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Closing Comments

 

Corn battled for another small win today, forging a modest gain of +2 ½ (Dec). Corn crop conditions were reported at 61% good/excellent, down 1% from last week, which is not unusual for this time of the year. Only 12% of the crop is considered mature (black-layered), 6% behind the norm. And, only 60% of the crop is dented, which is 14% behind last year. Some of the important growing states running behind are the Dakotas, IL, IA, MN and WI. Next week’s USDA report will be getting a lot of press. In exports, Mexico has been on a roll, as they booked another private sale of 253,300 MT of corn for the 2017/18 timeframe. The U.S. is holding an advantage over Brazil for Mexican business, due to favorable freight costs. Look for EIA ethanol numbers tomorrow due to the holiday shortened week.

 

Soybeans saw more gains as traders prepare for the USDA report next week, +2 ½ (Nov). Lower than expected soyoil yields and the potential effect on biodiesel brought a measure of support today. Macro factors were also lining up to help as the Dollar is down and crude oil is up. Soybeans are continuing to experience solid demand on the global scene, but this is dampened by the large supplies on hand. It is expected that August soy shipments will be the largest since February, according to AgResource. Crop conditions yesterday were seen at 61% good/excellent, holding steady from last week. While soybeans had favorable August growing conditions, there is a degree of concern over the cool and dry finish, and how this will affect plant maturity and yield. Multiple reports from farmers this year have indicated more two and three pod sets instead of four pods. But, until there is confirmation of a national yield below 47 bpa, it is hard to envision a break-out rally.

 

Wheat followed the other grains positive, as Minneapolis was able to get back on track, +14 ¾ (Dec). Chicago SRW ended +2 ¾, while Kansas City HRW finished +3 ¾ (Dec). Stats Canada released numbers today which showed all wheat stocks up to 6.86 MMT, well above expectations of 6.00 MMT. This is considered bearish and will weigh down the supply fundamentals even more. Spring wheat harvest is now 89% complete, which is 11% above the 5-year average. Australia’s crop continues to see a decline in output with dryness persisting in the east, as estimates are now for a yield of around 20 MMT vs. 35 MMT last year. U.S. wheat exports have been interrupted by the damage inflicted by Hurricane Harvey in Texas. The ports there export 25% of all U.S. wheat.

 

Live Cattle continues to battle big supplies looming in the 4th quarter but still managed to finish positive, +.275 (Oct). U.S. boxed beef values have been surging, as they were up $1.10 yesterday, closing at $192.45. This compares with $191.50 last week and is the highest cut-out since August 22nd. Will cash cattle be able to stabilize and find support around the $104-105 area? Long-term, the hopes of increased Chinese buying and a big drop in 1st quarter production are bullish to the market. The groundwork has been laid for demand to overpower supply in the future.  

 

Hogs have had a sharp retracement from their recent break in August, as February hogs gained back more than half of the drop by the end of the session yesterday. Today saw mixed results with October finishing, -.200, and the deferred months in the green. Average weights from IA and MN are up almost 3 lbs over last year, and supplies are large. This is thought to be the result of low corn prices and cool August temps. But, with increased capacity of hog plants, as a new plant opened yesterday in Sioux City with capacity for 10,000 head/day, increased supplies could be absorbed rather quickly.

 

In Other news, the EPA is considering banning the spraying of the herbicide dicamba after a pre-determined date next year, in response to the crop damage caused this year from drift into adjacent fields.

 

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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