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Water Street Solutions Daily Report 2017.6.28
2017-06-28T02:16

Corn demonstrated indecisiveness related to weather in anticipation of the acreage report on Friday, -2 ½ at 3.56 ¾ (July) and –1 ¼ at 3.76 ¼ (Dec). The EIA Ethanol report released today for the week ending June 23rd was positive, showing production up over last week while stocks were down. Ethanol production for the week averaged 1.015 million barrels/day, which is 2.53% over last week and 1.20% over last year. Ethanol stocks were down 1.98% compared to last week, but up 3.17% over last year. Related to the acreage report, a survey of Wall Street Journal analysts is expecting corn acres to tally 89.82 million acres compared to 94 million last year. Will predictions match the USDA’s thoughts or are we in for a surprise?

Soybeans found strength in a weak Dollar and the positive action of wheat, +2 ¾ at 9.14 (July) and +4 ¼ at 9.21 ¾ (Nov). Most of the bearish fundamentals regarding acreage and stocks have been built into the equation, and there is anticipation surrounding the EPA’s pending announcement on biofuels very soon. How much will this positively impact domestic soy oil and the soy complex? It will definitely be positive, and tariffs that will be levied against Indonesia and Argentina imports have yet to be enacted, so between the two soybeans should have some positive ahead. A little trivia to consider – the average daily price range the last 10 years on stocks and acreage report day is 51 cents, with the average close up 31 cents. So, needless to say, this will be a pivotal report on Friday at 11am. 

Wheat is being driven by poor conditions and expectations of more dry weather ahead in spring wheat growing areas. Minneapolis had another breakout day, as its lower quality siblings were able to piggyback for the ride. Minneapolis finished +24 ½ (July), while Chicago and Kansas City finished +4 and +4 ¼ respectively. How long can MN keep up this torrid pace? Yield predictions for spring wheat continue to fall, the latest at 34-35 bushels/acre. Also, Canada, planted more canola than spring wheat and their conditions are also causing concern, and tomorrow morning will feature final Canadian planting estimates. It is likely when the spring wheat runs its course, the winter wheats will follow, as their fundamentals have improved. There are still global weather and dryness concerns that are looming in the background, but also an abundance of stocks to chew through. 

Live Cattlewas able to grab on to hog’s coattails and bounce back from a rough start, finishing positive, +.600 at 115.625 (August). Packer margins are turning heads at $229.25/head. Boxes are lower with both Choice (-$2.30) and Select (-$1) down. The Fed Cattle Exchange will be closely monitored with 2,500 head on the sale block – will sales be higher than last week’s cash? Also, carcass weights will be released tomorrow, and traders will be looking for any changes in the underweight status compared to last year that has been demonstrated by both steers and heifers.

Hogs are not giving an indication that they are done yet, as the front month led the way +1.450 at 87.925 (July). August ended +.925 while October was at +.525. Like cattle, packer margins continue to increase ($28.19/head) and carcass values were up $0.96/cwt. The Hog & Pig report tomorrow will be looked to as a barometer for direction, as the U.S. breeding herd is expected to increase 1-2% over the same period last year, and animals kept for marketing are estimated to increase by 3-4% over last year.

In Other News, the Brazilian Real has stabilized but is expected to continue to weaken with upheaval in the country. It is thought that President Temer will be tried for impeachment in early July, with the JBS meat scandal looming in the background. With Brazil’s large crop yields this year, the weak Real will make it harder for U.S. exports to be competitive on a global basis. 


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 2017.6.27
2017-06-27T02:22

Corn responded to the less than bearish crop conditions report and uncertainty with weather (especially in July) to finish mildly positive, + ¼ at 3.59 ¼ (July) and + ½ at 3.77 ½ (Dec). The USDA rated corn crop conditions at 67%, which is below trade expectations and the year-to-date average of 69%. Of the Big Four corn producing states (IL, IA, NE, MN), Illinois stood out as being 16 points behind last year. Nationally, the poor/very poor category increased from 5% to 8%. To put things in perspective, last year at this time conditions were a lofty 75%. How will this bode if we are to run into more challenging conditions during pollination? Based on corn pollination maps the third week of July will be pivotal, showing about 25% of the corn growing area “dry” (especially in the northwestern region). All eyes are on Friday’s Acreage Report and any surprises that may be in store. Will corn acreage be closer to analysts’ expectations of 89.9 million acres or more on par with the March Intentions Report’s 89.99 million acres? The quarterly grain stockpile report will also be announced at the same time. Corn usage continues to chew up big demand, so any confirmation of less than expected acres will be impactful. Managed money’s net short position has grown to around 130K contracts.

Soybeans received support from action in corn and wheat as well as a strong soy oil market, +4 ½ at 9.11 ¼ (July) and +3 ¾ at 9.17 ½ (Nov). The USDA crop conditions report was down a point from last week and 2% below analysts’ expectations, coming in at 66%. To give a bigger picture perspective, 75% was rated good/excellent last year at this time and the year-to-date average is 69%. As with corn, anticipation for the acreage report is reaching a feverish pitch – will acres increase from the previous intentions numbers showing 89.48 million acres to the 89.8 million that is expected by analysts? Soybean stocks will also be important to consider with expectations at .983 billion bushels compared to last year same time of .872 billion bushels. Look for the EPA to release its RVO (Renewable Volume Obligations) mandates this week, which should increase biofuel requirements, helping the soy complex. 

Wheat reversed course this Turnaround Tuesday against the backdrop of a declining Dollar and poor crop conditions, +3 ¼ Chicago, +4 ¼ Kansas City, and +21 Minneapolis (July). Weather is mixed, with Europe getting some moisture relief but still a lot of stress globally from lack of moisture in parts of US, Canada, Australia and the Ukraine. Both North and South Dakota as well as Montana continue to struggle with dry weather and no relief in sight in the 6-10 day forecast. The USDA crop conditions report was instrumental to the market also, as spring wheat was downgraded yet another point to 40% good/excellent (expectations of 41%). This in stark contrast to last year’s 72% G/E and 74% average year-to-date. Minneapolis is the leader and the winter wheats are taking its cue. Harvest for winter wheat was reported by the USDA at 41% complete compared to 42% last year and 35% average year-to-date. 

Live Cattleafter locking limit up yesterday, did a complete 180 degrees, finishing -3.250 at 115.025 in August, with feeders in lock step -4.575. While packer margins are very strong, boxes are lower in both choice and select cuts. The Cattle on Feed report on Friday may be encouraging bearish mindsets, as placements were the highest for the month of May since 2007, leading traders to wonder the effect on August and October cattle, even with strong demand.

Hogs saw a battle of buyers and sellers in back and forth trade, with August -.125 at 78.550 and October –.725 at 67.650. July has led the way to high levels on the chart, dating back to the last week of April. Exports and retail demand have been good and packer margins continue to be profitable. As we approach and pass the July 4th holiday, it is thought that seasonal influences will start to weigh in on fundamentals. The Hog & Pig report will be released this Thursday.


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 2017.6.26
2017-06-26T03:10

Corn traded both sides of the open throughout today’s session closing +1¼  at $3.59 July. Between high temperatures in Ukraine, drought concerns in northeast China and heat moving back into the US forecast, the market found some light support this morning. A rare late June cold temperature event brought scattered light frost to some parts of the upper Midwest with a few reports of frost damage to crops. Last Friday’s COT report showed managed money and large spec traders rebuilding their large short position and the USDA weekly corn inspections were below expectations for the week ending June 22, as they were announced at 965,608 MT compared to estimates of 1.0 MMT.

Soybeans traded higher today closing +2¼ at $9.06 ¾ July. Widespread rains of .75 to 5.5 inches across the Midwest and including the eastern Dakotas and much of Nebraska failed to pressure the market overnight and throughout today’s session. The USDA released weekly inspection numbers and soybean inspections came in slightly over estimates at 315,099 MT vs. thoughts of 300K MT. The USDA also reported a sale of 110,000 MT of soybeans to Bangladesh. 

Wheat had a negative day today closing -8 at $4.65 ½ Chicago September, -11 ¼ KC July and +2 ½ MN July. The downward move is thought to be related to the expectation that Europe will receive good rain coverage this week; however, Ukraine will remain mostly dry and French wheat conditions dropped 6% with continued hot/dry weather. The USDA weekly inspection numbers for the week ending June 22 exceeded expectations coming in at 629,070 MT vs estimates of 500K MT. 

Live Cattle closed limit up on a technical bounce of +3.0 at $118.275 August. Friday’s cattle on feed report showed placements for the month of May came in at 112.2% of last year as compared with trade expectations at 110.4% of last year. This is the highest placements for the month of May since 2007 and will be seen as bearish for August and October cattle.

Hogs traded higher throughout the day closing +1.725 at $87.025 July. USDA pork cutout values came in at $100.44 up $1.47 from Thursday and up from $94.90 the previous week. The USDA estimated hog slaughter came in at 419,000 head for Friday and 2,000 head for Saturday. Bringing the total for last week to 2.144 million head. Down from the previous week, but up 2.3% from this same time a year ago.


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 2017.6.23
2017-06-23T01:57

Corn is down over 20 cents this week, trading at the bottom of the range established this past spring/winter, -5 at 3.57 ¾ (July) and –5 ½ at 3.75 ¼ (Dec). Managed funds have sold a large chunk of contracts the last few days, taking them up near the 100,000 mark again. Watch for short-covering with even the smallest changes in weather forecasts and perceptions. While rains have been spotty, almost 70% of the growing region has received precipitation, with no real threats pending and cooler/milder weather on tap for the next few days. The Acreage Report in conjunction with ending stocks next Friday will be pivotal to confirming whether 90 million planted acres is still the bullseye, or if the target has changed.

Soybeans were able to put in a late push in the front month, + ½ at 9.04 ½ (July) and –2 ¼ at 9.11 (Nov). The last few days have featured a sharp decline, as lower lows have been the fare of the week. With improved weather and a lack of fresh news, the market is not able to spur buyers to step forward. On a positive note, Chinese demand for soybeans continues to grow as it was announced that Chinese imports to-date are 20% higher than last year. The acreage report on June 30th will be important for short-term direction until the growing season for beans becomes clearer. Today’s close below 9.09 ½ took out the low on a weekly chart to a level not seen since April of 2016. 

