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Closing Comments

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Closing Comments

 

December corn finished the day in the middle of its trading range, off 1 ¾ as corn continues its now two month consolidation trade. USDA reported private sale of 132,000 mt of corn sold to Spain for the 17/18 MY. Expectations are for revisions lower to the Ukraine corn crop coming in and there are suggestions of Russia being overstated as well. Large fund net short position continues to provide support but good yields and prolonged harvest is keeping any rally in check for now. For the week, December corn gained 4 ¼ cents but couldn’t hold onto strength the first half which was kicked off by a key reversal for higher on the daily chart. December needs to prove it can close above Wednesday’s swing high of 355 ¼ to start a ‘higher high’ mode.

 

November soybeans finished the day near their high, up 4 cents, as it tried to carve out some support amid the option expiration and nearing first notice day for the contract. In South America, The expectation is a wetter Parana in south Brazil – creating some delays in wheat harvest – while there looks to be good moisture outlook for central Brazil.  USDA reported private sale of 238,000 mt of soybeans sold to China for the 17/18 MY. Brazil continues to carve out their share of the Chinese export market with the recent strength of the dollar helping their position. China has plenty to get for Nov but the ample supply situation and so-far uneventful South American headlines is keeping a lid on the market. Soybean futures will need to prove they can garner support here or risk breaking down and out of the trading channel. Nov lost 3 ½ cents on the week.

 

Hard to believe, but for the week the wheat complex printed green (barely). Chicago added 1 ¼, KC up 2 ½ and Minneapolis tacked on 5 ¾. Unfortunately the last half of the week gave up most of the early gains. Hard wheat cash bids are beginning to firm up, which should provide some support to futures while the expectation for export business is hopeful. That said, the strength in the dollar adds a headwind to the already insecure, over-supplied market. EU reported their 17/18 soft wheat production will be 141.5 MMT, up from the 140.4 MMT estimate and above the 16/17 production of 133.7 MMT. This bumped their ending stocks estimate up 1.1 MMT. Downside in the wheat markets should be limited from here, with upside objectives in front month winter wheats in the 4.70 to 4.90 area.

 

Cattle where higher again today with the higher Oct futures suggesting supportive cash trade and continuing to push shorts out of December. The relationship between Oct and Dec suggests the market is counting on big demand to show up to address the big supply. Beef responds well to rallies in the stock market and consumer sentiment (consumers are very optimistic going in to this holiday shopping season) but the stronger dollar may slow export demand. The market is getting a bit overbought, but a put toward 123 next week in Dec futures can’t be ruled out.

 

While the hog market continues its counter-seasonal uptrend, the December contract seems to be running short on energy. Strong pork values have continued to help cash hogs and bringing speculative buyers into the futures. Feb closed lower for the day but up 1.150 for the week, looking poised for a run toward 72.500 if it can take out Thursday’s high.

 

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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