Home Market Market Watch Closing Comments

Closing Comments

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Closing Comments

 

Corn was able to forge out small gains today, as traders are hesitant to take on too much risk heading into the weekend with uncertainty related to relations with Russia and China hanging over the markets, +1 ½ (Dec). USDA Weekly corn sales were slightly below expectations, pegged at 896K MT (both crop years) compared to the range of expectations of 1.0-1.6 MMT. Also, helping the mood of trade, is President Trump indicating that there will be no changes to biofuel policy and the RFS for several months. This delay is due to a desire to placate the American farmer who is already enduring indigestion over concerns of declining demand due to potential tariffs.

 

Soybeans led the way today as the world needs more soybeans, +7 (Nov). All the uncertainty around trade as well as geopolitical strife has not been able to hold down the market, as buying continues. Weekly export sales announced this morning were huge, at 2,464,500 MT, well above estimates ranging from 1.3-2.0 MMT. Buyers included “unknown”, China, Egypt, Mexico and Taiwan. The threat of trade war between the U.S. and China drove Brazilian values sky high, which brought other world buyers to the U.S. to pick up the slack. This has helped to neutralize fears of less sales to the PRC. Soybeans have built a very long net position at the CBOT, which makes them vulnerable to adverse news.

 

Wheat values declined, as the possibility of rain across the Plains and Midwest dampened enthusiasm. Kansas City HRW was hit the hardest, with 60% of the growing area expecting precipitation, -9 ¾ (July). KC filled the gap on the chart left from earlier in the week, while Chicago stayed above it. SRW was down –6 (July). Weekly sales were underwhelming today, as the USDA announced them at 188,700 MT, which was well off estimates of 250K-650K MT. The largest buyers of new crop Mexico and Honduras. The Russian Ruble is weak, achieving a 15-year low yesterday, which only makes it that much harder for the U.S. to compete for global sales. Minnesota HRS also gave up gains, -4 ¼ (Sept).

 

Live Cattle made a strong move to the topside today, as June finished +2.125. Looking at a choice cutout seasonal price trend, both the 5 and 10 year averages show a break through this week, followed by a strong seasonal rally during spring grilling season, according to AgResource. The longer term mid-summer view is still bearish based on large supplies ahead in the marketplace.

 

Hogs continued their rally from the low on April 4th, as June showed solid gains +1.475. Has the market gone up to far too fast based on fundamentals of large supplies? The seasonal trends would support a cash rally over the next few weeks. Of concern is the very large premium of the June contract over April, as April goes off the board. The premium is hard to justify, and April’s expiration will leave a large continuation gap to the next spot May contract.

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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