Water Street Solutions
Water Street Solutions Daily Report 8.28.14
2014-08-28T02:28


Corn

December corn continued to fail attempts to rally through the 20-day average at $3.69 throughout the day, but finally achieved the objective in the final minutes of trade. That, along with the increased Ukraine risk, could provide more support going into the three-day weekend amid a lack of harvest results from the Midwest yet. However, there’s little sense that market sentiment has changed.

Soybeans

November bounced off recent lows, garnering strength from strong export demand, moving 5 cents higher on the day. However, the overall tone remains bearish, with traders sensing that Sudden Death Syndrome will not be a big enough problem to offset the large supplies coming.

Wheat

Wheat quickly rallied to double-digit gains this morning on escalation of the war in Ukraine as Russian troops and tanks pour across the border. The risk of exports being significantly impacted for a long period of time remains low, but traders still wanted to add risk premium ahead of a three-day holiday weekend just in case. Chicago and Kansas City managed to rally to three-week highs, but then prices pulled well off those highs late in the session as day traders took profits. This suggests a lack of conviction at this time of the Ukraine story being a long-term bullish factor for the wheat market.

Beef

October live cattle surged to their highest level in more than two weeks today. The rally managed to top the 20-day moving average at $149.75, but fell short of the 40- and 50-day moving averages, at 152.67 and $152.72 respectively. Traders need to see resurgent strength in the cash market into next month to change current sentiment that believes that current strength is merely temporary until larger supplies hit the market next month.

 Pork

October lean hogs traded largely within the previous day’s trading range, with traders not willing to push above the 200-day moving average, currently at $97.24. The cash market has nearly closed the gap with the October contract, removing reasons for pushing the contract higher at a time when the cash index continues to slide lower.
 

Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.
 

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.

 

 
Water Street Solutions Daily Report 8.27.14
2014-08-27T03:22


Corn

Both September and December corn ended the day unchanged, with March and May both down ¼-cent. December corn hit sell stops below support at $3.65 Tuesday, but traders were reluctant to test support at $3.60 or the contract low at $3.58 ahead of a three-day holiday weekend before seeing more harvest results. That provided support for the market, but resistance was at that $3.65 level that had been support previously. The pattern in high-yielding years is for prices to break lower again after harvest results start to confirm the larger kernel size and high yields.  

Soybeans

Tight supplies of soymeal, and old-crop soybeans needed to make it, supported the September contracts of those markets once again. Prices had simply fallen too far too fast. Yes, new-crop supplies are making their way north and a few old-crop bushels are being uncovered, but not enough to meet demand in all locations. That’s created a wild basis market, with futures bouncing back to reflect that. Meanwhile, the November and beyond contracts reflected big crop expectations. The contract held above Tuesday’s low, but the charts remain bearish, suggesting lower lows in the days and weeks ahead unless the SDS problem turns out to be much larger than currently perceived.

Wheat

Ukraine’s military reported today that Russian troops and armored vehicles were occupying a town in eastern portions of that country. That was enough to stimulate support for wheat prices overnight when European traders were dominant, but U.S. traders weren’t buying the fear factor. Overnight gains quickly evaporated, sending prices lower once again. That selling was insufficient to test the previous day’s low in Chicago and Kansas City. However, harvest selling managed to push prices much lower in Minneapolis. Overall, it’s likely going to be difficult to sustain strength in the wheat market if corn is eroding lower.

Beef

The beef complex traded weaker for much of today’s session, with traders taking profits following recent gains, not willing to press chart signals further without greater fundamental support. The trade believes that packers have control over a greater portion of the supply as we move through September and October, limiting upside price risk. USDA data suggests that the packers have150, 000 more cattle contracted for the next two months than during the same period last year.  

Pork

October lean hogs rallied just shy of the 200-day moving average, currently at $97.168, before pulling back today. It’s yet to be seen whether buying enthusiasm will be sufficient to push above this indicator, especially with the cash market still working lower. However, traders are currently reluctant to push prices to new lows until they know more about the supply of slaughter-ready hogs next month.

Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.

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.

 

 
Water Street Solutions Daily Report 8.26.14
2014-08-26T02:12


Corn

December corn dropped to $3.6175 today, hitting sell stops below $3.65. However, it remains above its contract low of $3.58 set on USDA report day earlier this month. Prices firmed into the close, suggesting a reluctance to push another leg lower at this point, but rallies have been very difficult to sustain as well. USDA reports that 83% of the U.S. corn crop had reached the dough stage by August 24, up from 70% the previous week and above the five-year average for the week of 78%. Most concerning has been maturity delays in North Dakota, but it is beginning to close the gap. North Dakota was 57% in the dough stage as of August 24, down from the five-year average for the week of 61%.  

Soybeans

It was a wild day in the soybean futures pit today. November soybeans dropped to a new contract low of $10.1975 on big crop ideas, but then firmed again as the lead September contract plummeted and spread were unwound. That left November with a 1-1/4-cent loss on the day, but September settled 50-1/4 cents lower and just 2 cents off its low. Some took courage from the late-day firming of the deferred contracts, but there is nothing bullish about the charts.

Wheat

Wheat prices were under pressure most of the session, with traders focused on sinking corn prices and “adequate” wheat supplies around the world. Minneapolis was under the greatest pressure due to harvest selling. Prices firmed late in the day on speculative short covering regarding rising tensions in Ukraine, but sustaining this strength is expected to be difficult without something more substantial to threaten supplies. 

Beef

Live cattle futures posted a healthy bounce today as the market consolidated above chart support. Last week’s cash trade firmed through the week, suggesting that we could see steady to firm cash action this week. However, next week’s slaughter schedule will be shortened for the Labor Day holiday, with packers also expected to have greater control over the supply via contracts starting with September deliveries.

Pork

Cash hogs were mostly steady to $2 lower today as packers buy for a holiday-shortened week next week. The latest CME 2-day lean hog index was down another $1.67 to $103.32 per cwt. The index has been lower on 27 consecutive trading days, with losses over that period totaling $30.85 per cwt. Producers are panicked about even lower prices, pulling hogs forward to get them sold, leaving packers content to allow the market to come to them.

Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.

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.

 

 
Water Street Solutions Daily Report 8.25.14
2014-08-25T01:38


Corn

Corn traded lower in the overnight with follow through selling continuing in the day session as weekend rains exceeded expectations in some of the driest areas of the Corn Belt. Specifically NE Iowa and Northern Illinois received widespread inch to two inch rains that will at least prevent the crop in those areas from deteriorating further and add much needed test weight to later season varieties.

Soybeans

Soybeans suffered very negative trade after enjoying better than expected rains at the tail end of last week, and losses were further amplified by September soybeans and meal sharp intraday reversal. Weather remains the prime motivator for the soybean complex this time of year with demand’s impact more powerful within the front month contract.

Wheat

Wheat tried rallying this morning after wire service reports indicated that Ukrainian forces were engaged in battle with a column of 50 armored vehicles that crossed the border form Russia.  However due to a lack of fresh news mid-morning out of Ukraine/Russia, wheat was unable to hold its modest gains and closed down 7 cents in the December contract.  Without the support of world headline news the trade quickly brought its focus back to plenty of world supply. 

