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Closing Comments

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Closing Comments

 

Corn traded sideways to down, finishing –3 ¼ (Dec). Funds seem content to sit on their large short position heading into the USDA Report tomorrow. Corn harvest is running behind average, as yesterday’s progress report showed corn harvest 22% complete, compared to 37% complete on average. In daily exports, Mexico stepped up to the plate and purchased 150K MT of corn for 2017/18. This in conjunction with NAFTA negotiations that reconvened today through the weekend – may be a subtle reminder to the U.S. of how valuable they are as an Ag trading partner? Brazil weather continues to be a focus, as the market is monitoring the possibility of a developing La Nina pattern, and hot/dry conditions in Mato Grosso.

 

Soybeans gave it one last effort pre-report, finding support in daily export sales, but could not finish above water, – ¾ (Nov). The USDA reported two sales this morning – a private sale of 132K MT to “unknown” destination and a private sale of 264K MT to China for 2017/18. There is some chatter about China rejecting two Brazilian soybean cargoes for poor quality due to storage in silo bags that overheated. Will this influence their choice of destination? As with corn, South American weather is coming into focus, as traders are looking for new developments to spur action. If Brazil stays hot and dry and soybean planting is delayed, this could have a negative impact on S.A. double crop corn, changing the timing of its pollination window to the hottest time of the year. On the U.S. front, basis has started to stabilize, as the flow of river traffic is showing improvement.

 

Wheat is still battling the fallout from the bearish news of the Sept 29th crop report. Even if the report tomorrow is bullish corn or beans, wheat is likely to be a follower and has a good amount of overhead to account for that will mute rallies. If there is a surprise in store, look for it to be in U.S. ending stocks for 2017/18. On the farm, wheat is seen by the USDA as 48% planted compared to 58% average this time of year, with winter wheat 25% emerged vs. 30% normal. The U.S. continues to struggle to compete with Russia on the export front, as their exports through August were announced at 16.743 MMT vs. 13.967 MMT last year at this time. However on a positive note, Mexico booked a HRW sale this morning for 104,202 MT for 2017/18. SRW -2, HRW -3 and HRS +1

 

Live Cattle is struggling with short-term supply in the weeks ahead, –.275 (Dec). But, the market has found support in strong seasonal demand and solid slaughter margins. The outlook into the 1st quarter is more positive as supply will slow. In the meantime, keep any eye out for a short-term peak.

 

Hogs built off yesterday’s gains, +.950 (Dec). The market seems confident that demand will offset production in the near-term. Also giving support is firm cash as well as gains in pork values, including bellies. The market may be susceptible to selling when the cash market trends lower, as it is at a discount to futures, which is atypical for this time of year. To maintain current levels, the market will need to see a growth in export business.

 

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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