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Closing Comments Corn and the rest of the grains remained unfazed by what some considered a “bullish” Report yesterday, -5 (Dec). The biggest eye-popping number was the 2018/19 world ending stocks for corn at 35 MMT lower than last year. Domestic stocks also got trimmed by 500 mbu. This, in spite of a small reduction in exports and domestic demand forecasted. Good planting conditions and trade pressures are continuing to win the day in the short-term. Mexico has indicated they will not be “rushed” into a bad NAFTA deal just to get it done. Funds decided to remove risk today, as the market was not able to leg higher post-Report. What will Mother Nature bring later this summer? All things the same, expect June crop conditions to be higher than last year. Soybeans need summer weather to provide an impetus to rally, -16 ¾ (Nov). A failure to respond positively to a bullish report could be viewed as a bearish development. Traders continued to liquidate length ahead of U.S.-Chinese negotiations next week in Washington D.C. The talks will likely be a lengthy process, and in the short-term the best news may be to “kick the can” down the road by the U.S. agreeing to delay imposing $50B in tariffs. This may cool things off a bit. There were no new export sales announcements this morning. And, the idea that more soybean acres may be planted due to delays up north is not helping matters. Wheat continued to see the addition of more short positions after the crop report showed wheat production on the high end of expectations. The size of the planting intentions is offsetting some of the poorer yields. The complex finished: Chicago SRW -7 ¾, Kansas City HRW -9 (July) and Minneapolis HRS -4 ½ (Sept). Winter wheat production was seen as less than last year (by 6%), at 1.2 bbu, with a 2 bushel/acre reduction from last year predicted. The level of the Dollar and the wide gap between U.S. and Russian pricing for HRW wheat ($.80), leaves the U.S. in a less-than-competitive position. Stats Canada released data showing all wheat stocks below expectations of 16.9 MMT at 16.392 MMT, and less than last year’s 17.06 MMT. Live Cattle saw the continued battle between large supplies and strong demand, trading both sides of unchanged, +.100 (June). A late session rally brought futures back to parity. Although demand has been strong enough to stave off the weight of supplies, are we now seeing a peak in futures? Hogs exhibited a strong move to the downside with a bearish engulfing bar on the chart, -2.225 (June). As with cattle, hogs have been battling the optimism of strong demand against weak supply factors. It is hard to see too much upside with the slaughter pace running 4.4% ahead of last year for the week. |
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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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