Beef

Live cattle futures were expected to open under pressure after a Cattle-on-Feed Report that was deemed as “neutral to bearish”. Many calls were to see the market down about a buck from last week’s closing trade. However, cash trade late Friday afternoon at $155 on a live basis in Western Nebraska ($2 higher than the previous day), and the discount the futures hold to those cash prices, seem to be providing some buying interest to start the week. Show lists appear to be smaller this week and asking prices are starting out at $154 on a live basis in the South, while offers are $10+ above the August futures in the North.

Pork

Hogs enjoyed positive trade today after Friday’s disappointing close, with some hope that steep basis will help to support this market on its recent lows. Negative sentiment remains as trade is still concerned with the recent sharp drop in pork cutout values. USDA pork cutout values released after the close on Friday, came in at $102.84, down $2.15 from Thursday and down just under $10 from one week earlier. Cold storage showed weaker demand as frozen stocks fell only 2.7% versus a normal seasonal drop of 4.5% for the month.

Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.

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.

 
Water Street Solutions Daily Report 8.22.14
2014-08-22T02:35

Corn

December corn struggled to hold gains over $3.73, which is currently acting as an area of resistance for the market. Traders will pay attention to weekend developments in Ukraine, with some risk to exports being blocked from the region. The risk is thin, but the consequences would be significant if it were to occur. Otherwise, this market continues to look very weak as we head into market. We are seeing basis firm across much of the Midwest as farmers hold onto old-crop supplies.

Soybeans

Old-crop soybean supplies are nearly nonexistent, with significant harvest still several weeks away. That pushed the September meal contract above $441.5 today, with September soybeans to $11.705. Some meal offers were said to be $130 basis over the board as well. Yet, the November contract continued to feel the weight of a big harvest coming in the weeks ahead. This week’s Pro Farmer crop tour found a fair amount of variability, with some soybeans waiting for another rain before adding and filling the final flush of pods. Many areas of the belt got that rain this week, with most remaining areas expected to see relief in the days ahead.

Wheat

The dollar rallied to fresh 11-month highs to close out the week, making U.S. commodities less competitive. Wheat is particularly sensitive to the strength of the dollar, with so many other sources of wheat around the world. That leaves the wheat market vulnerable on Monday if tensions have again eased in Ukraine. However, tensions were high to close out the week, supporting strong gains on speculative short-covering.

 
Beef

Live cattle futures firmed today as the market consolidated higher ahead of this afternoon’s USDA cattle-on-feed report. There’s nothing bullish about the charts, but pre-weekend and pre-report profit taking could be expected after recent sharp losses. The feeder cattle market traded both sides of unchanged as well, waiting for greater clarity of direction. The latest CME cash index came in at $218.27 per cwt, down $1.19 on the day.

Pork

October lean hogs found support just above $90 Thursday, but Friday’s early rally fell short of testing Thursday’s high. As such, this market remains technically and fundamentally weak in the near-term. The longer-term question is that whether easing carcass weights will run into a larger hole in supplies later next month due to PED virus losses earlier this year. That said, it’s still difficult to get overly bullish with the large supplies currently in the freezer.

 
Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.

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.

 
Water Street Solutions Daily Report 8.21.14
2014-08-21T02:05


Corn

The dollar reversed lower after hitting a new 11-month low today. That coincided with a return of fund buying of the broader commodity sector. Grain and oilseed prices firmed with the increased money flow, including corn. Fundamental support came from the Pro Farmer tour, which found greater variability and overall lower yield potential than the previous day, although still a decent crop. December corn spent the day largely inside the previous day’s trading range, consolidating just above recent contract lows. The market managed modest gains supported by money flowing into the broader commodity sector, but strength was sold through the day, with traders still expecting a big crop.

Soybeans

The entire oilseed complex garnered support from strong demand amid increased outside money flow, but rallies in the deferred contracts still uncovered selling interest on expectations that we will see a big crop come in this fall. This morning’s Pro Farmer crop tour saw tremendous pod counts on some routes, while others were disappointing. However, much of the areas received a good rain overnight and today, which is expected to add to current production estimates. November soybeans finished the day near unchanged, after slipping to a new contract low of $10.35 earlier in the day. The charts continue to suggest more weakness ahead, particularly if the rains continue to fill in dry areas.

Wheat

Wheat prices bounced along with the remainder of the commodity sector today, despite weak export sales. Wheat has been trying to confirm a seasonal low, but sustain gains has been difficult amid sliding corn prices and a pattern of money flowing out of the broader commodity complex this summer. Exporters sold 7.7 million bushels of wheat in the week ending August 14, down from 12.4 million the previous week and down from the five-year average for the week of 23.6 million bushels. The total included a cancellation of 2.2 million bushels of U.S. hard red winter wheat by Brazil after the 10% import tariff was reinstated, but Brazil did take shipment of 0.9 million bushels of HRW wheat.

Beef

Cash cattle movement this week has mostly been at $152 per cwt on a live basis, down $3 from the previous week, with movement in the north at $240 to $242 per cwt on a dressed basis. That’s still quite a premium to the futures market, but bearish chart signals continue to encourage selling. A weaker dollar raised prospects of a recovery in export demand. That supported another bounce off chart support just above $144 in the October contract. The charts remain weak, but consolidation was in order to correct an oversold condition.

Pork

Lean hog futures dropped to new lows before reversing higher today. The bullish reversal comes as the market tried to correct over-sold conditions while trading more than $15 above the cash market. Granted, the cash market is falling at a rapid pace, but the futures market needed to bounce, after going through the past month without a significant correction.

Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.

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.

 
Water Street Solutions Daily Report 8.20.14
2014-08-20T02:17


Corn

December corn broke below Tuesday’s low, but held above its contract low of $3.58. That becomes the next target of market bears, who are slowing regaining momentum as yield checks come in across the Midwest. The focus currently is on the big U.S. crop. That combined with a stronger dollar and general outflow of money from the broader commodity sector could take prices much lower than we would otherwise expect from a crop this size.

Soybeans

November soybeans trended lower throughout much of the day’s trading session as good pod counts continued to flow into the market from the Midwest crop tour. This week’s rains are slowly filling in dry areas, with most dry spots expected to see relief over the coming week. This should give the crop a late-season boost to help it fill what is believed to be a high yield potential.

Wheat

Harvest is gaining momentum in the Northern Plains spring wheat crop, applying pressure to Minneapolis prices. Additional pressure for the broader wheat complex comes as supply concerns ease out of the Black Sea region. There was less panic about Ukrainian supplies today, particularly in light of favorable crop reports out of Russia suggesting that it and other producers in the region may be able to make up lost production from Eastern Ukraine. The above contributed to weakness in the wheat sector today, with additional weakness coming from a strong dollar.

