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Closing Comments


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Closing Comments


Corn finished with a whimper after trying to follow soybeans higher, – ¼ (Dec). Traders have placed their bets heading into the Thursday Report, as corn is held in a near record short position by managed funds. Adding support today was an announced private sale of 130K MT of corn to “unknown” destination. On the other hand, USDA weekly inspections were under expectations, coming in at 444,648 MT for the week ending November 2nd vs. estimates of 600K MT. With all the talk and speculation surrounding the Thursday USDA report, analysts are predicting corn yield to be raised to 172.4 bpa from 171.8 bpa and ending stocks up from 2.340 billion bushels to 2.360.


Soybeans poked through support on the chart before reversing course and regaining a good portion back of what was lost on Friday, +7 ¼ (Jan). Beans have several positive background stories including expectations that NASS will reduce soybean yield based on second half of harvest declines, China’s 2016/17 soybean imports being understated which could raise current crop by 1-2 MMT, and a portion of India’s soybean crop being lost to monsoons. Exports have not been great year-to-date though, as soybeans are down 9%, with the overall number behind growing. USDA weekly soybean inspections were right in line with projections, as they were pegged at 2.490 MMT compared to estimates of 2.500 MMT.


Wheat received a boost from a larger than expected U.S. sale to Iraq of 500K MT, Chicago +5 and KC +3 ¼. Wheat weekly inspections, however, were a bit lackluster at 284,293 MT compared to 350K MT expected. As with corn, managed funds hold a large short position in wheat at around 110K contracts, which could result in short-covering if the market were to be sparked in any significant way. There has been plenty of resistance to stifle rallies with the U.S. Dollar showing strength and huge production coming out of the Black Sea Region. Minneapolis broke positive and closed above the tight range it has been trading in the last month, +6 ¼ (Dec).


Live Cattle experience a correction and profit-taking from its recent sharp ascent on the charts, -1.975 (Dec). Managed funds hold a large net long position in cattle, as the market is in overbought territory. Can demand get even stronger ahead with fat packer margins and futures’ premium to cash? The beef cut-out continues to rise and is at its highest level since July 17th.


Hogs saw a continued decline in the Dec contract but the deferred months gained, -.475 (Dec). Like cattle, the market is overbought and managed funds hold a large net long position. Friday saw a jump in pork values and the CME Lean Hog Index gained 12 cents. Although the market is vulnerable to weakness and long liquidation selling, positive short-term forces are neutralizing negative factors. Keep an eye on the speculator and whether he maintains length.


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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