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Closing Comments

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Closing Comments

 

Corn futures pushed ahead, refusing to succumb to bearish yield estimates from the USDA, +3 ¾ (Dec). Good demand is helping to offset, with the USDA reporting weekly export sales up substantially for corn, at 1.6 MMT vs. estimates of 750K-1.0 MMT. Two-thirds of the total were sold to Mexico, with Japan, Korea and Latin America making up the balance. It was also announced by cash grain sources that South Korea’s KOCOPIA purchased 60K MT of U.S. origin corn. Look for corn to follow beans, as it lacks a bullish story of its own.

 

Soybeans built on post-report gains, also finding support in strong export sales, +8 ¼ (Nov). Managed funds added to their net long position in both beans and meal. USDA weekly export sales were above and beyond expectations, coming in at 1.747 MMT vs. estimates of 900K-1.25 MMT. Will the Chinese reward these prices with more buying or will South American farmers now be more apt to reward the rally? With the report now in the rearview mirror, attention will focus squarely on South American weather. This will determine whether funds continue to build a long position or whether the short-term rally dissipates.

 

Wheat was able to find support in corn and beans, as well as a weakening Dollar. The winter wheats made the biggest gains with Chicago +9 and KC +10. Minneapolis also posted positive gains at +3 ¾ (Dec). Wheat does not have a bullish story of its own, so expect rallies to be muted by the weight of heavy supplies. The weekly export log showed disappointing numbers for wheat, with a reported 175K MT compared to expectations in the range of 250-500K MT. Russian sourced wheat has proved to be a thorn in the side, as they have continued to dominate opportunities with Egypt and outbid the U.S. on a number of fronts. And, it appears Russia has been able to increase export capacity, now estimated at 34 MMT.

 

Live Cattle trended lower today, -.150 (Dec). Has a short-term correction of cattle’s overbought condition begun? Longer term, February should trend higher, with tighter supplies. It is predicted that 1st quarter production will drop a record 810 million lbs. from this quarter. As of the week of September 30th, beef production came in at 7.8% higher than a year ago, with average steer weights at 894 lbs, down from last year’s 904 lbs. Slaughter for that week was the highest since July of 2013.

 

Hogs were able to reverse course after yesterday’s negative action, +.575 (Dec). Like cattle, if hogs can thwart off selling pressure due to short-term supplies, the 1st quarter is expected to show a steep decline in production of 395 million lbs. Of note, China’s pig herd declined last month by 6.1% compared to the same time last year. This is significant and bears watching considering China is the largest global consumer of pork.

 

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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