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Water Street Solutions

Water Street Solutions Daily Report 2018.6.21
2018-06-21T02:30

Corn fought off the negative pull of beans and the baggage of trade tensions to forge a modest gain, +2 ½ (Dec). Are weather risks returning to a more bullish posture? After June 30th, heat and dryness is showing up again for the Midwest. While a great crop is expected, any bushels trimmed off trendline yield will be impactful against a backdrop of shrinking ending stocks. But for now, it is continued sideways grind. USDA weekly export sales data revealed a less than stellar performance for corn, pegged at 505,600 MT compared to estimates of 800K-1.4 MMT. Japan and Mexico led the list of buyers. Even though totals were lower this week, corn is on track to meet USDA export targets.

Soybeans drifted lower as trade tensions have not been helpful to export sales, -9 (Nov). Will recent lows be re-tested? Depending on the upcoming USDA Report on Tuesday, a scenario to consider would be if acres increased to 90 million and yield is estimated at 50 bpa and exports are trimmed by 10%, ending stocks would look more like 700 mbu vs the current 385 mbu estimate. On the other hand, if the Report is more favorable and Trump and China are able to work out an agreement before July 6th, limit-up days could lie around the corner. The fact is China cannot source all their beans from Brazil, but they are going to try inflict as much pain as possible in the meantime to bring pressure to the negotiating table. USDA weekly export sales were unimpressive, registering at 529,400 MT vs expectations of 450K-1.0 MMT.

Wheat led the grains again today, as global weather concerns are outweighing trade war skittishness in the minds of traders. Results included: Chicago SRW +7, Kansas City HRW +4 ½(July) and Minneapolis HRS +1 ½ (Sept). Wheat has been less affected by tariffs and more by global weather concerns of late - from the Black Sea Region to Australia to China, threats to production are causing concern. Weekly export sales numbers were in the upper end of expectations, coming in at 461,600 MT compared to ideas of 250K-500K MT.

Live Cattle gave up some ground after hitting a new short-term high yesterday, -.525 (Aug). Is the market forming a short-term peak? According to Hightower, open interest in futures has fallen to its lowest level since October, and short-covering is not a strong foundation for a sustained rally. Net export sales were down 25% from last week and 15% off the prior 4-week average. Strong demand from meat packers has helped support prices.

Hogs stabilized after yesterday’s large setback, +.450 (July). It seems that this week traders have succumbed to trade war fears, as the market is negative overall for the week. It is possible that as soon as next month, there could be an 88% tariff on U.S. pork to the PRC. Net weekly pork export sales were down 35% from last week and 42% below the 4-week average. 

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 2018.6.20
2018-06-20T02:48

Corn exhibited selling exhaustion as the market rallied off its low to positive territory for the day, + ¼(Dec). The trade tensions looming over the market are preventing fundamentals from pushing corn higher. With the unpredictability of the Presidential Administration, it is plausible that tomorrow could be bullish – no one knows. NAFTA talks are making some progress, but will be interrupted by the Mexican Presidential election in July. Cash markets are starting to firm up as producers are refusing to sell at these low levels. Demand continues to impress, as evidenced by the weekly ethanol reporting. EIA Ethanol production numbers were strong, up 7.47% over last year and 1.04% over last week. Ethanol stocks were lowered by 2.38% vs last week and 2.84% vs last year. Corn used in ethanol production was an impressive 110.86 mbu compared to the average of 99.73 mbu needed to hit the USDA overall annual estimate of 5.575 bbu. Plenty of rain in in the forecast is on tap up to July.

Soybeans showed a similar trading pattern to corn with the market running out of sellers and a return to near even by the close, - ½ (Nov). In a “normal” trading environment, the action would suggest a recovery is in the works. However, traders are anxiously awaiting any word or indication from Trump or China that an agreement is in sight. This would have potentially huge market ramifications. China’s soybean needs are estimated to be 100% filled for July, 90% for August, 35% for September and 10% the rest of the year. At some point, whether the tariffs are resolved or not, China will have to buy U.S. beans as Brazil cannot fill their needs for the entire year. The Acreage Report will be key on the 29th, as most analysts are expecting an increase in acres for both corn and beans.

Wheat was the leader today, with winter wheat out in front: Chicago SRW +10 ½, Kansas City HRW +5 ¾ (July) and Minneapolis HRS +2 ¾ (Sept). Wheat was able to gain back some of yesterday’s losses that resulted from bearish news from the crop report and lower global offers for wheat tenders. It is thought that the Acreage Report next Tuesday may show a decline of harvested wheat acres, which would be supportive to the market.

Live Cattle put in another short-term high and eked out a small gain, +.225 (Aug). It is still a similar theme of the discount of futures to cash providing support while upside is somewhat limited.

Hogs had a large setback, -1.850 (July). The fears of trade wars’ effect on exports in the second half of the year weighed on the market. Of all the U.S. pork production, 25% is exported. Of that amount, 50% go to China, Mexico and Canada, who are not particularly pleased with the recent trade discussions

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 2018.6.19
2018-06-19T02:02

Corn gave new meaning to “Turnaround Tuesday”, with a wild day in the trading pits, -1 ¾ (Dec). The corn market showed extreme volatility, with a huge bar to the downside by 17 ¼ points to 3.60 before clawing all the way back to near even on the day. The recent flare up of rhetoric between President Trump and China seemed to spark the slide in the grain complex, as Trump responded to Chinese retaliation with a threat to impose another tariff on $200B of their goods. The Chinese will not be able to respond in kind because the U.S. only imports around $129B in total to the PRC. They would have to resort to other measures which could include excessive inspections, embargos, etc. However, they do not want to hurt their own economy, so hopefully both side will be able to come to an agreement that is palatable. Corn crop conditions improved to 78% G/E from 77% last week and above expectations of 76%.