Wheat is the only grain with a story, as it was able to leverage concerns with drought and quality issues sustain a moderate gain in Minneapolis HRS, +3 ¾ (July). Chicago SRW (-1 ½) and Kansas City HRW (-3 ½) traded both sides of the coin before settling on “tails”. Areas of eastern Montana and North and South Dakota are continuing to see expansion on the Drought Monitor. The wheat harvest is running 3 points ahead of average at 28% complete. Oklahoma and Texas are leading the way at 77% and 74% respectively. Oklahoma is sitting on a good/excellent condition rating of only 47%. As a general trend the early planted wheat is below average and the later planted is above. Wheat quality remains front and center as there is a growing trend of receipt cancellations due to low protein levels. Fifty contracts of HRS were recently canceled out of Duluth. And, world production continues to take a hit due to heat and dryness, with the ARC recently estimating EU to 138-139 MMT, which is down 12-13 MMT from the USDA June forecast. 

Live Cattle found support in a USDA announcement last night that all fresh/frozen Brazilian beef imports would be suspended, +1.000 at 115.275 (August). In practice it is a small amount of only 6.6 million lbs of the U.S. monthly production of 1.96 billion lbs in April. It was only recently that Brazil had gained entry into the U.S. beef market and they had started to increase shipments. Cash cattle has steadily declined over the past two weeks from $137 to $119. While the general direction of the beef cut-out has been down, overall demand is still good. Key support is around the 113 level. Cattle on Feed report will be released today after the close.

Hogs saw long liquidation selling today, to a much greater degree in the deferred months, with July +.275 and August and October –1.225 and –.675 respectively. The Cold Storage report was slightly bearish, and yesterday featured a downturn in the market from a high level not seen since 2014. The USDA pork cut-out values were down $1 from Wednesday to Thursday to $98.97 but still up from last week’s $94.23. Packer margins were lower at around $21.22/head. Look for the Hog & Pig report next Thursday.


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 2017.6.22
2017-06-22T03:54

Corn could not find any positive momentum as the story continues of a normal forecast for the Corn Belt featuring cooler temperatures and average rainfall into the July 4th timeframe, -6 at 3.62 ¾ (July) and –6 at 3.80 ¾ (Dec). USDA weekly export sales had corn within the estimated range, pegged at 528,800 MT for old crop and 124K for new crop. And, corn basis has been weakening due to Tropical Storm Cindy impeding grain loadings in the Gulf region. Argentina is emerging as a threat to U.S. corn exports as their peso is just below a record low and their July corn is within 2 cents of Chicago. According to Ag Resource, both Argentina and Brazil are offering FOB corn cheaper than the U.S. well out into October. This is the result of their large exportable corn surplus and currency valuations.

Soybeans experienced a sharp drop, taking out key resistance, based on a lack of a story, normal weather patterns and poor export numbers, -14 ¾ at 9.04 (July) and –14 ½ at 9.13 ¼ (Nov).  The Dollar was up today and the Brazilian Real has been weakening, adding to the bearish tilt. In that vein, it was reported that China had purchased 9-10 cargos of Brazilian beans, which is much higher than the assumed 1-2 cargos. The USDA announced weekly export sales at 111,200 MT of 2016/17 and 3,800 of 2017/18 compared to expectations of 350K-750K MT. Other stories to monitor include the impending EPA biofuel mandate announcement, action on proposed tariffs on Argentine and Indonesian biodiesel dumping into the U.S. market, as well as the June 30th acreage report. The acreage report is not expected to be bullish beans, as the market is expecting a bump in acres if anything. Other news included Egypt looking for 30K MT of soyoil for August shipment. 

The wheat complex took a different approach, finding strength in a more bullish fundamental story, and scrapping to a strong recovery into the close: Chicago -3 ¼, KC even, and MN +7 ½. Wheat was the standout on the USDA weekly export sales report, as numbers well exceeded the estimated range of 300K-500K MT at 542,900 MT. Egypt reported that they were in today for 175K MT of Romanian and Ukraine origin wheat. The global drought monitor has some hot spots that require a close eye. However, recent weather improvements across European growing areas and a rising Dollar added a measure of weakness today. Minneapolis is once again leading the pack on un-improving drought concerns in both North and South Dakota. 

Live Cattle picked up where it left off yesterday, gapping lower at open and continuing to give up gains throughout the session, -1.075 at 114.275 (August). The market is overbought and expectations tend bearish for the Cattle on Feed report tomorrow afternoon. However, packer margins are still very profitable.

Hogs filled the gap on the way down today in the front month, -1.050 at 85.025 (July), while the deferred showed larger moves negative. It has been a steep climb the last several weeks for hog futures, and the seasonal nature of the selling cycle may be starting to influence direction. Keep an eye on exports and domestic demand, as they have been key drivers of this recent rally. The Hog & Pig report will be released a week from today.


All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading and may not be suitable for all investors.

Water Street Solutions Daily Report 2017.06.21
2017-06-21T02:35

Corn traded both sides of unchanged before settling in the red, -1 ¼ at 3.68 ¾ (July) and -1 ¼ at 3.86 ¾ (Dec). EIA Ethanol reported ethanol production down 1.2% compared to last week, but up 2.91% compared to last year. Ethanol stocks were down 1.16% from last week, but up 5.54% compared to last year. Corn used for ethanol so far this year is 4.41 billion bushels, with the USDA estimate a target of 5.45 billion bushels for the entire year. Ethanol blending margins are now negative and ethanol exports are slowing due to Brazil becoming competitive from a pricing standpoint. The 6-10 day weather outlook is very good over much of the Corn Belt, making it difficult to sustain any kind of a rally. Managed funds have rebuilt a portion of their net short position, as it was estimated going into today’s session at 70,000 contracts short. Important dates upcoming include option expiration this Friday (for July contracts) and the highly anticipated June 30th acreage report.

Soybeans continue to trade fundamental weakness along with weather, -9 at 9.18 ¾ (July) and –11 at 9.27 ¾ (Nov). There is continued chatter about the EPA biofuels mandate announcement which is thought to be soon. Keep an eye on Trump’s appearance this evening in Cedar Rapids, IA, to see if the President addresses the topic and outlines a proposal. Expectations are for the new mandate to increase demand for soyoil by up to 350 million lbs. Additionally, the tariff to be announced on incoming biodiesel due to dumping by Argentina and Indonesia into the U.S. market should further amplify domestic demand. As with corn, the next big date on the calendar is June 30th, featuring the June quarterly stocks report along with acreage report, which is expected to tend bearish for beans. 

Wheat trended lower on profit taking, after leading the grain complex of late: Chicago SRW -8, Kansas City HRW –6 ½, and Minneapolis HRS –9 ¼ (July). With relatively quiet news it makes one wonder – are rains forecast for Europe expected to be more impactful than anticipated? The chatter has been above average temperatures and below average precipitation for Europe and the Ukraine. According to Ag Resource, HRW early harvest results are less than stellar, with fields offering yields of 20-32 bpa with test weights of 56-59 and low protein levels expected. This is resulting in old crop KC wheat receipts being canceled as industry is looking for protein in the upcoming season. At this point, until spring wheat can show improvement, it is likely wheat will continue its ascent up the charts. 

Live Cattle had a setback, not able to build off yesterday’s selling exhaustion, -.550 at 115.350 (August). The market is still overbought and 2nd and 3rd quarter cattle production, estimated at 415 million lbs, is dragging down the market. Trade is expecting the cash price to come down to around $120. The Cattle on Feed reports will be released this Friday at 2pm. Expectations are for On Feed at 102% of last year, placements in May at 110% of last year, and marketings at 109% of last year’s level.

Hogs continued their divergence from cattle’s trend, forging a new high in the front month, +1.100 at 85.000 (July). August and October contracts followed the upward trend with modest gains.  The pork cut-out continues to grow, up $.74 from Friday, which is the highest level since November 3, 2014. The cut-out is being led by bellies and hams. Even with large production (430K head yesterday), demand is winning the day. Technical momentum indicators are pointed higher so look for more positive movement in the near-term.

In other newsSonny Perdue, U.S. Ag Secretary, is scheduled to meet today in Savannah, Georgia, with his Mexican and Canadian counterparts in order to lay the foundation for talks later this summer to re-negotiate NAFTA. Mr. Perdue indicated changes are needed to the 25-year-old agreement regarding changes in global production, changing consumer tastes and technological changes. Robert Lighthizer, U.S. Trade Representative,  is also going before the Senate and the House to talk export trade as concerns are mounting regarding Mexico shifting to alternative sources. For example, U.S. soy meal trade with Mexico this year is down 15% and corn exports down 6%.


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 2017.6.20
2017-06-20T02:08

Corn responded to Turnaround Tuesday with a spoiler mindset, taking out and closing on the July contract low resulting from Thursday’s volatile action, -5 ¼ at 3.70 (July) and –5 ¼ at 3.88 (Dec). The market needs an ominous weather outlook to change sentiments. With the managed funds now out of their large short position, it is going to take something on a larger scale to give them a reason to buy the corn market. The USDA rated corn 67% good/excellent, which was unchanged from last week.  However, 2% moved from good to excellent. This is still well behind the 75% rating last year at this time. Indiana stands out in the worst spot, with a 45% good/excellent rating compared to 72% last year. On the ethanol front, Mexico’s Regulatory Commission announced it will make an upward revision in the amount of ethanol that can be blended with Mexican gasoline, from less than 6% to 10%. This will bring it more into alignment with U.S. and Canadian standards, and could be a plus for the ethanol market.

Soybeans tested last Thursday’s low, but were able to hold and close above it, -10 at 9.27 ¾ (July) and –9 ¾ at 9.38 ¾ (Nov). The USDA pegged soybean conditions up 1% over last week to 67%, with the trade expecting 68%. In South America, it has been reported by private analysts that Brazilian farmers have been holding onto their current soy crop, with only 58% sold compared to 76% sold at this time last year. A couple of positives to keep in mind, it is expected that the EPA will soon announce their biodiesel mandate, and it is rumored that President Trump may address the topic during his visit to Cedar Rapids, IA, tomorrow evening. Secondly, it has been reported that a Chinese delegation will visit the U.S. the second week of July to sign contracts in Des Moines to buy more soybeans. While it is largely a symbolic gesture, the Chinese have continued to ramp up soybean purchases and this will only help to cement the relationship with U.S. growers. 

