Water Street Solutions
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.

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 7.28.14
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.

 
Water Street Solutions Daily Report 7.24.14
2014-07-24T02:46


Corn

The unexpected surge in new-crop corn sales sent December corn surging to $3.7675 early today, but that fell short of the $3.78 target needed to close a chart gap left on Monday, leading to a technical collapse once again. That chart gap now becomes a bit more significant for traders. Farmers still holding old-crop supplies were eager to sell the rally, once again capping the rally. A well-known private analyst firm estimated this year’s corn yield above 174 bushels per acre, with little reaction from the trade. That suggests that the trade is already pricing a yield in the low to mid-170s into the market.

Soybeans

August put and call options expire tomorrow. The $12 strike price is most attractive for the August contract going into Friday’s expiration, based on open interest. $11.80 is also in play, as is $12.40, but the latter currently appears less likely. August soybeans surged to $12.3275 on the above export sales data, but that’s when selling of the rally pulled prices well off their highs. The contract remains above the $12 strike price, which should come into play tomorrow. November soybeans surged to $11.0725 on the export news, but settled at $10.8475. Even so, the contract managed modest gains on the day as moisture deficits begin to mount in portions of the western Midwest. Commodity Weather Group currently estimates the crop’s potential at 46.1 bushels per acre.

Wheat

Wheat found support from the early-day rally in corn prices, but prices turned negative once selling returned to the corn pit. Australia’s official weather bureau released a warning today that eastern Australia could see wheat yields trimmed by dryness over the next three months, but that was largely offset by this week’s tour of North Dakota, showing very good spring wheat potential, with the average tour yield at seven-year highs. As such, the path of least resistance remains lower as long as corn prices are trending lower.

Beef

The futures market continues to trade at big discounts to the cash market, believing that this rally simply isn’t sustainable. That seems logical, but this market has thus far been illogical, driven by much stronger than expected demand for ground beef, supported in part by a mild summer encouraging more grilling. Yet, Friday’s USDA cattle-on-feed report is expected to show that June placements were again 3.4% below year ago levels, with all-cattle on feed down 1.7% from the previous year and June marketings down 2%. Feeder cattle ended the day mixed at best, skeptical as well about the sustainability of the fat cattle strength. The latest CME cash index came in at $210.64 per cwt, up $0.16 on the day.

Pork

High prices continue to hurt pork export demand, accounting for some of the recent price weakness. USDA’s weekly report showed that exporters sold 4.2K tonnes of pork in the week ending July 17, up from 3.4 the previous week, but near the year’s low. Actual shipments totaled 10.1K tonnes, up from 6.9K tonnes the previous week. August lean hogs dropped to $121.65 today before pulling well off their lows, with the December and February contract periodically touching the $3 daily limit lower, settling near those levels. The charts are trumping PED virus fears as long as the product market and cash markets are falling.

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 7.23.14
2014-07-23T04:11


Corn

December corn slipped to $3.6575 early in the session, a new low for the move. However, the market is oversold and due for a corrective bounce. The problem is that every attempt to do so thus far has been sold. The track record for years with record yields is for prices to put a near-term low in the market in the final third of July, so this might be the beginning of that bounce. We should note that in all but 2003 the market went on to take out those late July lows later in the year over the past couple of decades.

Soybeans

August soybean options expire on Friday, with a lot of options focused on the $12 strike price. That could be part of the strength in the August contract, but additional support comes from strong basis in the country as demand picks up amid tight old-crop supplies. The trade is also looking for tomorrow morning’s weekly export sales report to reflect old-crop demand for 5.5 to 9 million bushels of soybeans that we don’t have, with new-crop demand of 44 to 53 million bushels. Gap resistance on the November chart sits at $12.825. Topping that would target $11.1875. Sentiment remains bearish, but soybeans have the best demand to lift prices at times when selling interest dries up.

Wheat

Wheat is finding some value near its January lows in Kansas City and Minneapolis. We’re well below that level in Chicago. Large speculative short (sold) positions in that market supported a bit more of a speculative bounce. Those that have tried to pick the bottom of this market in past weeks have paid a steep price.

Beef

The lead contract collapsed nearly $3 in the next 50 minutes, including a wild bounce of more than a dollar in the midst of that fall. Yet, the break did little to create fear among feeders, with most still holding out for higher prices. There were trade reports of some cattle moving at $255 per cwt on a dressed basis in Nebraska, with other reports that feeders have passed on offers of $160 on a live basis in the high plains.

 Pork

Lean hog futures posted strong gains Tuesday on strong beef prices, with the expectation that demand would be shifting to pork. However, yesterday’s cold storage report showed a smaller reduction in supplies than expected, especially for bellies, with ham supplies actually up nearly 15% from the previous month. Furthermore, the pork product market is breaking lower, suggesting that hopes for a major shift may be optimistic.

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 7.22.14
2014-07-22T02:31


Corn

December corn dropped to a new low for the move today, settling a quarter-cent above the session low of $3.68. Rallies continue to be sold, making it difficult for this market to find firm footing, with the path of least resistance remaining lower longer-term. There is a tendency for prices to post a near-term low in record yield years in the final third of July, but there are no guarantees that we will see that this year.

