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Midday Update

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Midday Update

·         The most troubling development today was in the flow of outside money. There’s been considerable bearishness toward the broader commodity sector this week; the kind that one typically sees when the market is near a bottom. Some of the major commodity indices appeared to be preparing for a soft landing near multi-year lows on the charts. However, bearish global economic data early today reignited the selling frenzy in the broader commodity indices, pushing them to their lowest levels since 2009, triggering sell stops that accelerated losses and tipped the grain and oilseed markets sharply lower as well.

·         August options expire today, creating added volatility when prices approach strike prices with larger volumes of open interest. Strike prices of interest for spot corn are $4.00, $4.10 and $3.90; for Chicago wheat $5.20, $4.80 & $5.40; for soybeans $9.80, $9.30 & $10.00.

·         The recent break in prices triggered an increase in export demand for U.S. grain and oilseeds. USDA’s daily export reporting service today revealed that China bought another 8.1 million bushels of new-crop soybeans, while Mexico bought 9.1 million bushels of new-crop corn (2.5 million of this total is for the 2016 crop). Taiwan purchased 3.8 million bushels of wheat, while “unknown destinations” bought 4.6 million bushels of U.S. grain sorghum; evenly split between old- and new-crop supplies.

·         There’s been an increase in reports of uneven corn conditions coming in from the northwestern Midwest the past couple of days, not like the southern Midwest, but northwestern areas may not be as good as thought. Dryness is the big problem near-term, but crop scouts are also finding a lot of variation in the ears from field to field or even one part of the field to another in the region. Many of the dry areas should see relief starting this weekend, but we may need to dial back expectations for record yields in northwestern areas.

·         This week’s industry of the Canadian Prairies crop belt resulted in sharply lower production estimates. This year’s spring wheat yield estimate is 38.9 bushels per acre, down from last year’s estimate of 45.7 bushels. The durum crop is pegged at 27.8 bpa, versus last year’s estimate of 40.9. The canola crop is estimated to be 29.3 bpa, down from last year’s estimate of 34.4 bushels.

·         Corn futures are down 9 cents. Prices are firming a bit on bottom-picking after prices traded to $4.0225.

·         Soybeans are down 15 cents in the nearby and down 9 cents in November. The contract is recovering after probing below support at $9.70, which is a 50% retracement of the mid-summer rally.

·         Wheat futures are down 9 cents in Chicago and Kansas City and down 7 cents in Minneapolis with prices trying to carve out a broad low.

·         Live cattle futures are 25 to 50 cents lower today after the August contract probed to a new four-month low earlier on weaker cash trade and soft product prices.

·         Feeder cattle are down slightly in the August, but steady to 65 cents higher in the deferred contracts on the sell-off in corn prices.

·         Lean hog futures are steady to 50 cents weaker today as the lead August contract fails for the third time to sustain a probe through the 100-day moving average currently at $78.58 per cwt. Cash hogs are mostly steady across the Midwest today.

 

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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Arlan Suderman | Senior Market Analyst
WATER STREET ADVISORY® | www.waterstreet.org
(316) 729-4599 | asuderman@waterstreet.org

Past performance is not indicative of future results. The information contained in this report is intended for informational purposes only and is the opinion of the writer and may change at any time. This information was compiled from sources believed to be reliable but accuracy cannot be and is not guaranteed. There is no warranty, expressed or implied, in regards to this information for any particular purpose. There is SIGNIFICANT RISK involved in trading futures and or options on futures and may not be suitable for all investors. Investors should consider these RISKS and evaluate their suitability based on their financial conditions. No one should ever consider trading futures or options on futures with anything other than RISK CAPITAL. This information is provided freely and is NOT in the capacity of a trading advisor. NO LIABILITY on the part of the author exists for any trading loss you may incur in the use of this information. Information provided is not to be construed as an offer to sell or solicitation to buy any commodity or security named herein.

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