Wheat was mixed with Minneapolis leading the charge fueled by yesterday’s condition report, +16 ¼ (July). Spring wheat received a poorer rating than expected from the USDA, as crop ratings showed 41% good/excellent compared to a dismal 45% last week. The market was expecting 47%. This news also helped boost Chicago SRW (+5 ½) and KC HRW (+1 ¾). The theme in Chicago has been short-covering, as funds have reduced their net short position significantly over the past week. Keep an eye on the Drought Monitor regarding dryness north of the Black Sea, Europe and Australia, which are important production areas. It is surprising that the worldwide drought story has not yet provided more support to the market. Even with spring wheat’s positive momentum, some restraint may be in order for traders as market indicators are now in overbought territory. But, the wheat market is thinly traded, and if it decides to take off on a rally it will go! 

Live Cattle fell sharply before running out of sellers, forming a “hammer” on the charts to finish down slightly -.200 at 115.900 (August). The long-term outlook tends bearish, with record production expected in the 3rd quarter along with cattle weights gaining from their lows earlier in the season. Yesterday afternoon saw a mix in the cuts with choice down $.38 and select up $1.56. It is worth noting that pasturelands on the Northern Plains are not showing improvement regarding crop condition ratings. As a matter of fact, North Dakota showed 54% poor to very poor while South Dakota’s poor to very poor increased week over week from 45% to 49%. This is a first for both states to be in this poor of condition at this time of the year. With speculators in a large net long position in cattle, long liquidation selling could continue to weigh on futures if support levels do not hold.

Hogs continued their divergence from cattle’s trend, forging a new high in the front month, +1.100 at 85.000 (July). August and October contracts followed the upward trend with modest gains.  The pork cut-out continues to grow, up $.74 from Friday, which is the highest level since November 3, 2014. The cut-out is being led by bellies and hams. Even with large production (430K head yesterday), demand is winning the day. Technical momentum indicators are pointed higher so look for more positive movement in the near-term.

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 2017.6.19
2017-06-19T02:44

Corn was down sharply to open the week on improved weather and results from the COT report Friday afternoon, -8 ¾ at 3.75 ¼ (July) and –8 ¾ at 3.93 ¼ (Dec). It came as somewhat of a surprise that the Commitment of Traders report showed managed funds’ position in corn (as of June 13th) short a mere 17,929, which would make it basically flat as of today. This took trade by surprise, as expectations were for managed funds to still be positioned around 50K contracts short. The fact that managed money had maintained such a large short position, had offered optimism that if a short term rally were to commence, this would spark a larger move. Now that this variable is out of the picture, it is day by day, with the June 30th acreage report the next key date on the calendar. It is thought that a large amount of farmer selling muted a larger move to the upside while the funds were covering their short position. Ethanol profitability is a bright spot, as there is general consensus that Midwest plants are clearing $.20-.30/bushel. USDA weekly corn inspections were above expectations for the week ending June 15th, as they were announced at 1.218 MMT compared to estimates of 1.0 MMT. Look for corn condition ratings later this afternoon to show a slight improvement over last week. Will wheat’s story be able to help carry the load and pull corn along?

Soybeans traded both sides influenced by weather, the negative pull of corn and  a stronger Dollar, -1 ¼  at 9.37 ¾ (July) and -1 ½ at 9.48 ½ (Nov). USDA weekly soybean inspections came in slightly under estimates at 275,461 MT vs. thoughts of 300K MT. This is still within the range needed for beans to keep pace with the USDA predictions for the 2016/17 marketing year. Rumor has it that President Trump may announce the renewable fuel mandate proposal when he visits Cedar Rapids, IA, this week. What would that mean? Expectations are for an increase of biofuels, which in turn would increase demand for U.S. soyoil. While recent rains have been beneficial, the real threats to the crop are still ahead. Look for soybean crop conditions to get a boost from the 66% good/excellent reported last week. And, keep an eye on areas in the Dakotas, Nebraska and western IA who missed out on the recent rains and are looking at a dryer forecast. 

Wheat continues to lead the grain futures while battling the bearishness of corn, as wheat quality is front and center, +1 ¾ Chicago (July). Kansas City HRW and Minneapolis HRS finished with a whimper, -1 and -4 ¾. All eyes will be focused on the crop conditions report which should show a slight improvement, as spring wheat ratings plummeted 10 points last week. Will any more surprises be in store? Wheat made it 2 for 3 (joining corn), exceeding USDA weekly inspection numbers, as they were pegged a solid 739,634 MT for the week ending June 15th compared to estimates of 600K MT. While managed funds covered some of their short positions, the COT report showed wheat still with significant shorts compared to corn. Weather is an issue for wheat presently, as over a quarter of N. Dakota is in a severe drought while Montana and the rest of the Dakotas will see less rain in the near term. Additionally, Europe and the Black Sea region are also seeing some of the same dryness issues. 

Live Cattle continued to plummet from the high experienced a couple weeks ago, -2.075 at 116.100 (Aug). Cash fed and feeder cattle prices declined sharply last week as fed cattle showed a drop of $6-8 per cwt, while feeders had a setback of $5-10. Even at that, prices are still above last year at this time. Two big stories are looming in the background. The first is the opening of the Chinese market to American beef and the associated protocols that must be met, i.e. traceability of cattle breeder origin, no ractopamine and only natural growth hormones. The second, impacting retail grocery, is the acquisition of Whole Foods by Amazon. These are both potential industry game changers whose impact is yet to be felt.

Hogs are clicking on all cylinders as profitability is high from producer to retailer, with underlying strong export demand providing support, +1.575 at 83.900 (July) and +2.350 at 81.475 (Aug). Also giving a boost are tightening supplies of barrows and gilts. Exports comprise about 15% of the U.S. production pie, and appetites are continuing to grow globally. Growth of hog kills by 4% is predicted for this year and next. The Hog & Pig report later this month combined with demand will be key to future direction.

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 2017.06.16
2017-06-16T03:05

Corn was able to exert a Friday surge to finish the week almost gaining back all that was lost from earlier in the week, +4 ½ at 3.84 (July) and +4 ¼ at 4.02 (Dec). Weather overall is definitely not bullish, with a plethora of rains blanketing the growing region and more predicted next week. However, the recent focus on the models lining up for a hotter and dryer last week of June and first week of July has some skittish. This in conjunction with the USDA acreage report on June 30th, could produce volatility. Wheat’s bullishness is also providing support to corn and beans, as less acres and lower quality harvests are weighing in on the markets. Will managed money continue to cover their short positions and spark more rallying in the short term? The Commitment of traders report later this afternoon will be watched especially closely this week, to see how much funds positions have changed from Tuesday of last week through Tuesday of this week. Adding to optimism, the USDA reported a private sale to Mexico of 2017/18 crop of 120K MT. Watch for adjustments to crop conditions on Monday.

Soybeans forged higher with the other grains led by soyoil and bullish thoughts from the NOPA crush report yesterday, +4 ¼ at 9.39 (July) and +6 at 9.50 (Nov). The EPA is rumored to release their biofuel mandate today, with expectations of only helping the soy complex. It will be interesting to see the trade on Sunday night and Monday, as overall the picture is bearish with both an expected large U.S. crop on more acres and plentiful global stocks, but weather forecast changes and the crop conditions report on Monday always add to uncertainty. It is likely soybeans will see get a positive nod on crop condition ratings, as rains have prevailed recently. Argentina continues to struggle with its port workers, as 20 cargos were recently stranded in the Parana River as workers continue their strike for higher pay. This is not a positive for their export business, and may open the door for limited U.S. opportunities. 

Wheat was led by Chicago short covering to another high not seen since March 8th, +11 ½ (July). Kansas City and Minneapolis were not far behind, +8 ¼ and +7. Minneapolis HRS has been driving the wheat market, driven by the demand for higher quality wheat and factoring in parched weather conditions in spring wheat country. The wheat market in general is being driven by quality issues, more than weather, unlike its grain siblings. And, it is not just the U.S., Ukraine and Kazakhstan are also experiencing dryness which could impact the global market. KC Hard Red Winter wheat specifically, has been showing up under grade of 10.5%, as ideally buyers would like to see protein levels at 11.5%. Also, providing support, is a survey of analysts who believe the FSU (Former Soviet Union) production will be down 3%, and France AgriMer lowered their soft wheat and Duram wheat conditions by one and two percent. Customers on the wheat global market this week included Japan, Tunisia, Egypt, Taiwan, Saudi Arabia and Syria. 

Live Cattle were down in the front month but positive in the deferred, as June finished –.800 at 121.700 and August +.675 at 118.175. Cattle weights continue to be monitored closely, as they have been down significantly from last year. While there was gain in steers from the previous report (up 9 lbs), they were still 17 lbs behind last year, and heifers were also 14 lbs behind last year. There is a lot of chatter and anticipation as to what the new entry into the Chinese market will mean. It has become clearer that U.S. beef producers will need to meet three criteria in order to participate: ability to trace cattle back to breeder of origin, no ractopamine, and only natural growth hormones. Greater Omaha Beef was the first to ship into China. Will U.S. producers be able to remain price competitive for this Chinese opportunity with the added regulations?

Hogs ground their way higher in the front month without producing signs of an end to the rally, +.275 at 82.325. August and October experienced steep declines early in the session but bounced back to +.200 and –.425 respectively. Packer margins and carcass values were both down marginally. The cash index has continued to rise and is now at 82.100, up +.940 over the last settlement. Look for continued strength through the July 4th holiday.

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 investor

Water Street Solutions Daily Report 2017.6.15
2017-06-15T03:39

Corn could not decide which end zone to run to, with a severe drop to 3.70 July initially, but a nice runback to 3.79 ½ , +2 ½. Weather featured nice showers that gave a drink to a large part of the growing area, but against a backdrop of potential hot and dry weather the last part of the month and into July. It is likely this is not the end of weather induced volatility with the majority of the growing season ahead of us. USDA weekly export sales had corn at the low end of the expected range (600K-1.0 MMT), with 2016/17 at 600,700 MT and 2017/18 at 13,500 MT. Tomorrow’s action and close will be pivotal to direction in the near-term.