Soybeans

August soybeans and soymeal garnered support from the above export demand, but weakness in the rest of the complex eventually proved a drag on the lead contract. November tried to hold above the double-bottom at $10.65, but that support eventually gave way, allowing the contract to drop to $10.57, settling fractionally above that level. The path of least resistance remains lower until/unless data emerges to suggest that this will not be a bin-buster crop.  

Wheat

Chicago September wheat held its double-bottom low near $5.2375, but settled just fractionally below that, leaving the contract vulnerable. Sinking corn prices continue to leave this market vulnerable, because we need to keep a portion of this year’s crop competitive in the feed grain market. Kansas City and Minneapolis both moved to new lows for the move, with the lead September contracts finding next support at their January lows of $6.0875 in Kansas City and $6.125 in Minneapolis.

Beef

Feeder cattle followed the fat cattle market higher. It hesitated a bit, but then garnered the courage to push the daily limit higher in the nearby contracts when corn prices began to fall under water once again. The hesitancy came from weakness in the cash index. The latest CME index came in at $210.88, down $3.60 on the day and down near $7 from last week’s record high of $217.62.

Pork

USDA’s cold storage report indicated that pork in the freezer on June 30 totaled 537.7 million pounds, down 6.6% on the month and down 4.8% on the year. High carcass weights have been running better than 5.5% above year ago levels, helping to meet demand, but this data suggests that high carcass weights have not been enough to offset declining slaughter numbers. This in itself is probably not enough to sustain a rally in the lean hog futures market, but it will add fuel to rallies based on strength in the pork and beef product markets.   

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 7.21.14
2014-07-21T02:00


Corn

December corn gapped lower overnight to a new contract low. The contract dipped to $3.705 before selling slowed, allowing for a modest bounce off the lows. December corn typically posts a near-term low in the final third of July in record yield years, but there is no guarantee we will do so this year. Friday’s CFTC report based on positions of traders as of July 15 indicated that the speculative hedge funds still held net long (bought) positions of 75 million bushels, meaning they have plenty of potential selling yet to go.

Soybeans

November soybeans held above the July 11 low of $10.65, before bouncing late morning. Prices rallied close to their session highs, but then turned weak again in the final minutes of trade. We could have a bumper soybean crop this year, but the oilseed also has far more things that could go wrong to cut those expectations short. Virtually none of those things have happened yet, but they remain on the table as options to credit if the collective market thinking decides it’s time for a bounce.  

Wheat

Chicago prices bounced after significant sell stops below the July 11 low of $5.25, with some discussion of heavy rains hurting quality over the weekend in Germany and France. The Wheat Quality Council’s annual tour of the spring wheat belt takes place this week. Participants are scheduled to start walking fields tomorrow morning. This should provide the trade with our first hands-on look at the crop. Ironically, the region is also prime for rain over the next couple of days, providing in-time relief following a period of drier weather.

Beef

The trade is reluctant to believe that August live cattle could retest their record high of $156.50, but in the end it will be the cash market that determines where it goes from this point. Feeder cattle futures garnered strength from the fat cattle market and cheap corn today, but caution still prevailed with the charts looking a lot like a bear flag. The latest CME cash index came in at $214.48 per cwt, up $0.37 on the day, but down more than $3 from record highs set last week.

Pork

August lean hogs traded over $2 lower at times today, taking it more than $8 below the cash index, while breaking below chart support near $126. It temporarily found support at the 100-day moving average, currently at $124.38, but the weakness suggests that traders expect a significant drop in the cash market in the weeks ahead, despite strength in the 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 7.17.14
2014-07-17T02:47


Corn

Corn and wheat prices immediately pushed higher, with traders adding risk premium on the chance that the incident could escalate the war and increase sanctions, possibly blocking exports. The region exports roughly a billion bushels of wheat and 800 million bushels of corn annually. However, the initial surge in prices eased as time passed and emotions calmed somewhat. The odds of exports from the region being blocked remains somewhat low, but traders were less comfortable holding short (sold) positions until more is known.

Soybeans

Strong export demand, particularly for new-crop soybeans, lifted soybean prices late Wednesday, with follow-through demand-led buying today. However, price broke lower late today on reports that grain inspectors striking at Argentina’s Rosario port had lifted their strike. This keeps Argentine soybean and soymeal supplies on the world market, limiting demand for U.S. supplies near-term. Today’s settlement of the August contract was more than 20 cents above this month’s low, but it was still the lowest settlement price thus far this summer for the lead contract. November fell short of 11 cents shy of testing resistance just below $11.30, before reversing lower, settling near its session lows.  

Wheat

The wheat was down roughly a nickel ahead of the initial reports of the downing of the Malaysian airliner this morning. It quickly surged by more than 25 cents in a matter of a few minutes on fears that we could see exports from the Black Sea region shut down. Prices eased well-off the initial highs, but wheat traders are still a bit less comfortable being short (sold) until more is known about the incident and its implications.  

