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Midday Update

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Midday Update

* Grain and oilseed prices got a lift from the broader commodity indices this morning as those baskets of commodities gapped higher once again on the charts. That pushed grain and oilseed prices into areas seen as selling targets by both producers and speculators, leading to prices pulling back from their early highs.

* Additional weakness came when expectations for a bullish energy inventory report fell flat, yielding an increase in crude oil stocks that sent the energy sector well off its early session highs. Crude oil is a leading indicator for the broader commodity sector, leading the indices to erase early gains, and in some cases close chart gaps. The major commodity indices have erased early gains and remain under modest pressure as crude oil pulls back from 10-week highs. That added to pressure in the grain and oilseed pits but they continue to show some underlying support, particularly for soybeans, which ironically are expected to see a yield increase Friday.

* The Department of Energy reports that crude oil stocks rose 3.1 million to 461 million barrels in the week ending October 2. Those stocks are near levels not seen at this time of year for the past 80 years. Gasoline stocks increased 1.9 million barrels and are above the upper limit of the typical range for this time of year. Distillate stocks, which include diesel, fell by 2.5 million barrels and are in the middle of the typical range for this time of year.

* Ethanol stocks remained largely unchanged on the week at 18.8 million barrels in the week ending October 2, although those stocks were up slightly from 18.7 million in the same week last year. Ethanol production during the week rose to 950K barrels per day, up from 943K barrels the previous week and up from 901K barrels per day in the same week last year.

* Corn futures are 4 cents lower this morning after the December corn contract uncovered selling interest at $3.9975 this morning. The contract is now testing support in the $3.94 area, a level that was previously seen as an area of resistance.

* November soybeans are still a penny higher amid the selling pressure. The contract probed above trend line resistance that has held the market since this summer earlier today, but has not collapsed even though it fell back below that resistance. The trade expects a slight upward tweak in the yield Friday, but better than a 600K acre drop in harvested area.

* Wheat prices are 10 cents lower in Chicago, 8 cents lower in KC and 5 cents lower in MN. Kansas City continues to gain on Chicago, even as traders take profits on the recent price rise.

* Live cattle futures tripped preset buy stops this morning when they gapped higher in follow-through trading. October cattle are locked the $4.50 expanded limit higher, while December is trading $3.30 higher. Choice cuts finished the day Tuesday 20 cents higher; their first positive gains since September 9.

* Feeder cattle are $2.25 to $3.65 higher on strength in the fats, but with a bit less enthusiasm as the cash market remains soft.

* Lean hog futures are mixed to 50 cents weaker in profit taking. December lean hogs are mildly lower after profit taking kicked in this morning just below last week’s high of $67.60 per cwt.

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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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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