Soybeans were able to muster a rally based on a gain in soyoil, +3 at (July) and +5 at (Nov). NOPA showed the crush rate up 10.1 million bushels from April but behind last year’s record by 3 million bushels. The crush rate was well above projections combined with solid biodiesel and export demand.  This should help increase volume of soyoil contributing to the crush. Soybeans are at a point in their growing stage where they are not as affected as corn by the weather at this juncture. It is likely we will see choppiness in the current range until a more impactful story emerges. It is hard to see a large decline in beans with the key growing months of July and August ahead. Soybeans will likely be more of a follower of corn and wheat this season. Soybeans had a strong showing on the weekly export sales logs, with 2016/17 sales at 340,200 MT and 2017/18 at 314K MT. Expected sales ranged from 300K-750K MT. Included in the old crop breakdown, was a cargo purchased by China. 

Wheat complex was led by Chicago’s soft red variety, up + 10 ¾ (July). Kansas City HRW and Minneapolis HRS were of the same positive mindset, +7 ¾  and +5 respectively. Weekly export sales came in at the low end of expectations, pegged at 373K MT compared to thoughts of 300K-600K MT. The total was comprised of HRW 141K MT, SRW 83K MT, white wheat 66K MT, and Duram wheat at 1K MT. Mexico was the largest customer at 121K MT. 

Live Cattle continued to trade lower today closing the session -.375 at $117.5 (August). With the overbought condition, the daily and weekly key reversals last week and increasing supply ahead, traders expect a steeper than normal break in the cash market in the weeks ahead. On a production note, third quarter beef production is expected to increase by 415 million pounds from second quarter. If expectations are met, it will be a record high increase for the period.

Hogs traded lower today closing -0.525 at $82.050 (July). Third quarter pork production is expected to be about 6.4 billion pounds which is 4% above the same time a year ago. Both robust domestic pork demand and higher beef prices are expected to keep hog prices in a range of $47-$49 about 3% below this time last year.

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 investor

Water Street Solutions Daily Report 2017.6.14
2017-06-14T03:32

Corn traded both sides of even before finishing poorly, -4 at 3.77 (July) and –3 ½ at 3.95 ½ (Dec). There were a variety of factors influencing today’s action. In the outside markets, crude oil dipping below $45 and the Central Bank raising interest rates by .25% this afternoon helped dampen optimism. Not to mention, traders are closely watching the ever changing Midwest weather and potential production. If trendline yield is compromise just 5%, yield would fall to 162 bu/acre, and that would have significant market ramifications. With all the weather models seeming to agree that the last week of June will be hot and dry, this could be an interesting combo in tandem with the June 30th USDA Acreage Report. Another variable to consider is that pollination could come later than normal in areas of the Eastern Corn Belt – does weather premium need to be added for this? Corn used for ethanol continues to grow, as the EIA Energy showed production up to 294.6 million gallons compared to 293.7 last week. Ethanol stocks also were up by 23 million gallons.

Soybeans followed corn’s weak finish, - ¾ at 9.31 ¾ (July) and even at 9.39 (Nov). Continually changing weather models are not sparking bullishness at this juncture, especially with expected rains of up to 2” widespread across the growing region over the next several days. But, the idea that the Western Belt may see heat with a lack of rain over the next 8-14 days has some concerned about too much stress on the plants heading into July. However, many soybean plants are still too small to receive significant damage from heat stress. Look for the NOPA May crush report tomorrow. 

Wheat had a volatile day led by Minneapolis, which actually hit a high of 6.45 ¾ before plummeting all the way down to 6.27 ¼, - ½ (July). Chicago SRW and Kansas City followed at + ½ and –2 respectively. The back and forth volatility is being driven by speculation regarding weather as well as uncertainty with quality and production. Quality continues to be an issue with HRW, with protein levels below the 10.5% threshold in many cases from the Kansas harvest to-date. Last year saw millers blending 11.5% HRW protein with 14% HRS to meet specs. Will this become a major story in the coming days as Kansas gets deeper into the harvest season? Not to mention HRS has its own issues with quality and production. 

Live Cattle took a trip to limit down, as they have continued extreme volatility the last few weeks, -3.000 at 117.875 (August). The deal to open the Chinese market to American beef will likely take time, as presently only 2-3% of cattle on feed in the U.S. meet requirements. American beef producers will need to adapt to new rules, including the ability to trace cattle back to their birth farm. The U.S. will need to fight to remain competitive, as making adjustments will likely add premium to prices compared to other global suppliers.

Hogs continue to methodically move up the chart, reaching another new high in July and also staying positive in August. July futures finished +.300 at 82.575 while August followed at +.175 at 80.400. The recent World Pork Expo 2017 featured record crowds and pervasive optimism, as hog producers are confident that growing competition for hogs will lead to more value to their farms. The June contract went off the board today, as hog futures were up today. The cash index has continued to rise to over $80. Live supplies are tightening for packers, as the heat affects weight gain, with hogs eating less in hot weather conditions. This will also affect retailers preparing for the July 4th holiday festivities.

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 investor

Water Street Solutions Daily Report 2017.6.13
2017-06-13T03:13

Corn was able to get a modest bounce off a less-than-stellar crop condition report and also influence from spring wheat’s poor condition, +3 ¾ at 3.81 (July) and +3 ½ at 3.99 (Dec). The USDA corn crop conditions were announced at 67% good/excellent, down a point from last week and 3 points off the average. There is a big difference between East vs. West, with the East only showing 50% good/excellent while the West is 70% G/E. Informa came out with their latest corn acreage estimate today at 90.186 million acres, which is 190K acres more than the March NASS projection. Weather forecasts are calling for precipitation this week across the Eastern and Central U.S. Corn Belt, which is putting a damper on rallies, and the midday forecast only added to this line of thinking. Continue to watch for any changes in predictions that could sway the managed funds to resume short covering. This could propel the market a potential $.20-.30 higher with the right conditions.

Soybeans also responded positively to wheat’s reaction to crop progress reporting yesterday as well as its own sub-par rating (albeit a weak close), +1 ¼ at 9.32 ½ (July) and + ¾ at 9.39 (Nov). Soybeans got their first USDA crop condition rating yesterday, and it was pegged at 66% good/excellent compared to the average of 68% year-to-date. Last year saw 74% and it was estimated that this year would be at 70%. Also adding intrigue, Informa adjusted soybean acreage planting down slightly to 89.3 million acres.  Will this be verified by the USDA at the end of this month? The Brazilian Real is also lower today which is encouraging their farmers to open up the bins and sell into the market. Keep an eye out for a biodiesel ruling from the Commerce Dept. this month, which will undoubtedly be a positive for soyoil and will trickle down to the rest of the bean complex. 

Wheat was led higher by an explosive Minneapolis HRS (+26 ¼) this Turnaround Tuesday, as the USDA crop conditions rating of 45% was down 10 points from last week and well below the average of 74% year-to-date. Chicago and Kansas City also saw double-digit gains, +11 and +14 ¼ respectively. Wheat is helping to drive corn this year, and in turn beans, as all three are positioned very net short by managed funds at this juncture in the growing season. What will it take to ignite the “fear factor”? Keep a close eye on weather rains materialize over the next few days and the amount of coverage they blanket. It is a day-to-day pendulum, swinging the market from negative to positive and vice versa. Informa made a downward adjustment of 110K acres to 11.2 million acres of wheat planted this year. Overall, wheat harvest is 17% cut, as KS is running behind and OK and TX are running ahead of average. Egypt’s GASC made a large purchase of 300K MT of wheat in a tender (that did not include the U.S.), featuring 180K MT from Russia, 60K MT from Romania, and 60K MT from Ukraine. 

Live Cattle continued lower after an ugly downturn yesterday, -.675 at 120.875 (August). Packer margins are continuing to stay very profitable at $166.95/head. The slaughter came in at 117K head compared to 116K last week and 110K last year. Related to boxes, Choice was down slightly and Select was up. North Dakota’s pastures had the worst weekly crop condition rating since 2012, with 53% of the area rated as poor or very poor. This was a sharp increase from last week’s 35%. And, only in 2008 did June have a rating of poor to very poor over 50%. South Dakota is not much better, showing 45% poor to very poor pastureland rating. Look for a top in cattle before or after the July 4th holiday.

Hogs were able to forge higher without the help of cattle today, +1.575 at 82.275 (July) and +.225 at 80.225 (August). Packer margins are up and seasonal and export demand has remained strong. Pork is currently a more affordable option than beef for the consumer, and this is not hurting from a retail standpoint. Interestingly, Canada is ahead of the U.S. currently in pork exports to China (Canada exports half of their pork production). This has only happened a few times in the last 20 years. April saw a decline in U.S. pork exports to China, which has been a repeating monthly pattern in 2017.

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 investor

Water Street Solutions Daily Report 2017.6.12
2017-06-12T03:14

Corn had a blue Monday as the thought of possible impending rains across the Midwest by early next week lent to a bearish mood, -10 ½ at 3.77 ¼ (July) and –10 ½ at 3.95 ½ (Dec). It has become a “Tale of Two Corn Belts”, with the West getting off to a better start but now suffering dryness in some areas, while the East began poorly with cool and wet planting conditions and slow emergence of replanted crops. The market is waiting for a new story to emerge (in addition to the daily weather prediction changes), but for now it is chop-chop. Population counts could be a surprise later in the year, as stands do not look good in many areas. It is noteworthy that July corn was able to hold and finish above the 3.76-3.77 zone, as this is a key level of support. The USDA reported a private sale of 130K MT to “unknown” destination for 2016/17. USDA weekly corn inspections were a bit light this week, as the market was expecting 1.120 MMT but the actual reported tallied 1.041 MMT. Will Turnaround Tuesday have a surprise in store that will spark short covering?

Soybeans responded in kind to talk of rains watering the Midwest in the next few days, -10 ¼ at 9.31 ¼ (July) and –10 at 9.38 ¼ (Nov). Other topics of interest that could have market implications include the idea that this week could feature a much anticipated announcement by the EPA regarding biodiesel mandates, or RVO’s, which will be beneficial to the soyoil complex. Also getting attention is talk surrounding China and a renewed focus on strict enforcement against GMO soybeans infiltrating their imports. Will this slow down exports from the U.S. and Brazil? This afternoon will be soybeans’ first crop conditions report, and it is expected they will fall well below last year’s 72%. How will this impact trade tomorrow considering the funds are holding record net short positions? The USDA announced weekly inspections above estimates of 300K MT at 508,220 MT. Look for resistance around 9.80, near the 100-bar moving average. 