Beef

The futures market has done a poor job of anticipating reality this year. That’s largely because demand for beef has exceeded the industry’s expectations at record high prices. In fact, boxed beef prices rose to near record high levels once again this morning. Ironically, it’s been a demand rally led by hamburger more than steaks. Nothing is normal about this year’s fundamentals, but futures traders continue to try to use “normal” market factors to make trading decisions, which has repeatedly proven to be wrong.

Pork

 August lean hogs dropped to their lowest level since last Friday, with prices finally finding support at the 50-day moving average, currently at $128.10. The nearby contracts increasingly look like the high is in, at least near-term, with the cash market providing support. The deferred contracts have more at stake, but traders are waiting for harder evidence of the anticipated approaching hole in supplies later this summer and fall.

 
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 7.16.14
2014-07-16T03:05


Corn

December remains the leader. It spiked to $3.9375 when pit trade opened this morning, but that looked too attractive for many sellers to pass up. Prices trended lower off that high through most of the session, until firming again in the final minutes of trade, settling in the middle of the session’s trading range. The charts would suggest that a bounce to the $4 to $4.15 would be in order for this oversold market, but traders are very reluctant to build long (bought) positions until the fundamentals provide the excuse to do so, with downside risk still being greater in the near-term.

Soybeans

Like corn, soybean demand has benefited from the recent collapse of prices. USDA’s daily export reporting system confirmed this morning that China bought another 4.4 million bushels of U.S. old-crop soybeans after prices dropped temporarily below Brazilian values. Furthermore, “unknown destinations” bought another 8.8 million bushels of new-crop soybeans, which will be presumed to be China as well.

Wheat

Wheat proved to be the weak link of the grain and oilseed complex today. Chicago garnered some support from the Algeria purchase. We won’t likely see any U.S. wheat end up in the deal, but it does help remove competitive supplies for U.S. soft wheat from the global market. Chicago held on to very modest gains, while Kansas City and Minneapolis posted modest losses.

Beef

Weakness has emerged in the product market this week. It’s not much, but market bears are clinging to it after they sold futures last week in anticipation of a break in the product market. The August contract is still holding above support at $146.55, which it tested last week, as traders wait for direction from the cash market. Packers are said to be offering $152 per cwt on a live basis in the Southern Plains feed yard belt, while feeders are asking $158. Last week’s trade was largely $155, with some at $156.

Pork

Lean hog futures gave way to weakness in the meat sector today, with prices continuing to consolidate within their recent trading range. Support comes from declining numbers of slaughter hogs due to the PED virus, but packer margins are in the red, with carcass weights getting a boost from cheap corn and mild summer temperatures. Carcass weights are running about 5.7% above year ago levels, helping to offset the decline in numbers.

 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 7.15.14
2014-07-15T02:26


Corn

December corn fell to a new low for the move at $3.7825 today. It tried to rally off the low, but could not sustain much of a move to the upside. Buyers continue to sit on the sideline, waiting for prices to come to them. There are reports of end users taking advantage of the lower prices, but much of that is “hopeful” talk by those hoping for a more significant bounce. My greatest concern is the amount of old-crop corn that still needs to come to town to make room for crop for which we do not have enough storage. In other words, basis remains at risk of additional weakness.

Soybeans

Global demand for soybeans remains strong; but the expectation is that a near-perfect growing season will overwhelm that demand with a bin-buster crop. That could change in the weeks ahead, but traders currently have no reason to think otherwise. This morning’s USDA daily export reporting system indicated that China bought another 4.4 million bushels of U.S. new-crop soybeans. Fund managers continue to liquidate their long (bought) positions in old-crop soybeans. Today’s sell-off became too aggressive, down nearly 44 cents at one point. Buyers emerged at that point because the market was again pricing old-crop U.S. soybeans on the world market that we don’t have.

Wheat

Wheat prices consolidated inside the range of the past couple of sessions today. Chicago ended the day near its session high, while the hard wheat markets near their session lows as the soft/hard wheat spreads continue to narrow in profit taking. The market is past-due for a seasonal post-harvest rally, but thus far has not been able to put one together amid weakness in the corn and soybean pits and selling of the broader commodity sector.

Beef

Live cattle futures continue to consolidate above last week’s low, which represented a 50% retracement of the May to July rally in August futures as traders wait for additional direction from the fundamentals. Prices plummeted last week on fears that demand would drop off at these prices. Yet product prices near record highs have stabilized packer margins, currently estimated to be $35.55 per head, down from $39.30 the previous day, but up from $19.50 the previous week.

Pork

Lean hog futures continue to consolidate amid mixed signals from the fundamentals. Product prices are near record levels, but high cash prices are pushing margins negative for packers. Today’s packer margins are estimated at $0.50 losses per head, down from profits of $0.45 the previous day, but down from profits of $0.65 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 7.14.14
2014-07-14T01:52


Corn

Traders were content to allow corn prices to consolidate today in the face of firmer soybean and wheat prices, but gains were very limited, considering recent losses, due to the thick bearish cloud hanging over the market. The market is oversold and due for a correction, but that doesn't mean that prices have to bounce much. Rather, traders wanted to see this afternoon’s USDA crop progress datato see what USDA did with the crop’s ratings this week. The trade expects ratings to be unchanged at 75% Good to Excellent at a time when ratings are normally trending lower into harvest.