Beef

Live cattle futures are pricing in expectations for cash prices to drop deep into the $140s, with break evens for many of these cattle near $160. As such, the industry is starting to anticipate negative margins for feeding cattle, leading to pressure on the feeder cattle market. September feeder cattle have modest support at $210, but a violation of that support could open the door to a test of support at $195. The latest cash index for feeder cattle came in at $220.11, down $0.64 on the day.

Pork

Cash prices continue to decline, despite profitable double-digit packer margins as producers rush to sell hogs before they go lower. Carcass weights are stalling out – even creeping lower – at a time when they were expected to turn seasonally higher. The latest data shows carcass weights trending 4 to 5% above year ago levels, but that’s an improvement from the 5 to 6% seen previously through much of the summer. There’s been some talk that we could see a larger hole in supplies later in the year due to the rush to market hogs early, particularly if numbers drop as expected this fall due to the PED virus, but others believe that weights will return again.

Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.

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.

 
Water Street Solutions Daily Report 8.19.14
2014-08-19T02:00


Corn

Corn traded both sides of unchanged today and both sides of the 20-day moving average. Pressure came from the big crop expectations being supported by reports from the second day of the Pro Farmer crop tour. Losses were limited by ideas that those have already been priced into the market. We continue to see a fairly typical price pattern for a record-yield year, suggesting considerable additional downside price risk still ahead. But for now it’s consolidation time.

Soybeans

Soybean prices have been chopping sideways in recent weeks as strong demand offset big crop fears. Traders still remain bearish longer-term, but wanted to see if the pods were there after the 16th driest July on record. USDA’s weekly crop ratings combined with reports from the Pro Farmer tour to confirm that the pods are there in most cases, making them a bit more comfortable selling the market today. Strong demand for soymeal ahead of this year’s harvest continued to push the September soymeal contract higher, providing support for the nearby soybean contract as well. Processor bids pushed as much as 25 cents higher today in the Midwest, trying to uncover unpriced old-crop supplies. Yet, the deferred contracts came under pressure from expectations for a big harvest this fall.

Wheat

Kansas City led the short-covering buying spree higher, with Chicago eventually getting in the act as well. However, the Chicago September contract ran into a road block at Friday’s high of $5.5625, with traders unwilling to take out the high. Short (sold) positions are much smaller in Kansas City and Minneapolis, so it was more difficult to sustain strength in the market once the short-covering had been completed, although they still posted nice gains on the day.

Beef

Live cattle futures tried to push higher this morning, but then suddenly collapsed amid technical selling in a relatively thin market. The October contract tried to hold support at the 100-day moving average near $146.80, probing below it later in the day. The market is consolidating while waiting for greater clarity from the cash market, since it is already trading roughly $5 to $8 below the cash market. Open interest is the lowest since last October, allowing the market to get moved around with relatively little activity.

Pork

Today’s cash market was very weak, with terminals anywhere from $1 to $5 lower. Most packers simply report that they have all the hogs that they need. Last week’s slaughter data showed that the week’s estimated slaughter was down 7.7% from the previous year, but carcass weights running around 5.5% above year ago levels. That, combined with stocks in the freezer, provides plenty of pork to meet demand.  October lean hogs dropped to $93.25 per cwt this morning, which was its lowest level since March 4. The contract rebounded nicely through the morning, but struggled to sustain the move through the noon hour in Chicago. Selling interest is slowing, despite the sharply lower cash and weaker product market.

Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.

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.

 
Water Street Solutions Daily Report 8.18.14
2014-08-18T02:08


Corn

December corn garnered follow-through strength overnight from Friday’s rally. The contract was finally able to close a gap to $3.78 Friday, but it couldn’t close above it. Overnight buying pushed it to new highs for the move, but the market collapsed as reports began to hit Chicago from the field as this year’s Pro Farmer crop tour got underway. Yield results were good, suggesting a record U.S. crop, with even better results expected over the next couple of days. The December contract finished the day just above the 20-day moving average at $3.70.

Soybeans

Unlike corn, today’s tour results were mixed for soybeans, doing little to provide confidence for the bean bears, but not building a case for the bulls either. Pod counts are down a bit from previous year, but the plants overall look great. In some case the pods are only sporting two beans in the pod. In essence, the field reports suggest that the crop is being held back by dry weather after the belt experienced its 16th driest July on record is well-poised to respond to a rain this week. Forecasters remain optimistic that 80% of the belt should see good moisture by the end of the week.

Wheat

Russia’s President Putin made comments over the weekend suggesting an interest in stopping the fighting in Ukraine. That eased concerns in Chicago that trade out of the Black Sea might be interrupted. Traders used that news to sell wheat, along with pressure from a stronger dollar. Chicago wheat continues to have support at $5.20, while Kansas City is looking at $6.10, followed by $6.02. Minneapolis is feeling pressure from early harvest selling. Today’s USDA crop progress report is expected to show stable spring wheat ratings.

Beef

Live cattle futures firmed modestly today. They bounced off chart support last week and remain at a significant discount to the cash market. There are still reasons to believe that the high may be behind us, but there are also reasons for the bears to be concerned. Packer margins are strong, estimated at $70 per head. That means that they have the money and incentive to chase the cash market higher again if available slaughter numbers disappoint. I reported a couple of trade reports late last week that suggests that packers are concerned about available cattle numbers.

Pork

Today’s cash market was very weak, with terminals anywhere from $1 to $5 lower. Most packers simply report that they have all the hogs that they need. Last week’s slaughter data showed that the week’s estimated slaughter was down 7.7% from the previous year, but carcass weights running around 5.5% above year ago levels. That, combined with stocks in the freezer, provides plenty of pork to meet demand.  October lean hogs dropped to $93.25 per cwt this morning, which was its lowest level since March 4. The contract rebounded nicely through the morning, but struggled to sustain the move through the noon hour in Chicago. Selling interest is slowing, despite the sharply lower cash and weaker product market.

Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.

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.

 
Water Street Solutions Daily Report 8.15.14
2014-08-15T01:56


Corn

December corn settled at $3.77 going into the weekend. Now the test will be to see if it can sustain the rally through next week’s Pro Farmer crop tour. We expect the tour to expose traders first-hand to high yield potential, especially if they take kernel depth into consideration. Historically, this is the time when corn yield expectations begin to rise in high yield years; when the tour exposes the trade to the crop’s potential.

Soybeans

The soybean crop needs a drink, especially in northwestern areas of the belt. The crop is expected to get a good drink from increased rainfall at the same time that Pro Farmer tour participants are walking the fields to see its positive impact. September will likely find support until new-crop supplies begin to flow, but November and beyond will be vulnerable, with new lows likely if the forecast verifies.

Wheat

Kansas City matched the gains in Chicago as traders fretted over the possibility that trade from the Black Sea region could be disrupted. The region exports roughly a billion bushels of wheat annually, giving it a significant role in global trade. The conflict isn’t expected to physically disrupt trade. However, we cannot discount the possibility, as remote as it might be, that sanctions might be applied that would disrupt the flow of money used to pay for purchases from the region. That could in effect block exports from the region. Again, it’s not likely, but the mere possibility needed to be respected going into the weekend.