Wheat went on a double-digit trip to the downside, following corn and improved weather forecasts: Chicago SRW -11 ½, Kansas City HRW -8 ¾, and Minneapolis HRS -8 ½. Tomorrow could see a correction depending on the crop conditions report later this afternoon, as it is expected that wheat good/excellent ratings will be downgraded 1-3%. Wheat had a strong showing on the USDA weekly inspection balance sheet, coming in with 773,992 for the week ending June 1st compared to estimates of 575K MT. In world news, Egypt made a purchase of Russian and Romanian wheat over the weekend of 360K MT. With the managed funds still largely in a net short position, will a next leg higher ignite the “fear factor”? Keep an eye on wheat as it may take some time, but the potential is there for higher prices with poor quality concerns and dryness in areas around the world. Wheat usually bottoms mid-June, which could be positive for corn. If wheat and corn start moving in unison, things could get interesting. 

Live Cattle entered today’s session in a bearish technical posture after last week’s key reversal. According to Felts, fears that too many cows and non-fed cattle might move in the Dakotas because of the drought has added some selling pressure. June cattle finished –2.900 at 128.350 while August followed –2.300 at 121.550. Keep an eye of the closely watched Fed Cattle Exchange later in the week for price direction.

Hogs have been enjoying a strong surge upward of late, with investors watching closely for signs of a top. The cut-out value has been appreciating and exports have been strong.  However, today hogs followed cattle down the path of correction, -2.000 at 80.700 (July) and –2.050 at 80.000 (August).  Prices will likely head lower into the 3rd quarter but look for seasonal demand to provide support through the July 4th holiday.

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 investor

Water Street Solutions Daily Report 2017.6.9
2017-06-09T02:12

Corn and the rest of the market was not significantly impacted by the USDA Supply & Demand report today, as weather apprehension is driving the market, +2 at 3.87 ¾ (July) and +2 ¼ at 4.06 (Dec). June 2016/17 corn carryout was pegged at 2.295 billion bushels, above the expected 2.28 bbu but in line with the previous report. June 2017/18 corn carryout came in above trade estimates of 2.09 billion bushels at 2.110 billion bushels. However 2.110 bbu was spot on with the previous report. Predictions for 2017 corn production was identical to the previous report of 14.065, but slightly above trade estimates of 14.0 bbu. Look for continued scrutiny of weather forecasts and comparisons between the GFS and EU models, as uncertainty stateside with the GFS model is playing a role. Also, driving the market next week will be the amount of managed fund short covering in conjunction with the amount of farmer selling.

Soybeans were able to keep pace with the upward trending corn in spite of a slightly bearish tone from the USDA report, +3 ½ at 9.41 ½ (July) and +4 ½ at 9.48 ¼ (Nov). U.S. soybean stocks were bumped up 15 million bushels due to declining crush and flat exports. Helping to provide support was the sale of 3 cargos of beans to an “unknown” destination and the fact that it looks like the U.S. will stay competitive with South America for the duration of summer. New crop soybean carryout is unchanged while the 2017/18 were estimated to be 495 million bushels higher. Related to South America WASDE upped the estimate for Brazil’s production to 114 MMTs, and Argentina was raised by 800K MTs to 57.8 MMTs. 

Wheat was similar to beans from the standpoint that the USDA numbers were more of a bearish flavor, as old crop ending stock were bumped up by 2 million bushels. Wheat production also got a small promotion of 4 million bushels due to improved expectations for KS and CO. Much of the concern regarding the Western Plains is now dissipated, as the crop’s recovery from the harsh cold snap has been better than expected. HRW production was increased to 743 million bushels compared to the May estimate of 738 mbu. WASDE raised overall global stocks by 2.9 MMT to a record-level 261.2 MMT. Russia’s wheat production was enhanced by 2 MMT to 69 MMT. The market finished at: Chicago SRW -3 ¼, Kansas City HRW -2 ¼, and Minneapolis HRS +4 ¼. 

Live Cattle traded both sides of even today, settling up –.175 at 123.850 (August). According to Hightower, it will take a turn down in beef prices and a significant jump in cattle weights in order to confirm a near double top. The closely watched Fed Cattle Exchange had low volumes, with 334 head being sold at $136.81. Boxes have continued higher in both Choice and Select, while packer margins have remained strong at $140/head. Related to the Brazilian beef scandal, a raid was conducted by the Brazilian Feds on JBS offices on suspicion of insider trading. This scandal is worth monitoring, as Brazil is the world’s largest beef exporter and competitor of the U.S.

Hogs are continuing their seasonal increase in prices during the month of June, with July futures finishing +.500 at 82.700. The pork cut-out has continued to increase in value due to great prices for bellies and fat and lean pork trimmings, which is supporting higher cash hog prices. The high price of beef trimmings has also helped pork this season. How will hot weather in Iowa affect hog weights? It is worth noting that barrow and gilt weights are lagging 1.5% behind levels from a year ago. And, weights of hogs owned by packer has continued to decline as they are trying to take advantage of great margins by slaughtering now vs. later.

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 investor

Water Street Solutions Daily Report 2017.6.8
2017-06-08T03:12

Corn traded up to  $4.09 today before rain relief came into the near term forecast causing the d word (drought) threat to lessen and price to fall back down closing +1^0 at $3.85 ¾ (July). Yesterday’s volume tripling the average trading action (1090830 contract traded) was likely caused by speculative fund short covering. Today’s close below $4.04 was not ideal for a large breakout, but keep a close eye on the forecast as rain makes grain. USDA export report actual 348,600 mt vs. expectations of 600-1.0 mln mt.

Soybeans managed to sustain their third consecutive day of increasing prices closing +7^2 at $9.38 (July). At this point in the growing season, hot/dry days are not as detrimental to soybean development as they are corn, but it is still cause for concern if continued throughout the month. Tomorrow’s conditions report is probably keeping what bullish traders that are left on the sidelines for now. USDA export report actual 159,100 mt vs. expectations of 350k-750k mt. 

Wheat maintained its upward momentum closing +4^4 at $4.49 ½. With a close above $4.47, it is likely to spark continued short covering that could potential test the early May high of $4.61 ½. The USDA export sales report released this morning showed wheat exports were in line with expectations coming in a 461TMT. On the weather front, the good news for the KC wheat crop is that it is not yet in its reproductive stages. If the heat comes back in July, It will do much more damage. 

Live Cattle traded lower today closing -0.150 at $124.025 (August). The bull camp continues to be in control, but a down turn in beef prices might be all the market needs to assume that a top is imminent. Cattle owners in Nebraska sold 6,000 head for 15-40 day delivery at $135. After that, prices on most cattle quickly moved to $140.

Hogs experienced a much different trading session than cattle closing +1.125 at $82.200 (July). With both China and Mexico pork imports from the US recovering from last week, there is plenty of optimism that the market will have a difficult time moving much lower until pork cutout values begin a more significant decline.

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 investor

Water Street Solutions Daily Report 2017.6.7
2017-06-07T03:04

Corn continued to lead the move upward, as concerns are starting to mount regarding extremely hot weather and more dry days ahead, +7 ½ at 3.84 ¾ (July) and +6 ¾ at 4.02 ½ (Dec). July futures were able to break through and close above key resistance at 3.80. If managed funds rush to cover their short positions en masse, a rally could continue with weather’s cooperation. Rallies will be somewhat muted by farmer selling, as farmers are stepping up and bringing loads of bushels to the elevators. EIA Ethanol came out with their weekly numbers showing production down 21,000 barrels to 0.99 million barrels/day. Ethanol stocks were down by -781K barrels to 21.98 million barrels. Net ethanol margin is down 2 cents to 6 cents.

Soybeans found support in weather as well as strong meal trade, +7 ¼ at 9.30 ¾ (July) and +4 at 9.35 ¾ (Nov). The forecast for the next week looks hot, dry and windy with low humidity, which could take a toll on the Central U.S. If predictions are accurate, Minneapolis and Chicago could see 95 degree temps. This level of heat by June 15th has only happened seven times since 1872. However in the long-term, soybeans are still looking at a bearish fundamental picture with downside potential, without a major event. Look for Brazil’s CONAB to be out with updated crop production estimates tomorrow. 

Wheat came roaring out of the blocks with the other grains, as Chicago SRW and Kansas City HRW finished +9 and +8 respectively. However, Minneapolis HRS was the laggard today, as profit taking from recent rallies weighed down the complex, -3 ¼ (July). Much more rain is needed across Montana and the Dakotas to help alleviate the severe dryness that is plaguing the area. The HRS wheat in South Dakota and western North Dakota is in the reproduction stage, and the current hot/dry environment is taking the top end off yield. If there is no rain in the next 5+ days, weather may even cause crop failure. In world wheat, it was announced that Algeria bought around 450K tons of optional origin milling wheat in a tender that wrapped up today. 

Live Cattle has provided a measure of excitement of late, and they continued the volatile ride today, trading both sides of unchanged, +.575 at 124.175 (August). Feeders were trading with expanded limits today after their steep sell-off yesterday, and they continued the downward trend, -.575 at 154.800 (August). Boxes are higher in choice and select, and packer margins remain profitable at $141-142/head.

Hogs traded mixed but ended up in the red today, -.450 at 80.725 (August). Packer margins are a bit lower at $22.23/head and carcass values were lower by $.93 at $90.25/cwt. Look for August to have more upside potential.

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 investor

Water Street Solutions Daily Report 2017.6.6
2017-06-06T03:15

Corn took out yesterday’s low and high, finding support in wheat conditions and a dryer weather forecast, +4 ¼ at 3.77 ¼ (July) and +3 ¾ at 3.95 ¾ (Dec). Impending weather premium is on traders’ minds as well as managed funds positions standing at 210K net short. Chatter at the water cooler has centered around what it will take to spook the funds to cover their positions. On the other hand, there is plentiful feed grain supplies and a large South American production to contend with (Brazil may have a safrinha crop that is 50% over last year’s disappointing crop). The USDA upped crop conditions to 68% from 65% good/excellent last week, but this is still well behind last year’s 75% at the same time last year. Crop progress is penciled in at 96% planted compared to 97% last year same time, while corn emergence is pegged at 86% vs. 88% last year. Weekly inspections continue to impress, as the weekly report indicated 1.177 MMT, and this is 10% higher than last year. Interestingly enough, more was shipped off the PNW than the Gulf for the first time this year and two cargos were earmarked for China.