Soybeans

Last week’s price break briefly made U.S. old-crop soybean prices quite competitive on the global market, dropping nearby supplies at the Gulf 27 to 41 cents below Brazilian supplies. The problem is, we don’t have old-crop supplies to ship. That precipitated a quick Monday morning rally to shut off that demand. Brazilian supplies also quickly dropped in price, restoring their discount to U.S. prices.

Wheat

Wheat prices finally had some freedom to bounce again today, with the bleeding at least temporarily stopped in the corn and soybean pits. Chicago September wheat remained well below Friday’s session high of $5.4975, while Kansas City and Minneapolis both traded much closer to Friday’s high, but still were unable to take them out. As such, the bounce is nice, but it’s still premature to say whether this bounce is going to have the staying power to provide the seasonal post-harvest rally that we typically get.

Beef

The uncertainty of the cattle market remained the primary topic of conversation today following last week’s liquidation by the speculative funds. They turned sellers on the first possible sign that the product market may be ready to break. Instead, product prices finished the week near or at record high levels, but the damage had already been done. Now the question before the trade is whether that will translate into higher cash cattle prices this week, restoring strength to the futures, or whether product values will turn lower, allowing for lower cash.

Pork

Today’s cash hog market was mostly steady, after being soft late last week. The latest CME 2-day lean hog index increased $0.75 to a record $132.38 per cwt. The index has posted gains on each of the past 27 straight trading days, with gains over that period totaling $22.04 per cwt. Packer margins improved to $0.45 per head, up from losses of $1.10 per head the previous day, but down from $3.95 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 7.11.14
2014-07-11T01:46

Corn

 USDA’s July crop report held few surprise for corn traders, but that was a disappointment for many hoping for a bounce. Rather the focus shifted back to the very favorable weather forecast, with talk that USDA will likely raise its yield estimate in its August report, perhaps substantially, creating an even more bearish outlook. The agency started with the old-crop balance sheet, cutting 125 million from its feed  usage estimate following a bearish stocks report June 30, but bumping ethanol usage 25 million bushels. That increased old-crop ending stocks by 100 million bushels, resulting in a similar increase in new-crop beginning stocks.

Soybeans

 USDA cut old-crop soybean imports by 5 million bushels in its July crop report, while increasing crush by 25 and exports by 20 million. However, residual use was dropped to negative 69 million bushels, which indicates that we will eventually likely see a big increase in the size of last year’s crop. The net result was a 15 million-bushel increase in old-crop stocks, which was carried over to the new-crop balance sheet. The agency made the upward acreage adjustments seen in the June 30th survey results, while holding yield unchanged at a record 45.2 bushels per acre. The net result was a 165 million-bushel increase in production.

Wheat

Bearish news in the midst of selling in the broader commodity sector amplifies the impact of the selling, with buyers willing to let prices come to them. Hard red winter wheat saw the least bleeding from the data, largely because its domestic supplies will be the tightest of the major classes. Yet, even those supplies are projected to be at a healthy 87-day supply. Soft wheat needs to chase corn lower to get fed and hard red spring wheat is worried about surplus supplies coming south from Canada.

Beef

Live cattle posted some solid gains late in the trading session, posting a friendly reversal on the charts and allowing feeder that were the $3 daily limit lower in many contracts to firm well off their lows as well. The market’s been anticipating a break in demand at these prices for some time. We may soon get it, but thus far it lacks hard evidence that demand has been rationed. The latest CME cash feeder cattle index was $214.82 per cwt, up $0.73 on the day and just below the record high of $217.20.

Pork

Cash hogs in the closely followed Iowa and southern Minnesota market dropped more than $2 on Thursday as supply caught up to demand. Today’s cash market as mostly steady to $1 lower across the Midwest. However, much of this weakness had already been priced into the market. Packer margins are estimated at losses of $1.10 per head, down from losses of $1.05 the previous day.

 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 7.10.14
2014-07-10T02:21


Corn

Corn futures dropped to new lows once again today, marking the 8th day in a row since USDA’s June 30th reports. The decline was aided by broad-based selling of the commodity sector by equity traders worried that a sluggish economy will hurt demand for commodities. The market is oversold and past due for a corrective bounce, but few have the courage to step up and buy this falling knife.

Soybeans

August soybeans posted double-digit losses again today. The contract held above Wednesday’s low, but settled very close to the session low, suggesting that it remains vulnerable. Next significant support is at the January low of $11.9575. November soybeans sank on favorable weather, dropping below psychological support at $11. Next significant support is at the January double-bottom of $10.8825.

Wheat

Wheat gave way to selling pressure once again today. Weakness in the corn and soybean pits combined with broad-based selling in the commodity sector to pressure the food grain to new lows for the move. The wheat market would normally be carving out a seasonal harvest low, but negative money flow has made that difficult to achieve. Furthermore, there’s no compelling story to prove fund managers wrong with export sales failing to impress traders.