Beef

Live cattle futures bounced today. This week’s cash trade has largely been $5+ below the previous week, but the futures market is already at a big discount to the cash market. Furthermore, many futures contracts bounced off chart support this week. As such, the market is technically correcting oversold conditions by consolidating higher. Meanwhile, the feeder cattle futures market was strong today, supported by strength in the cash market. Demand for light-weight cattle remains strong amid optimism in the industry.

Pork

Longer-term, the trade expects to see a larger hole in supplies late this fall as a result of the PED virus. However, the futures market is already trading at a $20 to $30 discount to the cash market. That’s a huge discount amid a possible decrease in supplies later this fall. As such, we’re seeing a consolidation in the futures market until more is known. Pork movement Thursday reached 359 loads, down from 482 loads the previous day, but up from 359 loads the previous week. This suggests that total movement for the week will be one of the strongest for the summer. The composite product price rose $1.71 to $116.19 per cwt on strong belly demand Thursday. Belly prices pulled back a bit this morning, with a bigger drop in loin and rib prices.

Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.

 
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.

 
Water Street Solutions Daily Report 8.14.14
2014-08-14T01:58


Corn

December corn found strength in the new-crop sales this morning, finally succeeding at pushing through the descending 20-day moving average, currently at $3.7025. However, the buy stops parked above the indicator were insufficient to establish much upward momentum. The contract came within a quarter-cent several times of the August 6 high of $3.7475, but could not test it, with gap resistance above it at $3.7775 to $3.78. The market continues to correct its oversold condition by trading sideways. The Pro Farmer tour should give traders a clearer picture of the crop’s potential, beginning next week.

Soybeans

August soymeal went off the board today at roughly $450, while August soybeans traded at $12.80, after rising as high as $13.00 earlier in the session and traded as low as $12.35. September traded down to $10.7125 initially, essentially putting a double-bottom on the charts, with the contract low at $10.685. Traders are reluctant to push the market lower at this early date until they get a better handle on this crop’s potential.

Wheat

Rains continue to fall in Europe, pushing an increasing amount of the wheat into the feed grain quality category, which is rarely bullish for wheat long-term. That drop in quality was expected to bring more business to the U.S. market for quality milling wheat, but it simply has not lived up to expectations. Chicago wheat posted a technical bounce today after failing to test contract lows yesterday, but Kansas City and Minneapolis were reluctant followers, after those markets posted new contract lows yesterday. A sustained rally without leadership by Kansas City would be expected to be difficult to achieve, especially if corn resumes its weakness as we expect.

Beef

Cash cattle trade opened up in Kansas at mostly $155 per cwt on a live basis Wednesday, and in Nebraska at $153 to $155, down $5 to $7 from the previous week. We’ve seen some follow-through buying today at $156 in Nebraska, with more movement still possible in Texas. The discounted futures market suggests additional weakness over the next couple of weeks. However, the futures market consolidated today after holding support on the charts amid oversold conditions. August held above the 100-day moving average, while October bounced back above it after probing below it on Wednesday.

Pork

Today’s Midwest cash market was steady to $2 lower once again. The latest CME 2-day lean hog index came in at $117.88 per cwt, down $0.98 from the previous day. Today’s trade in the expiring August contract suggested that traders expect the cash index to drop several more dollars over the next couple of sessions. October lean hogs dropped the $3 daily limit on the weak fundamentals, although they came off the low over the noon hour. The contract dropped after opening below the 200-day moving average, currently near $96.60 per cwt. This is yet another bearish sign for the hog market in the days ahead.

Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.

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.

 
Water Street Solutions Daily Report 8.13.14
2014-08-13T02:01


Corn

Corn futures spent time on both sides of unchanged throughout the night and day trading session as the industry continues to digest the USDA figures and debate what they’ll see in the future. We could see a sort of consolidation period between now and the next Supply & Demand update, which is on September 11th, upon which the USDA will update yield estimates again. While yesterday’s yield figure was below the expectations, the long-term expectations continue to tout that big crops get bigger.

Soybeans

Soybean futures opened up firmer in the overnight session, seeing follow-thru from the recovery we saw late in the session yesterday, but optimism waned from there as the old crop August contract continued to see a decline in open interest as it expires Thursday at Noon. The new crop, November contract remains below resistance as well and with August weather looking a little better in the forecasts, traders are betting on higher yields. The 6-10 day was notable cooler and wetter, which should continue to alleviate any dry areas out there.

Wheat

While there were no major surprises in the USDA reports for wheat, the obvious continues to be confirmed – we have ample wheat supplies worldwide. The U.S. continues to chase the world export market to stay competitive and lower prices are need to do that. While there are some quality concerns for European wheat as they experience heavy rainfall, the supply can still be used as feed-grade quality, which continues to add to the pipeline of world grain stocks. Kansas City wheat future breached the double-bottom formed on the chart last week, signaling the possibility of another leg down in prices as traders continue to accumulate their short positions. Kansas City wheat finished down 5-7 cents while Chicago wheat was down 6-10 cents, and Minneapolis was down 5-6 cents at the close.

Beef

The beef complex saw weakness again today as cash pessimism continues to build as futures lead the way lower, despite the hefty discount to the cash market. The lead month August contract gapped lower overnight and continued to see selling pressure early in the session. Futures strengthened after that in an attempt to fill the gap, but to no avail. This could result in another runaway gap on the chart and indicate lower prices are still in store before we see a recovery. Feeder cattle futures followed suit again with the live cattle without any directional help from the steady corn futures. Here, again, charts are breaching support and we could continue to see some profit-taking and money flow out of the market as traders step to the sidelines. Cash could limit the bleeding as the August contract is trading around an $8 discount to the latest CME index at $148.25.

Pork

Lean hogs stemmed the recent declines today as some short-covering (profit-taking) was noted after the recent sell-off. Gains in pork prices helped the cause as carcass weights increased $1.17 at $118.19 and bellies gained $5.93 at $134.78. The outside money still holds quite a few long positions, so liquidation is a clear risk at this point, especially as weekly slaughter gets back toward the 2 million head per week figure and weights remain heavy. Near-term, however, the market appears over-sold and the lead month holds a $4-$5 discount to the CME index. Early this afternoon, August hogs were up .925 at $115.00.

Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.

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.

 
Water Street Solutions Daily Report 8.12.14
2014-08-12T02:11


Corn

The computers created a lot of excitement in the opening seconds of trade after the report’s release, trading about a 12-cent range. However, the trade then quieted to post a small gain at the end of the day, with December settling at $3.69 after setting a new contract low of $3.58. Some are talking about a bullish reversal, but the contract once again could not sustain a move above the 20-day moving average, currently at $3.7175. That becomes the first technical obstacle, while bearish expectations that next week’s Pro Farmer crop tour will open eyes to high yield potential should provide additional caps to selling.