Soybeans followed the market higher today, but without a bullish story of their own, as the outlook is still showing bearish potential long-term. July futures rose to 9.34 ¼ before settling at 9.23 ½ , up +1 ½. Some private analysts are predicting that another 500K acres of soybeans will be planted this year due to the delays experienced with corn plantings. Soyoil was able to give us a measure of follow-through strength, providing confirmation to the trade. USDA soybean planting progress was announced at 83% complete compared to the average year-to-date of 79%, with emergence at 58% (1% behind average). Look for the first soybean crop condition report next week to give a measure of direction . 

Wheat was the leader today as futures found support in dry and hot conditions in the northern growing region and a weak Dollar: Chicago SRW +6 ½, Kansas City HRW +8, and Minneapolis HRS +8 (July). Minneapolis wheat was the big catalyst today due to plant stress in the Dakotas and Montana, reaching a high of over $6/bushel before settling at 5.97. USDA spring wheat conditions were down 7 points to 55% good/excellent compared to last year same time at 79%. Hard Red Winter was also down slightly from last week’s conditions (2% overall with SD down 21%), and wheat overall was down 1%. Weather forecasters are monitoring the situation closely because if the adverse weather elements spread south and east, we could have a developing problem on our hands for corn and beans as well.  In world news, it is reported by lawyers that Egypt has re-instated its zero-tolerance policy on the grain fungus, ergot. They had voided the ban last year, and it will be interesting to see if this will narrow their field of importers (considering Egypt’s status atop the leaderboard of wheat buyers). 

Live Cattle started the session higher before experiencing a steep sell-off, flirting with limit down in the deferred month, -2.600 at 123.600 (August) . Feeders were limit down across all current year contract months, -4.500. There is some concern that even though demand has been strong, beef sales scheduled out 22-60 days are down 10% from last year and beef sales out 61-90 days are down 56% in the same time period. In news related to the JBS Brazilian meat scandal, JBS sold business locations in Argentina, Paraguay, and Uruguay to a competitor, Minerva, for $300M. This was done in order to help the company stay solvent, as they will be responsible for a multi-billion settlement to be paid over 25 years.

Hogs were strong today as they gained back much of what was lost yesterday. June was up +.925 while July and August were up +.950 and +.950 respectively. Packer margins are continuing to stay profitable, and the cash index is at a discount to futures at 77.340. While hogs are overbought and had appeared sickly on the chart, this posture has changed and are now looking like a market with more upside.


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 investor

Water Street Solutions Daily Report 2017.6.5
2017-06-05T03:40

Corn closed out today’s trading session +1/4 at $3.73 (July). The corn market continues to trade in a similar range while trying to navigate the current large world/domestic stock numbers along with a desire to add risk premium amid typical summer weather. Oh, and do not forget the massive fund short position, but they did buy 2,000 contracts today. Ahead of this afternoon’s USDA progress and conditions report, traders expect conditions to improve slightly to 68% good to excellent. That compares to 74% a year ago and 71% long-term average for this point in the season. South American crop estimates continue to angle higher; AgRural raised the second corn crop in Brazil another notch taking it to 67.1 from 63.6, and USDA weekly corn inspections 1.177 mln tons for w/e June 1 vs expected 1.1 mln tons.

Soybeans traded north and south of unchanged throughout the day closing +3/4 at $9.22 (July). Ahead of this afternoon’s USDA progress and conditions report, traders expect soybean planting 79% - 84% complete compared to 79% last year and 81% in the long-term average. The USDA reported private sale of 120,000 mt of soybeans sold to unknown destination half the volume for the 16/17MY and the other half for the 17/18 MY. USDA weekly soybean inspections 277,298 metric tons for w/e June 1 expected . 

Wheat closed unchanged today at $4.29 ½. Russia prices are up for a third week in a row with some minor crop concerns helping to support. Texas and Oklahoma released some early yield winter wheat number that came in below average implying that winter wheat producers should pick up the pace for harvesting the next couple of weeks. The USDA weekly wheat inspections numbers were below estimates at: 522,881 metric tons for w/e June 1 vs. expected 525,000. 

Live Cattle complete a 5th consecutive trading session in the green closing +.150 at $126.2 (August). Traders have been waiting for the turn down in beef prices and a significant break in the cash market but weakness is slow to develop. With only moderate volumes of sales last week, packers did not acquire any super inventory. Purchases this week will be for a full slaughter week next week and will occur during a period of improving beef usage across the country. In world news, the livestock industry in Brazil says bankers have been ratcheting up requirements on cattle ranchers that have receivable due from JBS for cattle delivered. They also indicated that the woes of JBS have prompted ranchers to seek alternative meatpackers to sell their inventory.

Hogs traded lower again today in a big way closing -1.550 at $80.425 (July). The rally into the June 1 peak was led by strong pork exports and the idea that the US could see better demand from China; however, they did not. China is the only market showing a decline compared to last year down 36% from last year. April exports of fresh frozen and cooked pork were 155,790 mt, 6% higher than a year ago. Based on the weekly export data, April hog exports are expected to be about flat with last year.


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 investor

Water Street Solutions Daily Report 2017.6.2
2017-06-02T02:28

Corn continues to trade sideways in a range, with competing factors of bearish weather and the uncertainty of the growing season ahead, +2 ¼ at 3.72 ¾ (July) and +1 ¾ at 3.91 (Dec). The USDA reported weekly export sales of corn of 412,100 MT, which was within expectations ranging from 400K-800K MT. Major customers included Japan and Mexico. South Korea booked another purchase overnight that is likely going to Brazil for 138K MT. However, new crop exports are lagging well behind last year. Weather is becoming less of a prominent issue, as we are settling into more normal summer patterns of warmer weather for the West and Midwest. However, there are hints of drought and dryness developing in the Dakotas and Minnesota that will require monitoring in the weeks ahead. Monday’s crop report is expected to show improvement in good/excellent by 1-2%. Next Friday, WASDE is expected to raise corn exports by 25 million bushels and U.S. ethanol use by 25 million bushels. Will fund managers grow impatient in the week ahead and exit unprofitable short positions?

Soybeans were able to bounce on a weak Dollar and positive export data, +9 at 9.21 ¼ (July) and +7 ¼ at 9.25 (Nov). The USDA announced weekly export sales at 610,200 MT for 2016/17 and 16K MT for 2017/18, compared to expectations of 200K-600K MT. However, new crop exports are running well behind last year. Additionally, this morning the USDA reported a private sale of 200K MT of soybeans to Spain. Next Friday, WASDE is expected to raise soybean exports by 25 million bushels and lower crush by 10-15 million bushels. Some concerns that Chinese soy demand could lessen in the 3rd quarter as crush margins are at a 33-month low, as Shandong reported nearly $52/ton in the red. Brazil is reporting their soybean exports are up for the month of May over last year, 10.96 MMT vs. 9.92 MMT. Brazil is also optimistic that costs to export out of their northern ports over the next five years will continue to decrease due to infrastructure improvements. Informa came out with an increased soybean production update for Brazil, moving them from 113 MMT to 114.5 MMT from their previous outlook. 

Wheat continued to trade mixed throughout the session on lack of meaningful news with Chicago SRW + ½, Kansas City HRW +2 ½, and Minneapolis HRS +5. The USDA weekly export sales were net negative for wheat for old crop (but still ahead on the year), but very strong for new crop, exceeding expectations of 250K-450K MT by a long shot at 810K MT. It is expected the USDA will raise export projections for the current year in the WASDE report on June 9th. Planalytics satellite imagery has increased their forecast of winter wheat yield to 51.3 bushels/acre from 51.0. Last year’s record was 55.3 bushels/acre. In Europe, Coceral, is expecting 2017 soft wheat production to decline to 141.9 MMT compared to March’s estimate of 144.8 MMT due to heat and dryness in France and Spain. 

Live Cattle continued its steep ascent, trading under expanded limits, +3.400 at 130.825 (June) and +1.350 at 126.050 (Aug). Smaller pools of cattle being traded in the cash markets is helping to create some of the recent volatility. When packers find themselves short on bought inventory for their slaughter needs, this can add to the frenzy when there is poor liquidity. Also, carcass weights continue to trend well below last year, as the May 20th report showed steers 27# below last year and heifers 15# below last year. The lower Dollar has also been helping to stimulate the rise in exports, as Japan and South Korea are the primary customers. The most recent numbers show exports up 3% over last year. There is much interest in the Chinese opportunity but a few details need to be worked out. One drawback to U.S. beef is that producers do not mandate the use of animal ID, which puts us at a big disadvantage to other countries that have instituted the practice, i.e., Brazil, Canada, Australia, Mexico, etc..

Hogs followed cattle, although to a much lesser extent, as June futures closed +.300 at 81.225 (June). Carcass values are up ($.44) and packer margins are a positive $29.67/head. The pork cut-out continues to inch higher. Retail demand is expected to be solid for at least the next month with Father’s Day and the Fourth of July on the calendar. And, pork is much more affordable than beef this year. Also providing support, is lower hog carcass weights, with packer owned hogs down 1.8% from last year. With China’s demand slowing and the market overbought, will we see a near-term top?


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 investor

Water Street Solutions Daily report 2017.6.1
2017-06-01T02:31

Corn was only able to get a short bounce out of the lower than expected crop condition report as today continued to give back gains, -1 ½ at 3.70 ½ (July) and –1 ¾ at 3.89 ¼ (Dec). The crop conditions is a clear tale of East vs West, with the East showing 52% (IL), 43% (IN) and 49% (OH) compared to the West showing 68% (MN), 76% (NE) and 73% (IA) good/excellent. There is some debate about how much initial crop conditions matter to final yield, as one analyst mentioned that first ratings were below 70% in 9 of the last 20 years, while producing a crop yield above the 30-year linear trend in 5 of those 9 years.  However, unknowns still remain regarding the number of acres that will be planted in total, how much yield potential has gotten a haircut off the top, and concerns of nitrogen loss. Volatility is picking up and with managed funds positioned heavily short, and this could produce a combustible combination under the right conditions. EIA Ethanol numbers were released today and they showed production up 0.99% over last week and 6.25% above last year. Ethanol stocks were also up 0.35% over last week and 9.6% over last year. Corn for ethanol usage is on track to hit the USDA estimate of 5.45 billion bushels. Ethanol will be interesting to watch as E-15 is getting more push, as increasing the blend will increase demand. Also, if the RVP waiver can be extended to blends above E-10 could also really increase demand in the U.S. Both of these seem to be more realistic under the new Administration.

