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Closing Comments

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Closing Comments

 

Corn was able to rise up off of the new lows made Friday with fund short-covering and support from wheat, +6 ¾ (Dec). USDA weekly inspections were a bit under expectations of 650K MT, as the USDA pegged corn at 614,075 for the week ending October 19th. The EPA is providing some positive influence to the market by confirming the RFS mandate will not be scaled back, with the point of obligation unchanged and possibly expanding E15 gasoline blends to year around. Iowa Senators Ernst and Grassley were instrumental in applying pressure in support of the RFS. Look for interior U.S. basis to improve as river levels are at better levels and corn harvest is reaching to surpass the 50% mark this week.

 

Soybeans found support in wheat, corn and a positive soybean oil story, +2 (Nov). There is a measure of relief on the biofuel front, as both Trump and Pruitt indicated the Renewable Fuels Standards will remain the status quo. This in conjunction with duties being imposed on Argentine imported biofuels to the U.S. in the near future, are leaning soybean oil friendly. Weekly inspections did not disappoint, as the USDA showed soybeans at a whopping 2,562,444 MT vs. estimates of 1.650 MMT. The shift in focus will be squarely to South American weather, which at the present does not seem threatening. Keep an eye on weak La Nina events which are starting to materialize for an early winter arrival.

 

Wheat provided a boost to the entire grain complex today, with all three classes showing solid gains – Chicago +10 ¾, Kansas City +10 ¾ and Minneapolis +3 ¾ (Dec). Fund short-covering was the fare of the day. Chicago and KC had both been down near contract lows before rebounding today. Weekly inspections were well under USDA estimates of 400K MT, coming in at 169,750 MT.

 

Live Cattle came out of the gates down due to the Report, but quickly reversed course for a gain, +.150 (Dec). The Cattle on Feed Report on Friday was considered bearish, as Placements were up 13% year over year compared to 8% expected, which equates to about 113,000 head. Low cattle weights in dressed steer and heifers have influenced the marketing pace this year. And, there does not appear to be a backlog of market ready cattle, according to the CME Daily Livestock Report. On Feed and Marketings were in line with expectations. Demand has been significantly stronger the past six months than the same timeframe last year.

 

Hogs had a setback to start the week, -1.325 (Dec). Demand is the key, and any interruption could send the market in a downward trajectory. So far, the cash market has remained strong and the added slaughter capacity has added a positive boost this month. Keep an eye on NAFTA and other trade negotiations/agreements as the hog market is very dependent on sales to Mexico and South Korea.

 

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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