Soybeans

August 1 is pretty early to be definitive with soybean yields and USDA’s July estimate was already at a record level. As such, the agency only tweaked the yield a 0.2 bushel higher to 45.4 bushels per acre. This increased the size of the crop by 16 million bushels, while new-crop demand remained unchanged. November soybeans spiked lower on the report’s release, but then came off of those lows. November reached a new contract low of 10.43, but settled in the middle of today’s trading range at $10.595, several cents above its previous contract low and double-bottom. The bias remains bearish longer-term.

Wheat

The USDA August report made very little changes for wheat.  Ending stocks were estimated at 663 million bushels which is 3 million more than the July report.  U.S. wheat production was also close to the previous report showing 2.030 billion bushels of all wheat, compared to 1.992 billion bushels.  With very little surprises in the report, the wheat complex closed lower overall.  KC December wheat made a new low today and could see more selling pressure.  KC December wheat settled down .10 ½ cents.  Minneapolis December wheat closed down 6 ¾ cents and Chicago December wheat closed down .11 ½.

Beef

Live Cattle and feeder cattle both experienced accelerated selling as fears about the cash market remain and the money moves to the sidelines. While cash markets led the way up and futures followed, the opposite is now true as the futures washout spurs panic selling in the cash markets and packers sit back and wait for the business. Sell stops continued to pressure futures as the previous swing lows were taken out on the charts. The pressure in the pork market was also a contributing factor as October hogs were locked the $3 limit down. Despite the discount futures hold to the cash market, the August contract was still down the limit this afternoon, while the deferred contracts were down $2.50.

Pork

Lean hogs struggled again today falling through initial support at $87.98 in the December contract. With the August contract coming off the board on Thursday, August was held up by the roll to the deferred months, made clear by the October contract trading lock limit for much of the session. More fuel for bearishness came from the USDA pork cutout values released after trade yesterday at $119.85, down $4.33 from Friday and nearly seven dollars from the previous week. Slaughter was also a disappointment early rumors said that slaughter would exceed 2 million head this week, and then started slow yesterday with only 375,000 head.

Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.

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.

 
Water Street Solutions Daily Report 8.11.14
2014-08-11T03:04


Corn

Corn traded strongly today closing near its highs as traders squared positions in advance of tomorrow’s USDA report. Overarching fundamentals remain bearish for corn as weather, weakness in wheat, recent weakness in livestock, and the idea that much of the US crop is made in the wake of last week’s rains all point lower. While tomorrow’s report is another piece of this year’s marketing puzzle, the feeling amongst traders is largely that corn is good for lower no matter what the USDA says, as every rally is quickly sold far before it is attractive enough to originate farmer grain.

Soybeans

Early strength in the soybean market quickly gave way as demand for old crop soymeal could not withstand selling pressure fueled by recent widespread rains. Despite bearish the current bearish weather scenario, tomorrow’s report could trump rains for the next 24 hours giving traders a reason to stay short or those on the sidelines to get a better position on a bounce. Any bounce should be capped at trend-line resistance at 11.10, and unless forecasts shifts radically bounces will be seen as opportunities to add to protection or cash sales.

Wheat

Wheat traded weakly today and is still being led almost entirely by the alternating improving and worsening situation in Ukraine. Today’s pullback is largely related to the story around European wheat quality becoming more muted, and with news of Russian sanctions giving way to troop withdrawal from the Ukrainian border. Position squaring in anticipation of tomorrow’s report will also drive today’s action. Although tomorrow’s report will be primarily focused on corn and beans, any significant departure from the trade expectation of 665 million bushels of ending stocks could provide further strength in this oversold market.

Beef

The cattle complex enjoyed another day of volatile trade today as the market reclaimed some of the losses sustained in last week’s bearish slide. After trading limit down on Thursday and Friday, today’s rally is largely technical as liquidation pushed the market lower than it needed to be. Fears over extra poultry and pork domestically hurting beef demand contributed to last week’s selling, but for the most part a market that has been as relentless as fats and feeders will take back gains as quick as it has added to them.

Pork

Lean hogs traded mixed in today’s session opening up weaker before surging into positive territory on the coattails of the cattle complex. USDA’s pork cutout values came in at $124.18 on Friday, down $1.43 from Thursday and the lowest level that we have seen since June 17th. With cash still carrying a hefty premium to futures the market has failed to gain much momentum below $98.00 in October. While cash should continue to support futures, it also slid to $122.22 to close out the week.

Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.

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.

 
Water Street Solutions Daily Report 8.08.14
2014-08-08T02:36


Corn

Corn prices gave way to chart-related selling to close out the week. Yes, traders use expectations of a bumper crop to justify their bearish leanings, but they are also doing what they can to protect a profitable downward trend on the charts. December corn failed to even test the 20-day moving average over the past week. As such, they gave up on efforts to push the market higher, choosing instead to try the downside amid the big crop expectations. The new-crop contract finished the week a couple of cents above its contract low of $3.61.

Soybeans

New-crop prices were under pressure for much of the day today on expectations of a big crop. However, strong upfront demand for soymeal continued to provide support for the nearby soymeal and soybean contracts following Thursday’s confirmation of huge sales following Argentina’s debt default. The strong demand outlook eventually lifted the deferred contracts into positive territory late in the session. That’s largely because so many questions remain about the size of this year’s crop. The trade expects USDA to peg the crop at 3.823 billion bushels on a yield of 45.6 bushels per acre on Tuesday, but they also realize that could be adjusted in either direction in September, depending on weather over the next several weeks.

Wheat

Wheat traders finished the week unconcerned about blocked exports from the Black Sea. However, the uncertainty of the weekend did encourage active profit taking to close out the week. Chicago September wheat had rallied 35 cents off the previous week’s close, while Kansas City rallied nearly 30 cents. Those profits may have been too much to leave on the trading room floor ahead of a very uncertain weekend.

Beef

Market bears have been trying to pound this market all summer long on the first signs of weakness in the fundamentals. Eventually they will be correct. They may be this time, but we won’t know. They aren’t selling because fundamentals are bearish now, but in the expectation of increased supply and weaker product prices. To be sure, product prices did slip late in the week, especially in the Select cuts. This pushed the Choice/Select spread seasonally higher as we approach the fall grilling season. However, packer margins remains profitable; currently estimated to be $40.95 per head, down from $64.02 the previous week.

Pork

The slide continued over the past week in the pork sector. Product prices are trending lower, supported by carcass weights that are 6% above year ago levels. However, cash prices are sliding even faster, keeping packer margins at profitable levels. Friday’s cash market was again mostly steady to $1 lower.  Like the cattle market, the lead August futures contract remains at a significant discount to the cash market, anticipating a continued slide in the country market. The latest CME 2-day lean hog index came in at $122.22 per cwt, down $1.15 on the day and down $4.61 on the week.

Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.

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.

 
Water Street Solutions Daily Report 8.07.14
2014-08-07T02:16


Corn

December corn found selling interest just below the 20-day moving average for the second consecutive day today. However, it also found support just above the previous day’s low of $3.665. As such, today’s trade was an inside day lower on the charts, with a weaker bias on expectations that big crops get bigger. We are seeing some dry areas report tip pull back and kernel abortion in scattered areas from east to west across the Midwest, but the bulk of the crop still looks good, with the best corn in Illinois.

