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Closing Comments

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Closing Comments

 

Corn was not able to muster a gain after yesterday’s short-covering, -1 ¾ (Dec). The EIA Ethanol weekly report this morning was supportive to corn, as it showed production up unexpectedly to 1.039 million barrels/day from 1.019 million last week, the highest level in six weeks. It was also 4.8% higher than the same timeframe last year. Ethanol stocks declined from 902 million gallons last week to 883 million gallons, a positive development but in line with recent levels and well above last year by 5.6%. Corn used for ethanol is on track to meet the USDA’s annual projection. South American weather is staying on track with a normal pattern, and it will be awhile before any impact on safrinha corn acres planted is known, due to delays with first crop soy plantings.

 

Soybeans started off sharply up in the overnight but was not able to sustain the rally, closing virtually on the 200-bar moving average, Even (Nov). There is not much of a demand story this week to cause any substantial move. Today offered no new export sales to report. However, sales of late have been brisk. Currently the U.S. is holding a $15-16/MT discount to Brazil off the PNW, and the U.S. Gulf is also competitive. Soybean oil showed indecision in its rally, finishing slightly negative. However, recent EPA RFS news and anti-dumping tariffs on biodiesel imports into the U.S. are supportive to oil. If soybeans can find a way out of this range, corn is likely to come along for the ride.

 

Wheat finished mixed, with the higher quality HRS +2, and the winter wheats down with Chicago SRW –2 ½ and Kansas City HRW – ½. It is thought that there could be a fairly significant reduction in wheat acres planted, with bean acres expected to increase next season across the Midwest, due to economic concerns in this tight profitability environment. There are a variety of other global issues, with Russia possibly planting less hectares than last year due to poor conditions, Brazil’s excessive rainfall in the southern part of the country causing them to look outside of Argentina for their needs, and South Africa also down due to dryness. For now, stocks are plenteous and wheat will continue to be a follower of the other grains.

 

Live Cattle could not maintain yesterday’s torrid pace, with some profit-taking today, -.450 (Dec). The market was surprised by cattle’s bullish reaction to what seemed to be a bearish Cattle on Feed report. While short-term supplies are burdensome, the market appears to be looking forward to a promising 1st quarter next year, with sharply reduced production projected.

 

Hogs do not seem willingly to succumb to weighty short-term fundamentals, as they carved out another gain, +.450 (Dec). The Dec contract is trading well above the 100 and 200-bar moving averages and the cash index has continued to trend positive. Continued strong export demand is the key the sustaining current levels.

 

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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