Soybeans traded mixed on lower volumes as the market is not sure what to make of weather, crop progress/conditions, etc, -3 ¾ at 9.12 ¼ (July) and – ½ at 9.17 ¾ (Nov). Word on the street is that China will be interested in resuming buying U.S. soybeans if July futures fall into the $9.10 range. Look for the grain crushings report to be released this afternoon. The market is awaiting word from the U.S. Commerce Department sometime this month on its ruling regarding Argentina and Indonesia dumping biodiesel into the U.S. market and the ensuing tariffs, embargos, etc. Export sales will be announced this week on Friday rather than Thursday due to the holiday. Trade is estimating between 200-600K MT. 

Wheat traded both sides of unchanged, battling a rallying Dollar, to finish – ¼ (Chicago), -1 (KC). Minneapolis was the only category to gain, as HRS ended +6 ¾ (July). There continues to be demand for high quality wheat as the spring variety is off and running, with an overall rating of good/excellent at 62%. States standing out from the rest include Minnesota at 96% G/E and Idaho at 75% G/E. Winter wheat harvest is ahead of schedule in Texas at 22% complete vs. the 5-year average of 15%, while Oklahoma is only 3% complete vs. the 5-year average of 10%. Russia announced that it has intentions to export 37-38 MMT of grain in 2017/18 compared to this year’s 34-35 MMT, while the EU pegged soft wheat exports at 22.1 MMT which is a decrease of 23% from last season. 

Live Cattle came charging out of the gates to a “limit up” day in both June and August contracts, +3.000. Sales have continued at high levels, as the Online Fed Cattle Exchange posted sales on most animals between $132-132.50, while sales for the 15-30 day delivery were in the range of $128-129. Japan and South Korea have been the impetus behind the growth in beef exports, as the Dollar has been at a favorable value compared to other world currencies. And, the idea of a “new” market opening in China, even with details to be worked out and negotiated, has investors licking their chops. Also adding to the frenzy are strong packer margins, at $163.25/head.

Hogs did not share the same optimism as cattle, as the front month fell the hardest, -1.000 at 80.925 (June). The cash index has continued to narrow the gap with futures, up +.110 on May 31st to 76.450. While the market is overbought, it has been difficult to sell this market, as hog supplies are tight with lighter animals. Packer margins are profitable at $28.12/head, and carcass values are up $.10 to $91.10/cwt.

In Other News, the 11 remaining nations are moving on without the U.S. on TPP, as they have set November 11th as the deadline to finalize the agreement.


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 investor

Water Street Solutions Daily Report 2017.5.31
2017-05-31T02:21

Corn was bullish this “Whipsaw Wednesday” on active fund buying, following a positive report yesterday, +5 at 3.72 (July) and +5 ¼ at 3.91 (Dec). Prices bounced up near the top of the range that we have been trading since the end of March. Yesterday’s USDA crop conditions report fell short of expectations with corn 65% good to excellent, 28% fair and 7% poor to very poor. Estimates for the report were 68% to 69% good to excellent and last year’s crop was rated 72%. The increasing uncertainty of production was reflected in buyers showing up throughout the day. In other news, cash gain sources reported 68,000 mt of optional origin corn was bought by Major Feedmill Group of South Korea. The 6-10 day forecast includes below average temps for the central and eastern U.S. and above average temps for the west. Precipitation is predicted to be below average for the northern U.S., normal for the central U.S. and above for a good portion of the south. Will the bullish mood last?

Soybeans had trouble staying on the bull train, as they were weighted down by a decline in Chinese meal values and the continued fall of their spot crush margin, finishing mixed +3 ¼ at 9.16 (July) and –1 ½ at 9.18 ¼ (Nov). The USDA planting progress report that was released yesterday showed progress at 67% complete vs. 53% last week, and emerged progress up to 37%. In world news, yesterday marked the first day of Argentina’s government inspectors’ strike that is expected to last through this Friday. The strike will untimely result in halted movement of grains/soy crops. China has announced it is willing to make trade concessions in an effort to create a win-win trade relationship with America. This was part of a 117 page document released by the Chinese Ministry of Commerce that indicates they want more infrastructure cooperation with the U.S. in exchange for taking more imports - that would include soybeans, as well as beef, natural gas and other services. Regarding Brazil and the focus on their currency the past couple of weeks, it is expected that the Real will continue to strengthen as Brazil’s economy is improving even in the midst of all the negativity plaguing their political scene. 

Wheat found support in corn’s resurgence and a weak Dollar, but winter wheat finished the session weakly: Chicago SRW – ¼ and Kansas City HRW -1 ½. Minneapolis HRS was the lone winner today at +4 ½ (July). The USDA report late afternoon yesterday was within expectations for wheat. Winter wheat is 80% headed compared to the five-year average of 77%. Winter wheat conditions was rated at 50% good/excellent vs. 52% last week, fair 35%, LW 33%, poor/very poor 15%. Spring wheat planting is virtually complete at 99% vs. the five-year average of 91%. Spring wheat emergence is 79% compared to the five-year average of 74%, and spring wheat conditions are seen as 62% good/excellent compared to 52% last year. Preliminary reports of the hard red winter harvest are indicating a good harvest with low protein. In global news, Egypt’s GASC purchased 180K MT of wheat at today’s tender, comprised of 120K MT from Russia and 60K MT from Romania. According to the Egyptian supply minister, their wheat stocks are good for five months. 

Live Cattle experienced a buying bonanza, with June trading to the highest level since May 12th, +1.450 at 124.425. Packer margins have been off the charts for beef at $240/head through last week, compared to a healthy $106 last year and $55 five-year average. It looks like relative strength could help propel beef higher in the short-term, in spite of the usual seasonal beef slow down into the mid-summer timeframe. Fundamentally, there has been a shortage of choice beef due to lighter carcass weights and less days on feed, and this will take time to replenish. So, even though there are 10% more cattle on feed this summer, the animals weigh less than last year and feedlots are motivated to push them through. It is worth noting that pasture/range conditions are down this year, so the Drought Monitor will be an important gauge to watch for MT, ND, etc. Related to the JBS meat scandal in Brazil, it was announced that Chairman Batista will step down and the company has agreed to pay $2.3B in settlement monies over 25 years.

Hogs were able reverse course from yesterday, as fundamentals seem to have more room to the upside, +1.425 at 81.925 (June). Seasonal demand and strong exports have continued to boost the market, although technicals show room for a correction, with the market overbought. Hog weights are below last year, which is also giving support. It is likely prices will peak in step with a peak in slaughter as we get further into the summer.


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 investor

Water Street Solutions Daily Report 2017.5.30
2017-05-30T03:49

Corn and other grains were hit hard after the long weekend, as pessimism abounded leading into the crop conditions report at 3pm today, -7 ¼ at 3.67 (July) and –6 ¾ at 3.85 ¾ (Dec). Rain was less than expected over the weekend and weather forecasts are somewhat benign, as the market perceives the crop will be planted. How everything shakes out long-term remains to be seen. It is likely that in spite of the rains and all the re-plant, farmers will try to stick with planned corn acres as much as possible. However, there could be a swing of another 500K acres if producers are not able to get seed in the ground soon, especially in some of the hardest hit areas in southern IL and IN. Crop conditions are expected to show 68% good/excellent compared to 72% last year. USDA weekly inspections produced another strong number for corn, coming in at 1.194 MMT for the week ending May 25th vs. expectations of 1.1 MMT. It is expected that corn will be able to capitalize on its discount to wheat on the world market, to garner a large amount of feed demand.

Soybeans led the way lower, as bears are winning the day –13 ¾ at 9.12 ¾ (July) and –9 ½ at 9.19 ¾ (Nov). Applying pressure are very weak Chinese crush margins and soymeal stocks piling up to levels not seen in five years. USDA inspections were not far off the mark, hitting 335,519 MT for the week ending May 25th vs. expectations of 355K MT. U.S. soybean exports had been looking like they would remain competitive on the global scene into August, based on pricing prior to the Brazilian Real tumbling on political turmoil. Maybe the Brazilian farmer selling is not necessarily all a bad thing, as the market will not have a huge supply of their old crop hanging over it. But, this has led to less opportunities stateside and bearish thinking in the near-term. It is important for the American farmer to hedge and make cash sales aggressively when above breakeven, as uncertainty abounds. Brazilian farmer selling has slowed down, after a strong push May 18-19 on the heels of the falling Real. They are still behind selling the 2016/17 crop, as year-to-date 58% is spoken for compared to 69% last year and 70% five-year average. As of today, Argentine beans are the cheapest for August offers, followed by the U.S., and Brazil. Incidentally, China is celebrating its Dragon Boat Festival, and will be returning to the market this evening. 

Wheat was down across all varieties, with Chicago SRW hit hardest at -8 ¾, followed by Kansas City HRW -4 ¼ and Minneapolis HRS – ¾. This, in spite of a positive USDA weekly inspection result of 602,913 MT for the week ending May 25th compared to expectations of 550K MT. As with corn and soybeans, wheat traders are less concerned now with weather and the feared damage to crops in the West from frost/freeze. In other parts of the world, while Argentina’s Chief of Agriculture is predicting a near-record 20 MMT crop, Canada’s Saskatchewan province will plant 700K hectares (1.7 million acres) less of wheat this year due to excessive rains and flooding of fields. Other areas of Canada also have been hampered by wet weather. France AgriMer gave the soft wheat crop a 76% good/excellent rating, which is up 1% over last week. With U.S. harvest getting into full swing in the coming weeks, keep an eye on managed funds’ large net short position in wheat futures. 

Live Cattle were able to reverse course after a poor start to the session, +.900 at 119.850 (Aug). On the one hand, strong demand and the potential of trade with China starting this summer are providing support, while the Cattle on Feed report last Friday was viewed bearish, as it featured placements up 11% to a high not seen in 14 years (1.85 million head). This was above trade expectations and is bringing pressure to the market. And, it has been revealed that major meat packing company, JBS, has been embroiled in a scandal and web of bribery. Up to 1,800 Brazilian politicians are involved and recordings have been obtained that implicate President Temer. JBS is an international company, and how this will all shake out is to be determined. Keep an eye on “combined” spec and funds’ net long position, as it is at a record high.