Soybeans

Exporters sold a whopping 731,100 tonnes of U.S. soymeal in the week that included Argentina’s default on its debt payments. That total included a strong 252,100 tonnes of old-crop soymeal and another 479,000 tonnes of new-crop soymeal. The strong sales gave a boost to soymeal futures, which in turn supported the September soymeal contract as well. The problem is, the September contract is really a new-crop contract, with early harvested soybeans already coming to town in the far South.

Wheat

Wheat traded lower, but inside the previous day’s trading range today. More significantly, Kansas City lost ground to Chicago, which is a bearish sign. Chicago September wheat faces its first significant resistance at the 50-day moving average, which it hasn’t traded above since May 13. Kansas City faces next significant resistance at the 40-day moving average of $6.66.

Beef

Feeder cattle futures locked the $3 daily limit lower through the April contract late in the session on weakness in the fat cattle market, although a couple of the contracts firmed off the limit at the close. The lead August contract faces first significant support at $217.95. The latest CME cash index came in at $224.56 per cwt, down $0.59 on the day.

Pork

Lean hog futures turned sharply lower today as well, garnering selling pressure from the cattle market as well as more talk about Russia’s sanctions on U.S. meat imports. Today’s cash market was again steady to $1 lower, with product prices continuing to trend lower. However, product price declines are slow enough to keep packer margins positive. Those margins were estimated to be $12.70 per head, down from $14.10 the prior day, but up from $10.16 per head the previous week.

Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.

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.

 
Water Street Solutions Daily Report 8.06.14
2014-08-06T03:06


Corn

December corn rallied on short-covering/profit taking on the uncertainty of the Ukraine crisis today. The contract fell short of challenging the 20-day moving average, currently at $3.755. The contract settled above the indicator just once since May 8, adding significance to it. However, more significant resistance sits a tick below $3.78. Even so, today’s trade remained below that zone.

Soybeans

Soybeans were on the sideline early in today’s rally in the grains, but buying eventually emerged to push the oilseed higher. Both soymeal and soybeans rallied again late, allowing the market to settle near its session highs. USDA will be releasing export sales data for the week ending July 31 in the morning, with traders expecting it to reflect demand for 37 to 44 million bushels of new-crop soybeans and 250K to 450K tonnes of new-crop soymeal.

Wheat

Soybeans were on the sideline early in today’s rally in the grains, but buying eventually emerged to push the oilseed higher. Both soymeal and soybeans rallied again late, allowing the market to settle near its session highs. USDA will be releasing export sales data for the week ending July 31 in the morning, with traders expecting it to reflect demand for 37 to 44 million bushels of new-crop soybeans and 250K to 450K tonnes of new-crop soymeal.

Beef

The cattle market was mixed in consolidation today as traders tried to digest the latest signals. Packer margins remain strong at an estimated $47.85 per head, although that’s down about $20 from last week. A lot of trucks were rolling in the Plains feedlot region earlier this week, suggesting that packers are leaning heavily on formula cattle now that the new month has arrived. The question then is whether they still have to be aggressive in bidding for negotiated cattle.

Pork

Today’s cash market as mostly steady, although the western Midwest markets were down as much as $2 per cwt. Packer margins remain strong as a result; estimated to be $14.10 per head, up from $9.45 the previous week. The CME 2-day lean hog index dropped another $0.79 to $124.32 per cwt. It was the 13th straight trading day with a lower index, with losses over that period totaling $9.85 per cwt. Even so, the lead August contract is trading at roughly an $8 discount to the cash index. The two need to converge ahead of next week’s expiration of the contract. As such, we saw the futures market stabilize today, sponsoring a technical bounce.

Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.

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.

 
Water Street Solutions Daily Report 8.05.14
2014-08-05T02:37


Corn

The corn market held support today above 3.61. Weather models were a little more convincing for better coverage across the Corn Belt this week.  Corn was held down by weather predications and private USDA forecasts.  Support technically on the charts and the wheat market strength were helping to keep prices from sliding further.  Certainly, tensions overseas are something to also keep an eye on and could offer support to prices if it continues to escalate.

Soybeans

Soybeans pushed back towards the end of the trading session, closing .06 ¾ off the lows after being down around .18 for most of the day.  Improved coverage in weather forecasts for the western Corn Belt was the main driver today and an unchanged good to excellent category in crop ratings were the main drivers today. 

Wheat

The wheat markets traded lower most of the morning until the second half on more Black Sea tensions.  Afternoon comments by the Polish Prime Minister mentioning that Russia could invade Ukraine sent the equities lower and offered support.  Showers across Europe this week will lead to further quality declines in at least half of the wheat belt.  Rain activity should taper off next week but still hamper harvest in U.K., northern Germany and Scandinavia.

Beef

Packer inquiry is light, and have yet to find a bid.  Asking prices remain $164.00 - $165.00 live in the south and $10.00 over in the August futures in the north.  Market struggled to hold gains today, cash quiet, and asking prices expected to hold in the near term.   

Pork

Lean hog futures continued the decline today as near term fundamentals weaken.  The cash market remains soft and lower pork is also contributing to nearby losses in the futures contracts.  Many are still supporting the deferred contracts on supply concerns.  Estimated daily slaughter was 337,000 head yesterday compared to 392,000 head last week and 366,000 head a year ago.  The CME index continues its downhill slide coming in at 125.11 (.71) on 8/1. 

Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.

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.

 
Water Street Solutions Daily Report 8.04.14
2014-08-04T02:24


Corn

Corn bounced in the overnight and into the day session as talk of declining crop conditions by 1-2% gave traders a reason to short cover after recent gains. However broader based fundamentals remain largely bearish for corn: the forecasted rain held over the weekend, trade’s lack of agronomic knowledge gives credence to rumors about the viability of “second ears” and their influence on yield, and increasing supply of European feed wheat are all long term issues that corn will need to overcome if it is going to have a sustained rally.

Soybeans

Soybeans pushed to a new contract low in overnight trade before rallying back in a solid short-covering bounce that continued throughout the daily session. Increasing dryness across much of the soybean belt has the market more nervous than it has been all season, but forecasted rains for the Southeastern half of the soybean belt could alleviate these concerns as soon as this Wednesday. The wetter forecast for this week held over the weekend, and actually increased precipitation for many key growing areas. The Dakotas, Nebraska, Iowa, Missouri, Illinois, Indiana, and Kentucky could all see between .5 – 2.0 inches of rain with local rains reaching up to 4 inches.

Wheat

Quality concerns in Europe linked to the wettest July on record in areas of France and Germany continued to provide support for the wheat market forging a fourth positive day since last week’s contract lows. The overall positive movement in the grain complex also bolstered wheat gains, as weather concerns in corn and soybeans helped magnify recent oversold sentiments in the grain markets. Waning harvest pressure and positive export demand news could also be helping wheat form a short term bottom.

