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Closing Comments

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Closing Comments

Markets generally supported today on the weakness in the US dollar in light of today’s USDA stocks report that added 25 mln bu to the US corn carry-out.

Crude inventories decreased by 3.6 mln barrels from the previous week according to the EIA inventory report. While encouraging to see a reduction in inventories, the surplus continues to be above 80 year levels and fear of the OPEC continued production kept crude from holding on to its early day strength.

Sources cited by Bloomberg suggest DuPont and Dow Chemical are in late stage talks to merge. If the deal were to come to form, analysts say the merger would create the second largest chemical company – bested only by BASF. The combined companies would surpass Monsanto as the largest seed and pesticide company.

Weakness in the US dollar and strength in the euro brought a generally supportive tone to commodities as traders return to interest in owning the unified currency.

USDA announced they will release selected tables from its upcoming “Agricultural Projections to 2025 Report” on December 11th. The projections are used as a starting point the short-term projections from the Nov 15 WASDE report. The full 2025 report will be released in February.

Corn

Corn shrugs off another increase to the balance sheet from the USDA.

The USDA raised their estimated corn used for ethanol in today’s report by 25 mln bu based on the stronger-than-expected ethanol production pace. Unfortunately the reduction in anticipated corn exports for 15/16 were adjusted 50 mln bu lower, reflecting the slow pace of sales and shipments and higher expected exports for Brazil and Canada. Global corn production was lowered 1 mln tons from production drops in India and South Africa.

This week’s EIA weekly report showed ethanol recovering production this week by 11 mln gallons – up to 291.1 mln gallons. Ethanol stocks fell 10 mln bu on the better-than-expected demand.

China plans to bring forward annual corn sales despite the full domestic market and some warehouses may be forced to offload inferior corn – perhaps to the ethanol market – in an effort to make room for stockpiles.

Global biofuel producer Abengoa and its creditors are meeting today. At stake is roughly 350 mln gal/year of US ethanol capacity, and a like amount across Europe.

Last trade date for December contract is Monday.

Soybeans

Soybeans have a 15 cent trading range but finish where they started on a neutral USDA report.

USDA left the US supply and use projections unchanged for the 15/16 forecast from last month. Leaving the ending stocks at 465 mln bushels, which if realized would be the highest since 06/07. Global oilseed production was revised down 2 mln tons to 529 mln tons. Global soybean production is projected at 320.1 mln tons, down 0.9 – mostly off the reduction in the Indian soybean crop off rainfall issues and late-season heat.

The market is keeping an eye on the South American weather developments as the southern production region continues with above normal moisture and the northern and eastern 10 to 15 percent of the grain belt struggles to find rain relief to the hot/dry pattern. Forecast is for rains in the north, but recent outlooks have disappointed.

Technically, Jan soybeans were able to hold both above the trendline from October highs and above the 20 day moving average – leaving a perfect “doji day” after two days of lower prices.

Wheat

Wheat finds support on weakness in the US dollar and short covering.

No changes were made to the combined US balance sheet this month in wheat – however a 10 mln bu increase in HRW exports and a 10 mln bu decrease in HRS exports was made. Global wheat supplies for 15/16 were raised 2.3 mln tons – primarily from increases in Canadian wheat production. Total wheat consumption for 15/16 was estimated down 0.2 mln tons – driven by the decrease in EU wheat feeding which was mostly offset by increases in several other countries.

The recent story from the Black Sea seems to be getting sidelined for now as cooperative/mild weather has added the poor conditions. The Ukraine Ag Minister revised the area of winter crops that are in poor condition from 30 percent to 17 percent.

Livestock

Cattle put in new lows, again, as the market tries to clear out the supply while hogs continue their sideways to higher trade.

Cash sources report cattle trading lightly in Kansas at $119 per cwt, down $5 from last week’s trade. Tuesday afternoon boxed beef cutout values were higher on Choice and firm on Select. Choice was up 1.27 at 204.14 with Select up .37 to close at 190.73. Total estimated cattle slaughter for today was reported at 111,000.

For October, the US exported 410.25 mln pounds of pork, up 6.9 percent from last year. China was sluggish but South Korea picked up their pace from September.

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Closing Market Snapshot

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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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