Home Market Market Watch Closing Comments

Closing Comments

SHARE

http://www.hoosieragtoday.com//wp-content/uploads//2015/08/image00947.jpg

Closing Comments

Corn

Corn continues to garner cautious strength from the crop tour, even as it sees its best fields.

China’s main stock index tumbled another 3.4% overnight, adding to global economic concerns. That weighed on U.S. equities, with losses near 300 points for the Dow Jones Industrial Average late in the grain trading day. The dollar broke to nearly six-week lows on ideas the Fed will not be able to raise interest rates next month, sending some of that equity money into the broader commodity indices. That helped amplify gains in the grain and oilseed markets, which found modest buying interest of their own today.

Corn futures continue to creep higher following last week’s USDA collapse. Buying is limited by fears that USDA’s big crop projection may be correct, but end users and some speculators see good value at current levels. The fourth day of the Pro Farmer crop tour found good corn in Iowa and southern Minnesota today, but again it was not overly exceptional and had more variability than some on the tour anticipated. That raises doubts about its ability to offset losses in eastern areas.

Satellite imagery that measures photosynthetic activity suggest significant reductions in crop health over the past couple of weeks across the Midwest as crops run short on nitrogen and stock health begins to deteriorate. The imagery particularly shows problem areas matching up well with those regions that were excessively wet in the first half of the growing season.

Exporters sold 33.8 million bushels of corn in the week ending August 13, including 11.1 million old-crop bushels. The old-crop sales were up from a mere 1.1 million bushels sold the previous week and were up from the five-year average for the week of 8.7 million bushels. Sales typically tale off in August, with the marketing year ending on August 31.

Marketing year sales to all destinations total 1.868 billion bushels, down 49 million or 3% from the previous year. Sales to date fall short of the seasonal pace needed to reach USDA’s target by August 31 by 31 million bushels, matching the previous week’s deficit.

Exporters sold 2.2 million bushels of grain sorghum in the week, with all of it being new-crop. The five-year average pace for grain sorghum sales in the week is 0.9 million bushels. “Unknown destinations bought 0.3 million bushels of old-crop grain sorghum, while China reduced previous purchases by the same amount. Chinese end users bought all 2.2 million bushels of new-crop grain sorghum listed for the week.

Marketing year grain sorghum sales to all destinations total 335 million bushels, up 137 million or 70% from the previous year. Exporters typically sell 87% of final grain sorghum shipments by this point in the year, whereas they had sold 94% by this point last year. However, this year they have already sold 96% of USDA’s target. As such, sales to date exceed the seasonal pace needed to reach USDA’s target by August 31 by 32 million bushels, but that is down from 34 million the previous week.

December corn is now 25 cents off its August 12 post-USDA low. I expect support at $3.65 to hold, but wouldn’t be surprised if we see prices pull back some in the days ahead as the market runs out of fodder to feed the bull ahead of harvest. Longer-term, we see good odds of higher prices with harvest results disappointing as we move into September.

Soybeans

Soybeans see big gains on bargain-hunter buying after setting new contract lows.

Exporters sold 30.5 million bushels of soybeans in the week ending August 13, including 1.7 million old-crop bushels. The old-crop sales were down from 3.5 million bushels sold the previous week and were down from the five-year average for the week of 3.5 million bushels. China reduced previous purchases of old-crop soybeans by 2.4 million bushels, while buying 15.7 million new-crop bushels during the week.

Marketing year sales to all destinations total 1.865 billion bushels, up 172 million or 10% from the previous year’s pace. Sales to date fall short of the seasonal pace needed to reach USDA’s target by August 31 by 8 million bushels, versus being short by 5 million bushels the previous week.

One of the keys to soybeans is to also monitor soymeal demand. Exporters sold 62.8K metric tons of old-crop soymeal in the week ending August 13, up from 57.1K tons the previous week, but down from the five-year average for the week of 91.5K tons. Actual shipments during the week totaled 178.2K metric tons, down from a robust 211.4K tons the previous week, but above the five-year average for the week of 111.5K tons.

November soybeans hit a new contract low of $8.88 overnight, but that’s when buying emerged to lift the contract to double-digit gains. Soybeans are a good value at $9 amid the ongoing uncertainty about the size of the crop, particularly amid expectations that acreage will be adjusted downward in future USDA reports. Sustaining the rally will likely be difficult until the combines run and/or we see significant outbreak of disease, but such is not the case this week.

The Pro Farmer tour continues to report some good pod counts for soybeans, but they are also reporting a fair amount of variability as well. The data is not convincing of a big crop at this point, particularly since tour participants bypassed some of the poorest portions of the belt.

Wheat

Wheat futures bounce on weaker dollar after chart support holds.

Exporters sold 11.6 million bushels of wheat in the week ending August 13, down from 15.5 million bushels sold the previous week and down from the five-year average for the week of 22.5 million bushels. Hard red winter wheat sales totaled just 3.6 million bushels during the week, while soft red winter wheat was even worse at just 1.1 million bushels. Hard red spring wheat sales had been topping 9 million bushels per week, but they fell to just 4.1 million bushels in the latest week reported.

Marketing year sales total 340 million bushels, down 59 million or 15% from the previous year. Exporters typically sell 40% of final wheat shipments through the first 11 weeks of the marketing year, whereas they had sold 47% the previous year. However, this year they have sold just 37% of USDA’s target thus far. As such, sales to date fall short of the seasonal pace needed to reach USDA’s target by May 31 by 27 million bushels, versus being short by 19 million the previous week.