Hogs suffered a setback today, most notably in the front month, as futures finished the session -1.325 (June) and -.900 (July). The cash market has continued to make up ground, as it rose $.18 to $76.25 on May 24th. This is a level not seen since late February. Fundamentals are in position to see more positive action, as kill numbers are expected to tighten. This is due to tight supplies and not poor margins, as packer processing is very profitable of cuts including hams, bellies, loins and butts. The June 1st Hogs & Pigs Report should help to bring more clarity and direction, but summer contract months look positive at this time.


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 investor

Water Street Solutions Daily Report 2017.5.26
2017-05-26T02:28

Corn trended higher today on anxiety related to a possible pattern of weather that could continue to sporadically drop more precipitation on already hard hit areas and further delay planting, +5 at 3.74 ¼ (July) and +5 at 3.92 ½ (Dec). The window for corn planting is beginning to close, but given some dry days, could still allow for planting to finish on schedule. However, re-plant is the talk at the water cooler, as this figure not accounted for in planting progress report numbers, and is a significant issue this year – may be the biggest re-plant east of the Mississippi ever, according to some seed dealers. The next big event is Tuesday, when the USDA will give its first Crop Conditions report of the season. Keep an eye on 3.88 and 3.90 ½ (Dec) support levels. If we can see consecutive closes above, these levels should provide a good foundation of support moving forward into the growing season.

Soybeans were down hard on thin volumes, with no news to change the current bearish outlook and weakness from a strengthening Dollar, -13 at 9.26 ½ (July) and –10 at 9.29 ¼ (Nov). With recent closes below the 9.41 (July) “line in the sand”, the door is open to selling pressure. Not to mention the possibility exists for more acres to be added to soybeans. In the short-term, Chinese demand is adding a bearish tilt as crush margins are way down and meal stocks are up. But, Chinese imports are estimated to be higher for the next couple of months. Continue to watch China - if they keep buying that is a good sign, as it is advisable to watch what they do vs. what they say. China has a good sense of value and acts accordingly. China’s economy seems to be doing fairly well and the hope is that they should generate good demand for years to come. The market is still awaiting the U.S. Department of Commerce ruling on duties to be levied on Argentine and Indonesian biodiesel imports. The delay has not helped the soy complex, as oil has given back April gains. Look for this announcement in June. 

Wheat was able to leverage the continued uncertainty of wet, cool weather and funds shoring up positions before the long weekend. Results were good across the complex: Chicago SRW +7 ½, Kansas City HRW +6 ¼, and Minneapolis HRS +6 ½. It is not expected that the USDA Crop Conditions report on Tuesday will show much change from last week. On the global scene, Australia is enjoying record exports (mostly to the Middle East and Asia), as last year’s production was a record level 35 MMT and they have plenty to ship. SovEcon analysts are predicting an increase in Russian wheat production by 500 MMT, and the Russians are expecting exports to be above the expected range. On the other hand, acreage and quality is down stateside and Brazil is also expecting to be down 10% on planted acres. Dryness concerns in Western Europe is also playing a factor – will wheat continue to build a story this year that will force managed funds to cover their massive short positions? 

Live Cattle is coming off one of the largest rallies in history on the heels of great export and consumer demand. However, the tables turned after the 11am report today (especially in the deferred months), -1.225 at 122.700 (June) and -2.450 at 118.950 (Aug). The USDA announced cattle on feed supply at 102% of last year, placements during April 17th at 111.1% of last year and marketings 102.7% of last year. The report was considered bearish with more cattle for late summer, and the market responded accordingly. On a more positive note, Brazil is currently the world’s largest beef exporter. However, with political upheaval and concerns about the future of one of their big packing firms ensnared in the beef scandal (JBS), some traders see the possibility of higher U.S. beef exports ahead, according to Hightower’s analysis. U.S. weekly beef export sales were down quite a bit from May 18th at 7,200 tonnes vs. the prior 4-week average of 14,025 tonnes. But, overall sales for 2017 are up 14.9%.

Hog demand continues to impress, and thoughts of a top in place are on hold, +.875 at 81.825 (June). Exports have been very good and will need to continue with big production slated for the rest of the year. Weekly sales announced yesterday showed pork sales up 12.5% over last week and 26.8% higher than last year. May shipments are pointing to continued growth for large markets – Mexico, Japan and China. How much will weekly kills tighten over the 30-45 days, once we get through the holiday and enter the easing demand of early summer.

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 investor

Water Street Solutions Daily Report 2017.5.25
2017-05-25T02:48

Corn continued to trade in the middle of the congestion area that the market has been stuck in since mid-March closing -2 at 3.69 ¼ (July) and -2 ¼ at 3.87 ½ (Dec). The cold wet trend that we’ve been experiencing is expected to continue into early June which may hold conditions down. No matter the weather conditions, three day weekends in the growing season tend to be volatile! It is not probable that there will be a further downtrend at this time with funds very short and so many unknowns about the growing season. In other news, the USDA reported a private sale of 115,400 mt of corn sold to “unknown” destination. Export sales came in at 956,200 mt which is in line with expectations. The next calendar event is the USDA Crop Conditions report due out on Tuesday.

Soybeans traded lower for a third consecutive day as the tug-of-war of fundamentals continues, closing -8 ¾ at 9.39 ½ (July) and -8 ¾ at 9.39 ¼ (Nov). The bears won overwhelmingly today, as outside market forces are mixed, with the weak US dollar and some stability in the Brazil currency for the 4th day in a row providing little underlying support. Brazilian soybean offers continue to keep the US competitive with occasional counter-seasonal opportunities, even with 40-50% of the Brazilian crop unsold. Without a significant change in the forecast, the trading volume looks to stay well below average. Export sales came in at 478,200 mt which is in line with expectations. Will soybeans gain more acres as the window is quickly closing on corn plantings? 

Chicago Wheat closed near the bottom of today’s trading session, -1 ¾ at 4.30 ¾. Kansas City HRW followed suit at -1 ½ while Minneapolis HRS was +1 ¼. In line with the other grains, weather continues to be a concern that could potentially affect overall production numbers; however, with much larger stock piles than both corn and beans, the concern of under producing is not as worrisome. Export sales were in line with expectations, coming in at 202 TMT for old crop with an additional 343 TMT of new crop sales for a combined total of 545 TMT. Mexico was the largest buyer taking in over 351 TMT between old and new. Look for more news on wheat quality, as this has been the biggest concern during early harvest thus far. 

Live Cattle futures continued their climb in spite of concerns that high prices may stunt demand, +1.800 at 123.925 (June). In weekly export sales released by the USDA for the week ending May 18th, cattle is on par with the last four weeks average and 3% over the same period last year. Large supplies later in the summer from placements in April and May could cool things down, as the USDA is estimating 2nd quarter beef production to increase by 325 million lbs. The two most important customers of U.S. beef are Japan and South Korea. As with other commodities, trade partnerships are key to continuing strong trends. Look for the Cattle on Feed report to be released at 11am tomorrow in advance of the holiday.

Hogs were up again led by strong cut-out values and healthy packer margins, +.750 at 80.950 (June). It has been a long run for futures without much correction, as yesterday featured trading and closing above the previous high from February, and today added more length. Profit-taking is limiting some of the gains. Exports have been great, with CAFTA and Korean free trade partners heating up the order board by 17% in the first quarter, and Japan was up 8%. This trend will need to keep growing in order to be able to consume the larger kill later in the year. Mexico and China have also shown strong growth in sales. It is estimated that 24% of U.S. pork production is earmarked for export.

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 investor

Water Street Solutions Daily Report 2017.5.24
2017-05-24T03:04

Corn traded in a small range today closing +1 ¾ at 3.71 ¼ (July) and +2 at 3.89 ¾ (Dec). With rain in the forecast for the next 10 day to 2 weeks across much of the Midwest, both planting and replanting challenges are likely to continue for the near term. EIA Ethanol report released today showed production down 17K bbl to 1.01 million bbl/day. Ethanol stocks were down 730K to 22.68 million bbl. Refinery capacity of 93.5% was over last week (93.4%) and expectations of 93.6%. This report was considered friendly as inventories of crude, gasoline and distillate were whittled down a combined 6 million. Next week, the USDA will release their first crop condition report, with last year’s initial rating at 72% good/excellent and the ten year average at 72% good to excellent.

Soybeans traded on either side of unchanged throughout the day closing flat at 9.48 ¼ (July) and - ½ at 9.48 (Nov). Too much rain and cool temps continue to have a negative effect on crop conditions in the E Midwest. The longer that farmers are unable to get corn planted (or replanted), the higher probability that some of those acres shift to short season beans. On the plus side, with the stabilization of the Brazilian real over the past few days, the onslaught of Brazilian and or Argentine selling has slowed. The market is likely to chop sideways for now without a new story. 

Wheat does not have a bevy of news to digest as chatter centers around wheat conditions, protein levels and weather. All the grains rebounded this morning from lower trading in the overnight, as wheat battled for modest gains: Chicago SRW +3, Kansas City HRW +2 ¼, and Minneapolis HRS +5 ¾. Lately we have seen the U.S. become more competitive on the global export stage, with a weaker Dollar. Will the U.S. be able to consistently vie with Russia and the Black Sea Region for Egyptian business, etc? Russia is still working out issues with Turkey, as Turkey has removed import tariffs but is still limiting Russian imports to 20-25% of all licenses issued. China is importing a solid amount as their wheat imports are up 99% over April of last year. Australia is getting the lion’s share of the Chinese orders, but the U.S. shipped 227,213 MT which is the highest monthly total shipped to China since February 2014. Wheat has upside potential brewing along with corn, so keep an eye on future developments. 

Live Cattle was down today in the June contract, -.950 at 122.125. Opposing forces of climbing beef prices at the meat counter vs. more bullish large basis and low cattle weights attempting to get the upper hand. The market is also hoping for a bounce from new open doors to China, that will allow U.S. beef across the border starting July 16th. Pork prices are low in relation to beef, and this is swinging the demand needle hogs direction heading into the holiday weekend. Look for the Cattle on Feed report due this Friday to provide some clarity. The market is overbought, leaving it susceptible to selling pressure.

Hogs gapped higher out of the 8:30am starting block, but pulled back under the downward pressure of cattle, +.050 at 80.200 (June). The story remains the same for now as seasonal solid demand both domestically and abroad continues to drive the market. Developing trade negotiations with NAFTA and China will be key to continued export growth, with 23% of pork sales beyond U.S. borders.

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 investor