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Closing Comments

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Closing Comments

 

Corn found support in positive export news, +3 ¼ at 3.58 ½ (Dec). The USDA reported a private sale of 143,650 MT to Mexico for 2017/18. This is welcome news, as NAFTA renegotiations continue with our important North American trading partners. USDA weekly inspections were above expectations, as they were announced at 797,555 MT vs. estimates of 750K MT. Brazil reported record exports for the month of August at 5.2 MMT compared to 2.5 MMT last year. Demand is a strong, underlying support to the market as the battle of supply vs. demand continues. It may boil down to populations this year – are populations well under where they were a year ago when record yields were experienced? With many farmers in some of the best growing areas feeling that they are 10-20% short of last year, it is hard to visualize the USDA’s number of 169.5 bpa coming to fruition. Next week will feature a USDA Crop Production and Supply & Demand report, and traders are positioning themselves cautiously. Managed money is estimated 64,900 contracts net short in corn through Tuesday (according to the COT), with expected net buying for the balance of the week.

 

Soybeans came out of the gates post-Labor Day with enthusiasm, +19 at 9.68 ½ (Nov). The corn belt is forecasted to stay dry and cool to finish the growing season, which is not ideal for beans reaching maturity. However, there will be a good crop due to August weather and more acres planted this year. Demand has continued to be a key driver, as it battles with supply for the upper hand. USDA weekly soybean inspections were right in line with estimates, as they were pegged at 644,909 MT vs. expectations of 650K MT. Adding to optimism post-holiday was the announcement of a private sale to China of 136K MT of soybeans for 2017/18. Traders are concerned that our trading does not see any interruptions due to posturing with China over North Korea, etc.

 

Winter Wheat drafted off the other grains for a nice gain, as Chicago finished +4 ¼ at 4.43 (Dec) and Kansas City +6 ¼.  Minneapolis HRS was alone in the losing column, with more long liquidation at -3 ¼. While there is not much fresh news, it is likely the bearish news has already been baked into the market. Wheat was well below projections on the weekly inspection logs, as the USDA announced 252,465 MT for the week ending August 31st, compared to expectations of 550K MT. The Commitment of Traders showed managed money short around 77,500 contracts, which may be providing support, as funds balance positions ahead of the USDA report next week.

 

Live Cattle traded on both sides before backing off for a loss, -.725 at 104.425 (Oct). Seasonally, it is expected that price trends will stay steady to lower into mid-October. Slaughter has backed off from last week and there is plenty of supply, but exports have been impressive.

 

In Hogs,  traders are anticipating the opening of new slaughter plants this week, and the market reflected bullish sentiment, +2.300 (Oct). The CME Lean Hog Index has continued to fall, down 1.07 to 73.520 as of August 30th.  The October contract is now within 10, at 63.750.

 

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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