Beef

Show lists are coming in mixed so far today, with asking prices ranging from $164.00 in the Panhandle to $165.00 in Kansas. There are no bids yet, and trade is expected to hold off until later this week. Live cattle opened strong before backing off into the late hours of trade, largely follow through action from the quick recovery made late in the day on Friday. Lack of cash trade should limit support for higher futures price, and packers could continue to pressure the market as move later into the week.

Pork

Lean hog futures traded mixed today as lower cash prices weighed heavily on August, and lingering supply concerns bolstered gains in the deferred contracts. Packers are generally well supplied for next week’s limited slaughter with kill expected to dip below 1.8 million head due to a number of plants taking a floating holiday on Monday.

Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.

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.

 
Water Street Solutions Daily Report 8.01.14
2014-08-01T02:55


Corn

Traders continued to focus on favorable weather forecasts today, pushing December corn to new contract lows. However, weakness was limited to close out the week on fears that the forecast might shift over the weekend. The highly-anticipated rain event is expected to begin Tuesday-Wednesday in the northwestern Midwest, shifting south and east in the days that follow.

Soybeans

September soybeans dropped to a fresh contract low today on expectations of a big crop. It won’t be long before we will begin hearing reports of early new-crop supplies being available in the Delta for meeting strong global demand. The focus continues to be on a crop that will be even bigger than is that strong global demand, resulting in rising stocks over the next year. Soybean prices have become known for their big price swings over the past several weeks. Look for that tendency to continue until the trade gets a better handle on the actual size of this year’s crop. November soybeans held a penny above the contract low of $10.55 late today, bouncing a few cents higher into the close, but still near the double-bottom created by today’s selling.

Wheat

Wheat prices are often known for their ability to trade seasonal factors whether the fundamentals justify it or not. They trade headlines and they trade seasonal factors, unless the fundamentals are overwhelmingly bullish or bearish. This year’s global stocks as a percent of use are in the middle of the historical range, allowing traders to focus on either bullish or bearish factors, depending on their leaning at the time.

Beef

Live cattle finished the day near session highs, but still posting modest losses on the day. Feeder cattle followed the fat cattle market, despite weakness in the corn market. The latest CME cash index increased another $0.11 to a record $225.06 per cwt. It was the fourth consecutive trading day of posting record highs.

Pork

August lean hogs consolidated modestly higher today while waiting for the cash market to come down to it. October lean hogs found support at Thursday’s low, but could not sustain a bounce amid growing bearish sentiment. Demand is sluggish at current prices, both in the domestic and export market. Carcass weights remain at 5% or more above the previous year’s level, supply the existing demand. Supplies are expected to decline later this fall, but that’s becoming difficult to focus on near-term.

Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.

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.

 
Water Street Solutions Daily Report 7.31.14
2014-07-31T02:38


Corn

December corn has significant resistance just below $3.78. It found support at Wednesday’s low of $3.67, although it ticked just below that in the final minute, settling right at that level. The contract low is $3.6475. Yields are coming in from Illinois at 250 to 260 bushels per acre and growing as kernels add depth in this cool weather. As such, this market remains vulnerable to more weakness as we approach harvest.

Soybeans

August soymeal and soybeans posted modest gains as a result. November soybeans posted fractional gains on strong existing demand and some lingering uncertainty about this year’s crop. However, the overall picture remains bearish if next week’s forecast rains verify for the Midwest.

Wheat

Hard red winter wheat sales accounted for 16.6 million bushels or more than 56% of the weekly sales, even though that class of wheat has the tightest supplies of the major classes as a percent of annual usage. Soft red winter wheat has the largest stocks at more than a six-month supply, but it only contributed 22.4% of the above weekly total. The demand provided a boost for wheat, especially the Kansas City market. Soft red winter wheat also finds pressure from the Euronext market, which is trading 50 to 60 cents below the Chicago soft wheat market due to the low quality of its crop as persistent rains hurt the crop at harvest.

Beef

Futures turned lower for several reasons. First, the charts were showing waning momentum to the upside, despite last week’s surge in cash prices to a big premium over the futures market. Traders don’t believe that the consumer will continue to pay current prices for beef. They garnered support for that view this morning from sinking consumer sentiment data and plummeting stock markets. Ironically, the product market responded by pushing to new record highs. Finally, at least one packer was said to be spreading the rumor that they would be able to pay less on the cash market this week due to increased supplies.

Pork

Lean hog futures tried to bounce higher today, but could not hand onto the gains, dropping into negative territory this afternoon. The cash market was mostly steady to another $1 lower, with the cash index doing the same. The latest CME 2-day lean hog index was down $1.00 on the day to $127.91 per cwt. The index has been lower for 9 consecutive trading days, with losses over that period totaling $6.26 per cwt from this month’s record high of $134.17.

Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.

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.

 
Water Street Solutions Daily Report 7.30.14
2014-07-30T02:26


Corn

Corn futures spent the overnight session in weaker territory while the day session saw both sides of unchanged from bell to bell. Prices were seeing some buying as charts remain oversold, yet given the time of year and lack of threatening weather in the forecasts, traders and farmers continue to sell any strength. The gap area near $3.78 will remain as initial and critical resistance for the time being. The U.S. Dollar continued its trek higher today, reaching new yearly highs, and levels not seen since September of 2013. Most of the strength is in reaction to worldwide geo-political events we’ve seen in the last 60 days.

Soybeans

Soybean futures traded lower throughout the overnight and day session and were quiet most of the day until some of the Noon weather models continued to suggest the increased rainfall into next week. The soybean crop likely has the most to gain from the rains as some areas throughout the Mid-west begin to see some stress from dryness, though not significant. However, because the crop is further from being “made”, every notch on the belt matters, and this could be a significant one.

Wheat

The wheat market was strong throughout the session as the Kansas City charts flirt with making a double-bottom for the near-term. In addition to this, we also saw a reported sale of 205,500 metric tons of wheat sold to Nigeria from the U.S. This suggests that U.S. prices are nearing levels where they can compete for world demand. There was also a reported sale of 175,000 metric tons of Russian wheat sold to Egypt.

Beef

Live cattle futures pushed higher today with the February contract scoring new highs for the move…again. New record high beef prices at mid-day, along with optimism for the cash market are main factors. Cash markets were quiet as of early this afternoon, but asking prices are firm at 170 on a live basis in the South and 265-270 in the North. This should keep the front-month August contract well supported as it currently trades around a $10 discount to the cash market.

Pork

Hog futures leaked lower early on in trade before coming under more significant pressure, triggering the $3.00 limit in the deferred contracts while the front-month August came just short. Early afternoon prices are still down $2.00 - $2.50 as money seems to be running for the exits as the charts appear ominous and cash prices weaken. The latest CME index price of $129.76 is nearly $10 above the August futures, which could limit losses over time, but fear-based selling has gained momentum as cash prices and pork prices continue to fall this week.

Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.

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.

