Closing Comments

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Closing Comments


Corn relented to the strong downward pull of beans and uncertainty as to whether NAFTA members can reach agreement by the deadline, -2 ¼ (Dec). Trade apprehension is dominating the minds of traders, and funds are not enthusiastic to increase net long positions until more negotiation details are known. EIA Ethanol reporting was a positive, as ethanol production for last week was up 1.73% over last week and 3.02% over last year. Ethanol stocks were down 2.09% vs last week and 8.15% vs last year. Corn used for ethanol was a whopping 110.26 mbu compared to the 102.678 mbu weekly average needed to achieve the USDA annual projection of 5.575 bbu. Corn is off to a good start with planting, but there are still concerns as private forecasters are saying it is the driest planting season since 1979 – “plant in the dust and your bins will bust”? States that are significantly short on soil moisture include GA, KS, OK, ND, MO, AR and IN – while MN, IA, WI and SD are experiencing planting delays. Will this tighten up the U.S. stocks outlook?


The entire soybean complex was under pressure today with meal and oil also sharing in the losses. November futures were -15 ¾. Once again there were no new daily sales announcement this morning, and U.S. bean offerings are higher than Brazil. This coupled with consternation over the trade situation with China, did nothing to appease mindsets. The market is waiting breathlessly for word from the talks in Washington between the two sides this week, as any news could swing market direction.  If agreement is not reached, the U.S. could move ahead with $50B in tariffs on the PRC, which would likely evoke a response that would not be good for beans. Informa gave soybean acres a boost, estimating them at 89.4 million vs the USDA’s current expectation of 89.0 million.


Wheat and corn are closely tied, and with corn down and weather favorable, wheat did not have much of a story to build on, although it was the lone grain to show gains. Chicago SRW + ¾, Kansas City HRW +4 ¼ (July) and Minneapolis HRS +5 ¾ (Sept). Weather in Australia continues to trend dry, while the Black Sea and U.S. Plains are becoming less of a concern. The U.S. Dollar is trading at 6-month highs, also putting a damper on rallies.


Live Cattle continued to stumble as traders seem to be siding with large supplies winning the battle, -1.150 (June). Opposite of hogs, cattle futures are at a deficit to the cash market. This may be a supportive factor, but the large numbers of cattle headed to the slaughterhouses are softening the market.


Hogs were supported by short-covering and seasonal fundamentals, +1.175 (June). The premium of futures over cash continues to loom over the market, as it is unusually high, and leaves the door open for futures to decline to fall into line with cash.

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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