Beef

Futures traders started selling out of fear earlier this week and fear in the broader marketplace added to the bearish cloud hanging over the pit. August live cattle dropped to find stability at support at $148, but finished the day near the session lows. The contract dropped more than $8.50 from this week’s high, stirring talk that the high is behind us. We expect that the top will look like this, but we’ve seen other “tops” this summer as well. Long-term, the fundamentals remain strong, but short-term, the market is vulnerable to a correction.

Pork

Pork exports haven’t been as impressive as beef this year, although they’ve been good in recent weeks. However, sales in the latest week reported softened once again as product prices approached record highs amid a firming dollar. Exporters sold 8.9K tonnes of pork in the week ending July 3, down from 12.3K tonnes the previous week and down from 17.1 the week before that. Actual shipments were good at 10.4K tonnes.

 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 7.09.14
2014-07-09T02:03


Corn

Traders would have liked to have held December corn above $4 going into Friday’s USDA report, just in case it held a friendly surprise. However, buyers were difficult to find, leading the contract to break below the support level, tripping preset sell stops below it. Selling accelerated, driving the contract to $3.95. Prices bounced from that level, but still ended the day below $4 at $3.98. The bottom line is that traders appear very confident being short (sold) going into Friday’s report. They are convinced that conditions are so good for the crop that they will eventually be proved correct in their short positions, even if USDA gives the market a bounce with a friendly surprise on Friday.

Soybeans

Soybeans continued to follow the path of least resistance lower today. However, the old-crop contracts were able to rally off their lows, settling near session highs, although still negative on the day. Much of the long (bought) liquidation has been accomplished in the old-crop contracts in recent days and traders still expect USDA to confirm relatively tight old-crop stocks on Friday morning, with the average trade guess at 128 million bushels.

Wheat

Wheat futures followed corn lower today, even as prices begin to trade in an area of value on the global market. This year’s export demand is well-above the seasonal pace needed to reach USDA’s low target for the year, but traders still aren’t impressed enough to get in front of the train to turn it around. Anyone who has tried over the past month has been run over. Hard wheat traders continued to liquidate their hard/soft wheat spreads in profit taking, punishing the hard wheat markets while limiting losses somewhat in Chicago soft wheat.

Beef

The beef complex tried to push higher this morning, but could not sustain the move amid nerves that a seasonal high may be behind us. Rib primal cuts are moving seasonally lower, down $9.09 off their record high of $388.24, but the end primal cuts are higher as beef supplies tighten. Ironically, this happens at a time when pork cutout is at record high values as well. Cow cutouts continue to post new highs, with female slaughter drying up as beef cow culling has slowed to nearly nonexistent levels and heifers are held back to rebuild the cowherd.

Pork

Estimated packer margins slipped into the red today at a $0.55 loss per head, down from profits of $0.65 the previous day and profits of $0.26 the previous week. Yet, cash prices were steady to another $2 higher across much of the Midwest today. Product prices are setting records, but cash hog prices are rising even faster, leading to the poor margins. The poor margins worried traders today. The lead July contract pushed higher trying to stay ahead of the cash index, but the deferred contracts occasionally felt the pressure of negative packer margins.

 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 7.08.14
2014-07-08T01:56


Corn

The Mississippi River is largely closed north of St. Louis, due to high water. That’s leading to some movement in the basis market, depending on whether you are north or south of St. Louis in the river system. Sentiment remains bearish in the futures market, based on strong crop ratings and favorable weather forecasts, traders appear reluctant to push December corn below $4 before seeing Friday’s USDA crop report.

Soybeans

Long liquidation continued in the soybean complex, with traders dumping their old-crop positions, amid significant imports and expectations of a huge soybean harvest this fall. August soybeans gapped lower Monday, while extending those loses today. Next significant support for August is stacked between $11.95 and $12. Basis remains very strong in markets without easy access to imported supplies, but futures traders will let the cash market worry about that.

Wheat

Wheat remained under pressure today, with selling in the broader commodity complex. Values are firming in Australia on signs the market has value there, but traders remain unimpressed. Chicago tried to firm today in unwinding of soft/hard wheat spreads, but it was eventually pulled modestly lower as well. Losses in the hard wheat market were more significant as we continued to see profit taking in the spreads.

Beef

It was turnaround Tuesday in the cattle complex today, with traders taking profits while waiting for clearer direction from this week’s cash market. Packer margins are evaporating, down to $19.50 per head, down from $82.27 the previous week. Product prices are still trending higher, but they are not moving higher as fast as the cash market, creating some anxiety among traders at these lofty levels.

Pork

Lean hog futures were mixed today, with July supported by a firmer cash market, while August and October coming under pressure from shrinking packer margins. Today’s margin dropped to an estimated $0.65 per head, down from $6.11 the previous week.
Today’s cash market was steady to $2 higher. The latest CME 2-day cash index came in at $129.25 per cwt, up $0.59 on the day. It was the 23rd consecutive trading day with a higher index, which is getting very close to its early April record high of $130.35 per cwt.

