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Midday Update

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Midday Update

* Grain and oilseed prices benefited from a surge in buying of the broader commodity indices this morning after an ADP Employment report showed that the private sector created 200K jobs in September, up from 186K the previous month and beating expectations of 190K jobs. The number suggests modest growth in the economy and raises the odds of an interest rate hike. Money flow slowed again after the initial reaction, but it was positive for corn and soybean charts.

* However, the primary focus this morning was on USDA’s quarterly stocks report. The numbers came in as follows:
U.S. Quarterly Stocks

2015-16

Wheat

Corn

Soybeans

billions of bushels

USDA September 30

2.089

1.731

0.191

Average Trade Estimate

2.149

1.739

0.205

Highest Trade Estimate

2.285

1.850

0.250

Lowest Trade Estimate

1.987

1.647

0.165

USDA Previous Year

1.907

1.232

0.092

Water Street Solutions

2.145

1.743

0.209

* The above was psychologically positive for soybeans and wheat, although we’re still not running out of wheat. However, we also saw the hard red winter wheat crop come in at 827 million bushels, down 29 million from expectations, while soft red winter came in at 359 million, down 24 million from expectations. Hard red spring wheat production came in at 599 million bushels, down 26 million from trade expectations.

* Crude oil stocks rose 4.0 million to 457.9 million barrels in the week ending September 25. Supplies remain near their highest level of the past 80 years for late September. Gasoline stocks increased 3.3 million barrels during the week and are near the upper limit of the typical range for this time of year. Distillate stocks (includes diesel) slipped by 0.3 million barrels and are in the middle of the typical range for this time of year.

* Ethanol stocks slipped to 18.8 million barrels in the week ending September 25, down from 18.9 million the previous week, but matching those seen in the same week last year. Ethanol production rose to 943K barrels per day during the week, up from 938K the previous week and up from 881K barrels per day in the same week last year.

* Russia is taking steps to reduce its export tariff for wheat by roughly 25 cents per bushel, making it more competitive into markets like Egypt. However, it is raising its intervention price to support local prices by roughly 44 cents per bushel.

* Corn futures are seeing the short end of some spread activity after the report, particularly after failing to test $3.95 this morning, and are currently down a penny, but I like this market.

* Soybean futures are up 8 cents on the friendly stocks data and good chart signals with support from the outside markets as well.

* Wheat futures are up 8 cents on the friendly production and stocks data and building on recent chart signals.

* October live cattle are down $3 again this morning, although expanded limits are in place. The supply of heavy cattle amid large imports and soft demand are a problem. Product prices are down again this morning, while movement is quite good.

* Feeder cattle are $0.20 to $1.40 lower on weakness in the fats and positive corn chart action.

* Lean hog futures are 25 to 90 cents higher on follow-through buying with good pork demand. Cash hogs are steady to $1 higher as packers try to pull hogs in to take advantage of good margins. Product movement is good at midday with firm prices.

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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or 1-866-249-2528

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Arlan Suderman | Senior Market Analyst
WATER STREET ADVISORY(r) | www.waterstreet.org
(316) 729-4599 | asuderman@waterstreet.org

Past performance is not indicative of future results. The information contained in this report is intended for informational purposes only and is the opinion of the writer and may change at any time. This information was compiled from sources believed to be reliable but accuracy cannot be and is not guaranteed. There is no warranty, expressed or implied, in regards to this information for any particular purpose. There is SIGNIFICANT RISK involved in trading futures and or options on futures and may not be suitable for all investors. Investors should consider these RISKS and evaluate their suitability based on their financial conditions. No one should ever consider trading futures or options on futures with anything other than RISK CAPITAL. This information is provided freely and is NOT in the capacity of a trading advisor. NO LIABILITY on the part of the author exists for any trading loss you may incur in the use of this information. Information provided is not to be construed as an offer to sell or solicitation to buy any commodity or security named herein.

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