88 million acres. Chicago SRW -6 ¾, Kansas City HRW -6 ½, Minneapolis HRS -6.

 

Live Cattle showed some indecision today, trading both sides of unchanged, +.450 (Dec). Look for Cattle on Feed results to be released this afternoon to set the direction for next week.  Cattle on Feed average estimates include: On Feed 104.7%, Placements 107.5% and Marketings 102.6%. Boxed beef values were up $2.31 yesterday to $199.57.

 

Hogs continued to move higher into new positive territory, +.600 (Dec). According to Hightower, until the trend in pork cutout turns down, the cash hog market should benefit from extra packer capacity and positive packer margins. On the flip side, a move lower in pork prices could spell a downtrend for Dec hogs, as Dec futures are currently trading at a premium to the cash market. The pork industry is closely watching NAFTA negotiations, as exports to Mexico are up 21% since August, and exports are key to demand being able to absorb increased supplies.

 

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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