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 7.07.14
2014-07-07T02:07


Corn

September corn dipped to $3.97, before bouncing back above $4 today, while the December contract came within 3 cents of testing the psychological $4 level. The trade may not want to push the December contract below $4 ahead of Friday’s USDA monthly crop report, which could precipitate some profit taking near-term. However, a violation of support at $4 in the December contract could also trigger another leg lower, with traders clearly bearish new-crop corn. Continuation of this year’s favorable weather pattern leaves this market vulnerable to sub-$3 for a harvest low, which is the greatest risk at this point after weekend model changes improved the outlook for late-summer.

Soybeans

The focus is clearly on the new-crop, with traders building short (sold) positions on favorable weather. August soybeans gapped lower, with traders eyeing the $12 mark for the next significant support. November soybeans gapped lower as well, dropping to $11.16. The contract bounced off that level, rallying to finish near the session high, but sentiment remains bearish. Soybeans are made in August, leaving some traders reluctant to test $11 this early, but USDA could change that perception on Friday.

Wheat

Wheat futures gave way to selling in the corn and soybean pits this morning. Losses were limited while the Chicago September contract held above its January low of $5.65, but the bears gained confidence once that gave way. Wheat will have to work to find its way into the feed grain market amid abundant corn supplies this year, making exports even more critical. Last week’s USDA reports did little to change wheat fundamentals, but wheat gave way to heavy selling in the other markets. That flipped the charts back in favor of the bears. Chicago September wheat held above support at its January low of $5.65 for a while, but sellers piled on again once that support gave way, with Kansas City and Minneapolis dragged lower as well.

Beef

Top-picking has been costly in this market thus far, with profits at the expense of the consumer stretching from the cow-calf man all the way to the packer. Traders are now analyzing the aggressiveness of retailers to restock their shelves following the Independence Day holiday weekend. Prices pulled back in consolidation today as traders assess that demand. Feeder cattle futures pushed to new highs today on high fat cattle prices and plummeting corn prices. Ironically, the latest CME 7-day cash index failed to make a new record high for the first time in more than a month. The index came in at $216.43 per cwt, down $0.77 on the day. The last time that the index failed to make a record high was May 29.

Pork

Lean hog futures resumed their upward trek today, supported by record high product prices that supported estimated packer margins of $3.95 per head, which supported cash prices of mostly $1 higher. Gains were again greatest in the deferred contracts as they try to catch up to PED virus loss data in USDA’s latest quarterly hogs and pigs report, but the nearby contracts also showed modest strength for most of the day, supported by firmer cash trade.

 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 7.03.14
2014-07-03T12:48


Corn

The Department of Labor reported this morning that the economy created 288,000 jobs in June, beating Wall Street expectations of 212,000, with the unemployment rate dropping to 6.1%. That told Wall Street that the Federal Reserve will likely continue to trim its stimulus and move closer to raising interest rates. That caused a sharp rise in the dollar, which tends to result in broad-based selling of the commodity sector, adding to weakness in corn and soybeans. Corn acres are small enough to create fireworks if adversity shows up on Monday morning’s outlook, but traders would likely see a favorable outlook as a near-guarantee of a bin-buster crop, leading to more selling.

Soybeans

August soybeans broke below the 200-day moving average at $13.05 today, dropping to its lowest level since February 21. The contract finds modest support at $12.96, just below today’s low, but look for soymeal prices to set the tone. We could see a rebound if the Argentine port workers strike gains traction, sending a lot of soymeal business our way, but that’s still a big unknown. November soybeans are oversold and due for a technical bounce, but the next significant support is at $11.00, and again at $10.88. Traders understand that soybeans are made in August, which could precipitate a bounce at some point, but fund managers like the current trend.

Wheat

Chicago September wheat held above its January low of $5.65, triggering more short-covering today ahead of the three-day holiday weekend. Sentiment remains bearish, but the short-covering spread to Kansas City and Minneapolis as well. The market is again trying to carve out a seasonal low, knowing that previous attempts have failed.

Beef

August live cattle pushed to the $3 daily limit higher for the first time on this bull run as the futures market struggles to keep up with the cash market. Feeder cattle futures saw strong gains as well, although traders in both pits are nervous at these lofty altitudes going into a three-day holiday weekend.

Pork

The latest CME 2-day lean hog index came in at $128.17 per cwt, up $0.66 on the day and just over $2 below record highs set in early April. We’ve seen a higher index for the past 21 straight trading days, with gains over that period totaling $17.83 per cwt. More significantly, the index is now coming close to converging with the lead July contract, allowing it to show a bit more firmness on the board. Meanwhile, the deferred contracts continue to push higher following Friday’s bullish USDA quarterly hogs and pigs report showing tighter supplies 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 7.02.14
2014-07-02T02:32


Corn

Corn prices continued to drop lower today, although selling is slowing somewhat as the lead September contract approaches support on the long-term continuation charts at $4.10, and again at $4.06. Psychological support also sits at $4.00. Prices are oversold and due for a bounce, particularly ahead of the holiday weekend. However, thus far nobody wants to be long (bought) amid trade expectations for a giant crop this year.