 
Water Street Solutions Daily Report 7.29.14
2014-07-29T02:42


Corn

Pressure came early this morning when the newest forecast model runs increased confidence that most dry areas of the Midwest should see good rains later next week. Cool weather between now and then is expected to reduce crop stress, with rains then benefiting crops once again. We did see a bit more new-crop demand show up today. USDA’s daily export reporting service indicated that Columbia bought 5.8 million bushels of new-crop corn. December corn has first significant resistance a tick below $3.78, with support at last week’s low of $3.6425. Rallies continue to be sold, both by speculative hedge fund managers, as well as producers trying to get caught up with old- and new-crop sales, limiting the scope of corrective bounces.

Soybeans

Soybeans continue to enjoy good new-crop demand, but gave way to selling in the broader commodity sector today, combined with improved weather forecasts. As for the demand, USDA reported today that “unknown destinations” returned to buy another 135,000 metric tonnes of U.S. new-crop soymeal. However, that again was more than offset by broader weakness in the commodities and favorable a weather outlook. August soybeans rallied to new highs for the move overnight, before the wetter forecasts became too much for the bulls to continue their support. Prices slid lower into the morning, but held above Monday’s gap on the charts, with first support at the top of that gap at $12.17.

Wheat

All three wheat markets broke to new lows for the move. Kansas City September wheat was able to hold just above its contract low of $6.0875 set in late January, but the Chicago and Minneapolis September contracts both made new contract lows. Yes, the market is oversold and past due for a corrective bounce as well as a seasonal post-harvest rally, but once again, anyone that has tried to anticipate that bounce by jumping into the market has paid a steep price.

Beef

Live cattle futures were mixed again today, with the August contract showing trade fears that big supplies are about to hit the cash market in August, but the deferred contracts showing a bit more strength based on Friday’s USDA cattle on feed report. Estimated packer margins remain good at $57.95 per head, down from $61.10 the previous day, but up from $40.90 the previous week. Feeder cattle pushed to new highs today, feeding off cheap corn and Friday’s supportive cattle inventory report. Additional support came from a strongly higher cash index. The latest CME cash index came in at a record $221.95 per cwt, up $7.82 on the day. The CME’s report included some feeder cattle selling in the Northern Plains at $253 per cwt.

Pork

The latest cash index came in at $129.76 per cwt, down $0.57 on the day. It was the 7thconsecutive trading day with a lower index, with losses over that period totaling $4.41 per cwt. Traders are convinced that the cash market has more downside risk over the next couple of days, with the August contract down another $2.55 today to $121.125. Weakness in the October to February contracts was more restrained, with USDA’s quarterly hogs and pigs report suggesting a larger hole in supplies in that window.

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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.

 
Water Street Solutions Daily Report 7.28.14
2014-07-28T03:51


Corn

December corn struggled to take out last week’s chart gap resistance between $3.7675 and $3.78, capping rallies throughout the day. The contract managed to trade into the gap, reaching a high of $3.7775, but it couldn’t close the gap, settling at $3.7675. A move through the gap would target $3.9575, but the rally will have to fight increased cash sales to do so, which will make it a difficult feat without a legitimate threat to the crop.

Soybeans

Soybeans are more at risk from dryness as we move into August, with their most critical reproductive phase still in front of them. That, combined with strong export demand, support short covering in the market today, along with fresh buying interest. Additional support came from USDA’s announcement this morning that China bought another 17.9 million bushels of new-crop soybeans, although 2.4 million of the total was for optional origin. August soybeans managed to push above the 20-day moving average of $12.30 late in the session, settling above it at $12.365. Chart gap resistance sits at $12.90 to $12.97, but the primary focus over the next two to three weeks will likely be the weather.

Wheat

Wheat tried to follow the other markets higher early in the session, but it simply could not hold the gains, with traders continue to liquidation hard/soft wheat spreads. Export competition remains too stiff to support a bullish argument at this time, with traders focused on rising global stocks. Prices at all three exchanges are consolidating just above last week’s lows, with speculative hedge fund managers holding large short positions at 369 million bushels as of July 22. However, that’s still well below the record of 520 million bushels short in soft red winter wheat last year.

Beef

Live cattle futures pushed higher this morning on Friday’s friendly cattle-on-feed and cattle inventory reports, but contracts struggled to hold onto that upward momentum, especially the nearby contracts. Traders remain nervous about the possibility of a larger supply of heavier cattle hitting the market next month, since the anticipated supply increase didn’t happen in July. However, the deferred contracts found a bit more strength in Friday’s data, with slaughter numbers most at risk of falling short of demand in the November to January time frame.

Pork

Lean hog futures were down across the board today on weaker fundamentals and chart sell signals. However, losses in the August contract were limited by the big discount it already holds to the cash market as expiration approaches in a little over two weeks.

Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.

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.

 
Water Street Solutions Daily Report 7.25.14
2014-07-25T02:57


Corn

December corn found buying interest when it held above Thursday’s low of $3.6425 this morning. The contract dipped to $3.6475 this morning before turning higher, slowly firming throughout the day. It remained well below Thursday’s high of $3.7675, which probed into a critical chart gap with resistance at $3.78. As such, the market may be in the process of carving out the long-awaited late July bounce that tends to come in record-yield years, but it’s having a difficult time doing so.

Soybeans

August soybean options expired today, creating some uncertainty about where the lead contract would finish the day. The contract settled at $12.1225, with little fanfare surrounding the associated option expiration. Now traders can resume their focus on positioning for delivery notices against the contract next Thursday and trying to manage tight old-crop stocks at a time when the path of least resistance on the charts is lower. November soybeans were unable to penetrate resistance at $10.88, with first the contract low at $10.55. Sentiment remains bearish, with this week’s crop tour reporting high yield potential in the central and western belt. However, prices have been consolidating over the past week on ideas that it’s simply too early to be this low, using strong new-crop demand as the fundamental reason to support the bounce, along with dry pockets in the western belt.

Wheat

Wheat prices rallied through the bulk of today’s trading session after holding above both Thursday’s low and recent contract lows set earlier in the week. The charts remain bearish, but the strength of today’s rally raised some hopes that perhaps we are finally starting that long-awaited post-harvest rally. In reality, that will likely hinge on whether corn can post its seasonal bounce starting this next week.

Beef

USDA released its cattle-on-feed report this afternoon. It showed that on-feed numbers on June 30 totaled 10.127 million head, which was 98% of year ago levels, slightly below expectations of 10.199 head. June placements though came in at 1.455 million head, below expectations of 1.498 million. The bigger numbers were in the July 1 inventory report. It showed total cattle and calves at 95 million head or 97% of year ago levels. Beef cows were at 97% of the previous year, while dairy cows were at 101%. However, heifers over 500 pounds being kept for cow replacement were at just 98% of the previous year. In other words, the cow herd is still shrinking and we’re not holding back enough heifers at these prices to turn it around.

Pork

August lean hogs bounced off chart support at $121.50 Thursday, leading to some follow-through buying today as traders realize that they probably took the contract to far below the cash market with the two needing to converge over the next three weeks. The product market showed signs of stability, but this market is vulnerable near-term until we begin to see a drop in supplies late this summer into the fall due to the PED virus.

Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.

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.