Kansas City and Minneapolis September wheat held contract lows when tested on Wednesday (Minneapolis actually probed slightly below it before bouncing), while Chicago September wheat held support at $4.90. All three markets began to bounce off those areas of support late Wednesday when the Fed released the minutes of its last meeting suggesting that a rate hike would be delayed. That created a sharp break in the dollar, which extended its losses to nearly six-week lows today. The softer wheat supported continued strength in the wheat market that had technical reasons of its own to bounce.

Even so, demand for wheat remains soft. Wheat typically adds some risk premium as we head into the fall, but the need for such is much less this year amid large supplies. As such, wheat continues to need help from the outside markets. The weaker dollar and firmer corn certainly helped encourage short-covering and bottom-picking today.

Beef

Cattle futures bounce following Wednesday’s sharp losses, but cash market still disappoints.

Exporters sold just 8.3K metric tons of beef in the week ending August 13 as the strong dollar continues to be a problem. The week’s total was down from 12.3K tons sold the previous week, but was up from a dismal 7.3K tons sold in the same week last year. Actual shipments during the week totaled 9.9K metric tons, down from 10.4K tons the previous week and down from 13.5K tons in the same week last year.

Choice cuts are still trending higher, but Select cuts are feeling the pressure of big imports and demand is expected to wane once retailers finish stocking up for the Labor Day grilling weekend. A larger showlist made feeders nervous in the northern belt, leading them to become active sellers in Nebraska and Iowa late Wednesday at mostly $145 to $149 per cwt, down from $150 to $151 per cwt on a live basis the previous day. Trading in Kansas and Texas remains on hold, with bids and asks spread between $146 and $150 per cwt.

Today’s kill is pegged at 107,000 head of cattle, down 2,000 head from the previous week and down 9,000 head from the previous year. Week-to-date kill is pegged at 429,000 head, matching the previous week, but down 27,000 head from the same period last year.

Boxed beef movement on the spot daily market continues to be good this week, with volume rising to 157 loads Wednesday, up from 141 loads the previous day and up from 137 loads the previous week. Choice cuts were up $1.70 to $246.78 per cwt, while Select cuts were up $0.19 to $236.44 per cwt. That pushed the Choice/Select spread to a 2-1/2 month high of $10.34 per cwt, up from $8.83 the previous day and up from $8.57 from the previous week. Movement at mid-morning today was very slow at 57 loads, with Choice cuts up another $0.87, while Select cuts were down $0.53 per cwt.

Live cattle futures posted a nice bounce today, after trading sharply lower on Wednesday on disappointing cash trade. The strength was a bit surprising considering the huge sell-off in the equity markets on economic concerns. Yet, it wasn’t surprising considering the big losses from Wednesday and the discount to the cash market. Even so, downside price risk remains the larger concern near-term.

Feeder cattle futures remained under pressure. Traders are not convinced that fat cattle will be able to sustain today’s strength, while the worry that corn will not be able to stay at these low levels. As such, September feeders Traded down to $205.50 per cwt before bouncing, which was just a dime above the July 27 low. Today’s 7-day cash index came in at $215.97 per cwt, down $0.75 on the day and down $0.71 on the week.

Pork

Early rally attempts fail in the lean hog futures market.

Exporters sold a solid 20.7K metric tons of pork in the week ending August 13, up from 16.4K tons the previous week, but down from 24.4K tons sold in the same week last year. Actual shipments during the week totaled 15.6K metric tons, down from 17.0K tons the previous week, but matching the pace seen in the same week last year.

Demand is decent enough for pork, but supply seems to be even bigger. The composite pork product price reached 2015 highs earlier this month, but it is now beginning to trend lower as packers pull hogs forward on strong margins, while producers deliver on fears of weaker prices down the road.

Today’s kill is estimated at 427,000 head of hogs, matching the previous week, but up 21,000 from the previous year. Week-to-date slaughter is pegged at 1.688 million head of hogs, down 13,000 from the previous week, but up 60,000 head from the same period last year.

The cash hog market was mostly steady across the Midwest, although Illinois was steady to 50 cents weaker. Today’s 2-day cash index came in at $78.93 per cwt, up $0.13 on the day, up $0.48 over the past four consecutive days and up $0.26 over the past week.

Product movement rose to 465 loads Wednesday, up from a strong 409 loads the previous day and up from 376 loads the previous week. The composite pork product price fell to $88.27 per cwt, down $1.85 from the previous day and down $1.81 over the past week. Movement at midday today was routine at best at 188 loads, while the composite price was down another $1.16 to $87.11 per cwt.

October lean hogs tried to go higher this morning, but couldn’t take out modest chart resistance and turned lower on fears of burgeoning supplies. Futures contracts already are trading at a big discount to the cash, but rallies have been difficult to sustain amid fears of expanding production if the corn crop is as big as USDA indicates.

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.

http://www.hoosieragtoday.com//wp-content/uploads//2015/08/image01047.jpg

http://www.hoosieragtoday.com//wp-content/uploads//2015/08/image01147.jpg

http://www.hoosieragtoday.com//wp-content/uploads//2015/08/image01247.png

www.waterstreet.org 
or 1-866-249-2528

 

 

http://www.waterstreet.org/s/ws-80x70.png

Arlan Suderman | Senior Market Analyst
WATER STREET ADVISORY® | 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.

The information contained in this e-mail message is intended only for the personal and confidential use of the recipient(s) named above. This message may be an attorney-client communication and/or work product and as such is privileged and confidential. If the reader of this message is not the intended recipient or an agent responsible for delivering it to the intended recipient, you are hereby notified that you have received this document in error and that any review, dissemination, distribution, or copying of this message is strictly prohibited. If you have received this communication in error, please notify us immediately by e-mail, and delete the original message. Water Street Solutions is an equal opportunity provider. Water Street Solutions is an equal opportunity employer.