Soybeans

Soybean futures plummeted following Monday’s trifecta of USDA reports that fed the bears, reaching oversold conditions. It’s difficult to be bullish new-crop soybeans near-term, despite good global demand, due to trade expectations of a bin-buster crop. However, we could see some short-covering surrounding the Fourth of July holiday break. A look back at history finds that the lead soybean futures contract settled higher on the final trading day ahead of the break in 9 of the past 12 years, but gains and losses were evenly split on the first trading day back over that 12 year period.

Wheat

Traders have been bearish Chicago soft wheat for quite some time, anticipating a big crop that would face stiff competition from Europe and the Black Sea region. However, the hard wheat fundamentals looked stronger, leading them to sell Chicago soft wheat, while building modest long (bought) positions in the hard wheat markets. That bias has limited the scope of weakness in the Chicago market in this week’s broader grain collapse, leaving the hard wheat markets more vulnerable. Long liquidation and spread unwinding in the Kansas City and Minneapolis markets continued to add to losses for hard wheat today, while Chicago benefited, posting modest gains at times. However, overall sentiment remains bearish, with Europe and the Black Sea still hurting U.S. soft wheat sales.

Beef

Most live cattle contracts posted new highs today, but traders also showed their nerves at these lofty levels ahead of a three-day holiday weekend as they waited for cash trade to unfold. The August contract has a technical objective just below $160 if it can establish itself above $153, but that’s assuming that we don’t get a post-holiday break. Feeder cattle futures followed a similar path today. The latest cash index came in at a record $216.92 as the cash market now threatens to blow past the futures market. It was the 22ndstraight trading day with a record cash index and the 38th out of the past 41 days. Gains over that period total $37.36 per cwt.  Cheap corn prices and expectations that they will be even cheaper in the months ahead are fueling the demand for light-weight cattle.

Pork

The deferred lean hog futures contracts continue to move higher as traders build expectations of fewer slaughter hogs in the months ahead following Friday’s bullish USDA quarterly hogs and pigs report. Meanwhile, the nearby contracts continue to consolidate at already high levels after that same report showed more than expected heavy-weight hogs.

 
 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 7.01.14
2014-07-01T03:25


Corn

Sentiment remains bearish, with expectations of a record yield and rising supplies. Fund managers like the current trend and would like to keep it going with market bulls lacking any hard data to prove the bears wrong. We saw prices come off their lows late today, suggesting that traders may be ready for consolidation to fix an oversold market, but it would likely take an emerging weather scare to turn this train around.

Soybeans

Soybeans came well-off their lows today, suggesting that prices likely dropped too far too fast, but few are willing to make a bullish argument for the oilseed following USDA’s bearish trifecta of reports Monday. Keep an eye on the Argentine story, as it will likely provide the impetus to surprise traders on the demand side of the ledger down the road, but for now the focus is clearly on expectations of burdensome supply.

Wheat

Wheat is caught up in the bearish frenzy, not only of the grain trade, but the broader commodity sector. However, the Egypt purchase of Romanian and Russian wheat did little to argue otherwise. The hard wheat markets are under greater pressure as traders take profits on the hard/soft wheat spreads after they expanded to historically high levels.

Beef

Live cattle futures came under some pressure on Friday, and again on Monday, prompting some speculation that the market may finally be putting in a seasonal high. The market typically corrects lower in the summer as supplies increase and heat discourages barbecue interest. However, the fundamentals beneath the market remain amazingly strong. It’s too soon to make presumptions about the recent price weakness, but much of it likely had to do with fund managers desiring to show a portion of their profits on their quarterly statements, with the fiscal quarter ending on Monday.

Pork

Lean hog futures surged on Monday in response to Friday afternoon’s bullish USDA quarterly hogs and pigs report, but reality returned today. We still saw the deferred contracts show strength on a much smaller number of light weight pigs due to the PED virus, but traders also focused on the fact that the report showed more heavier-weight hogs than expected, leading to some profit taking in the nearby contracts.

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 6.27.14
2014-06-27T02:15


Corn

Corn prices continued to consolidate just above areas of chart support today. Rallies are generally sold, but short covering ahead of Monday’s USDA data dump provided support. The trade expects USDA to peg corn stocks at 3.722 billion bushels Monday, up nearly a billion bushels from the previous year. We’re not going to run out of corn ahead of this year’s harvest, despite the strength of demand from ethanol processors.

Soybeans

Considering this year’s strong soymeal export program, the DDGS supplies are welcomed to fill the gap of tight meal supplies. The above had supported soybean prices Thursday, turning the charts higher. However, this morning’s Stats Canada report helped tipped emotions the other way, leading traders to suddenly worry that they were leaning too hard to the bullish side going into Monday’s reports, especially with USDA likely to increase acreage and with weather supporting the prospect of record high yields.

Wheat

The hard red wheat markets in Kansas City and Minneapolis led the market higher today with a boost from the Stats Canada report. However, the KC September contract remains vulnerable below $7.41, with many traders still pointing toward expectations of stiff competition from overseas. The trade expects USDA to peg June 1 stocks at 598 million bushels Monday, down from 718 million the previous year. However, the trade also expects export demand to plummet in the year ahead, leaving this year’s stocks adequate to meet end user needs. Hard red winter wheat supplies will be the tightest, but that is largely factored into the market, with Gulf HRW priced roughly $2 above SRW for export.

