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Closing Comments

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Closing Comments

 

Corn trended down as fund bears added to short positions, -3 (Dec). While yields are coming in better than expectations, the risk from winter storms with high winds in the upper Midwest and corn drying down too quickly in the field may have a neutralizing effect. Yesterday’s weekly harvest progress report showed corn across the halfway point at 54% completed, but still well off the 10-year average pace of 67%. Managed funds are now pushing 200K contracts short, which leaves them somewhat vulnerable if a story were to materialize. However, it is hard to envision a scenario that changes the overall backdrop of burgeoning global supplies, record high South American shipments and struggling U.S. export sales, undersold U.S. farmers, and the feeling corn stocks will only increase on upcoming USDA reports.

 

Soybeans traded slightly higher as yield reports are lending some uncertainty leading into the USDA report next week, +1 (Nov). Late yield reports and protein levels are down compared to farmer expectations and last year. The trickle-down effect could show up in soymeal being light on protein at the crushing facilities. Limited protein levels could also have a negative impact on the attractiveness of the U.S. product compared to the competition. The U.S. will be vying with Brazil for estimated bean sales to China of 1 MMT in November and 5 MMT in December to cover the PRC’s needs. Harvest is moving along at a steady clip, as crop progress showed 83% complete, ahead of the 10-year average of 81% year-to-date.

 

Wheat did not get a great crop conditions report, as winter wheat’s first rating was 52% good/excellent compared to 58% last year and the 10-year average of 54%. The all-time low was 40% good/excellent in 2012. Wheat got on the board with a sale of 100K MT of HRW wheat to Iraq for 2017/18 this morning, but are lagging the USDA’s projections. In global news, Russia’s Ag Minister said that their exports are up 21% since July 1st over last year, and October hit a new record of 4.0M MT. This is weighing heavily on the market. Argentina on the other hand expects their exports to be down 2.2M MT to 10.8M MT due to poor growing conditions with too much rain. Chicago SRW -6 ¼, Kansas City HRW –5 ¼ and Minneapolis HRS –5 ¾ (Dec).

 

Cattle took up where they left off yesterday after establishing a new contract high. Short-term the trend is positive, but the market is overbought which warrants caution. Cash prices are up but so are beef values, which is helping support packer margins. Slaughter numbers exceeded last week and last year, estimated at 116,000 head yesterday. Dec Cattle +2.225

 

Hogs are seeing a strong advance in the cash market leading the futures market higher, according to Hightower. Buying and speculation is at a fever pitch. Weekly slaughter and pork values are both up. Will the very large November supply temper enthusiasm and lower the pork cut-out? Weekly hog slaughter is up 4.9% over last year. Dec Hogs +2.825

 

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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