Beef

Lean hog futures had a firmer tone for the nearby contracts and weaker tone for the 2015 contracts today. Overall, traders were nervous ahead of this afternoon’s USDA quarterly hogs and pigs report. Product movement dropped to 207 loads Thursday as retailers began to balk a bit at near-record high prices, down from 326 loads the previous day and down from 277 loads the previous week. Strength in the belly market was more than offset by sharply lower ham prices, leading to a drop of $1.86 in the composite pork product price to $131.81 per cwt. Movement at midday today was very slow at just 96 loads. However, the composite price firmed slightly to $131.89 per cwt, up 8 cents on the day.  

Pork

Lean hog futures had a firmer tone for the nearby contracts and weaker tone for the 2015 contracts today. Overall, traders were nervous ahead of this afternoon’s USDA quarterly hogs and pigs report. Product movement dropped to 207 loads Thursday as retailers began to balk a bit at near-record high prices, down from 326 loads the previous day and down from 277 loads the previous week. Strength in the belly market was more than offset by sharply lower ham prices, leading to a drop of $1.86 in the composite pork product price to $131.81 per cwt. Movement at midday today was very slow at just 96 loads. However, the composite price firmed slightly to $131.89 per cwt, up 8 cents on the day.

 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 6.26.14
2014-06-26T04:15


Corn

Short-covering ahead of first notice day and Monday’s reports provided some support today. Further support came from a private firm’s estimate for corn acreage. The firm estimated this year’s corn acreage at 89.311 million acres based on its survey of Midwest producers. Plugging that number into my spreadsheet with the current yield estimates yields ending stocks for 2014-15 of 1.37 billion bushels. That’s not bullish, but it is less bearish than current trade expectations. As such, traders took a few of their profits off the table ahead of the report, just in case.

Soybeans

November soybeans reacted to better chart signals to post highs for the month, despite expectations of record yields on higher acreage this year. The fundamentals are bearish for new-crop soybeans, but it’s never wise to argue with the chart signals this time of year. Next resistance of note is $12.50.  

 Wheat

Chicago September wheat bounced off $5.80 as traders position for the end of the month, end of the quarter and USDA’s approaching reports. September KC wheat bounced off support at $7 mid-week, adding to those gains today. It’s time for a seasonal rally, although bounces have been sold to this point, so caution is warranted.

Beef

Strength in the fat cattle market certainly supports the feeder cattle market, as does expectations for cheap corn. But the feeder cattle index continues to push futures prices higher, with reports of video auction light-weight cattle moving for more than $241 per cwt. The latest CME cash feeder cattle index came in at a record $207.93 per cwt, up $0.30 on the day. It was the 18thconsecutive day with a new record high and the 34th out of the past 37 trading days with a new record.

Pork

The July contract garnered support from the cash index today, while the deferred contracts saw follow-through profit taking selling ahead of tomorrow’s USDA quarterly hogs and pigs report. However, the August and October contracts firmed to erase their losses by the end of the day. It all hinges on Friday afternoon’s USDA report now.

 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 6.25.14
2014-06-25T03:30


Corn

December corn continues to hold above the January low of $4.35. We could still see some short-covering ahead of Monday’s report, but thus far rallies have been sold. Traders are likely reluctant to push prices below $4.35 until they see Monday’s USDA data, as well as get a better handle on July weather forecasts.  

Soybeans

Soymeal prices firmed today, providing modest support for soybeans as well. Futures firmed as soymeal basis strengthened by as much as $5 in the Indiana truck market, while it was $1 to $2 higher for nearby shipments in the export markets. Northern Midwest flooding slowed barge loadings on the Upper Mississippi River system, limiting supplies for the export market. Persistent rains are also slowing rail movement of soymeal, backing up some shipments needing delivery. July soymeal is consolidating near $450 per ton, which is also near the 100-day moving average of $451.10. Old-crop soybean charts could easily go either way, pending Monday’s data, while November soybeans continue to hold above support at $12.10, followed by $12.00.

Wheat

Wheat futures pushed lower on global competition early today, before firming to settle near session highs. The market is past due for a more significant seasonal rally, but thus far rallies have been sold. We will likely need to see either a significant problem overseas or impressive exports to turn sentiment in Chicago.

Beef

Live cattle futures pushed to new highs for the move today on profitable packer margins estimated at $99.14 per head. Margins increased as product prices rose to record high levels, suggesting that we could see firmer cash prices this week, even though supplies are expected to increase at a time when packers will be buying for a holiday-shortened slaughter week next week.

Pork

Lean hog futures surged on Tuesday amid bullish expectations that USDA would confirm tight supplies in Friday’s quarterly hogs and pigs report. That report is expected to show market hogs held for slaughter down 3.2% from the previous year, with the biggest drop in the heavier weight hogs. However, the trade rushed to take profits today, recalling USDA’s pattern of bearish surprises over the past several reports.

 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.