Soybeans made corn’s action look tame, with a tumble of almost 64 cents before re-tracing to a more reasonable setback of –20 ½ (Nov). This seemed like a moral victory, and a buying opportunity. Trade is still very nervous about export relationships and is not willing to get back into the fray to a large extent. However, the demand and need for beans is not going away, and boycotting of beans will not last as the PRC needs beans and can only obtain so much from other sources. Crop conditions released yesterday showed beans 73% G/E, which is a decline of 1% but in line with expectations. The next big Report will be Grain Stocks and Planted Acreage on June 29th.

Wheat followed a similar pattern to corn and beans but to a lesser extent, with a large setback followed by a smaller retracement. Egypt’s GASC was back in for another 240,000 MT of wheat, this time of Romanian origin. Spring wheat showed a large improvement in crop conditions, pegged at 78% G/E vs 70% last week and 70% expected. HRW was also up 2% while SRW was down 2%. HRW protein levels are also much higher than last year. SRW declines were mostly from MO and IL. Chicago SRW -12 ¼, Kansas City HRW -16 ½ (July) and Minneapolis HRS -14 (Sept).

Live Cattle showed gains for the 3rd consecutive session, +1.250 (Aug). Cattle has been able to largely escape the trade war fallout, but if the tensions deepen and the domestic economy is hurt, that might be a different story.

Hogs stumbled but still traded within the newly established range, -1.850 (July). The market is skittish at the thought of the possibility of pork exports dropping significantly the second half of the year as production is at record levels. Meanwhile, the surge in pork cut-out values and cash prices is providing underlying support. 

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 2018.6.18
2018-06-18T01:43

Corn continued to probe for a new low, as great growing conditions coupled with trade tensions led to follow-through selling, -5 ½ (Dec). The dominant driver with corn is weather as weekend rains were as expected and the next several days offer plenty more precipitation to come. China does not import much U.S. corn, as NAFTA is more of a concern due to Mexico’s involvement. Seasonally, corn has a tendency to work its way down the last two weeks of June, before getting into July volatility. USDA weekly inspections did not disappoint, with corn having another very strong showing at 1,668,835 MT for the week ending June 14thvs estimates of 1,350,000 MT. Average Midwest ethanol margins are maintaining at profitable 10 cents/gallon.

Soybeans worked both sides of unchanged as the U.S. and China point to July 6th as the beginning of a new era of tariffs, +1 (Nov). China is on holiday today celebrating “Dragon Day”, and hopefully dialog will resume between the two superpowers soon to avoid an all-out trade war. It was somewhat disheartening to hear a Trump staff member say that not much will happen in the next 30 days.  Fund selling has continued in earnest, as they have pared net long positions significantly. China can only stay away from U.S. beans for so long, as they will need to fill their requirements in the 4th quarter. And, U.S. beans are currently the cheapest in the world, and will likely be receiving more orders from other sources. Buyers that have been stepping up include Pakistan, Thailand, Egypt, Mexico and others. Weekly soybean loadings were well above expectations of 500,000 MT, pegged at 818,396 MT.

Wheat does not have a noteworthy new story, and futures were not able to hold positive ground in the face of outside pressures and a positive Dollar. Results included: Chicago SRW -9 ¾, Kansas City HRW -20 ¼ (July) and Minneapolis HRS -8 ½ (Sept). HRW harvest results are trending better than expected, with protein levels at around 12.4% compared to 11.4% last year. Look for crop progress results later this afternoon. Also, global weather concerns are still in the forefront and being closely monitored.

Live Cattle had mixed results across contract months, with August showing a gain, +.400. The Chinese tariffs should have very little impact on the U.S. beef market. The cash market trade is lighter, down $3-5, but futures are still running at a discount to cash and providing support.

Hogs forged a new high in the July contract not seen since the end of February, +2.000 (July). Pork exports are running at record levels, and the market has been able to overcome the threat of tariffs and tensions with China and Mexico so far. However, it is important that a resolution is found this summer with hogs being very dependent on exports.

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 2018.6.15
2018-06-15T03:17

Corn dove to a new low in the overnight session before stabilizing to a modest setback, -1 ¾ (Dec). Traders need to keep in mind that no matter happens with China in the short-term, there is good demand for corn and tightening balance sheets. Futures are lower than this time last year, at a time when domestic and world stocks are at their lowest level in five years. If one looks at 2018/19 export projections of 2.3 bbu and a trend yield of 174.0, ending stocks would decline to 1.377 bbu vs. current estimates of 1.577 bbu. What if just an “average” type yield occurs of 171.3 bbu? We could be staring at ending stocks of 1.111 bbu and a stocks/use of 7.5%, which would be the 3rdlowest on record. Politics has disrupted the bullish story this week. Keep an eye on the developing weather story in Europe, which if it lowers yields will push more demand to the U.S. this August and beyond.

Soybeans have fallen $1.30+ in the last week, as beans are showing how vulnerable and dependent they are on consistent purchases from China, -19 ½ (Nov). President Trump indicated he will proceed with $50B in tariffs on Chinese goods. China has responded that they will retaliate, and Trump has prepared a 2ndlist of $100B in additional tariffs he will enact if the PRC does in fact escalate the situation. Beans have lost substantially to corn in the last two weeks, as there seems to be a shift going on at the macro level. However, if China chooses to source elsewhere, it will force other soybean importers to the U.S. market which will help to neutralize some of the decline in sales to the PRC. This battle with China is not likely to end soon, as the goal from the Administration is to change behavior regarding intellectual property transfer and one-sided trade advantages for China. NOPA results showed the crush slightly lower than expectations, while soyoil stocks were sharply lower. Soyoil futures do not seem to care, as they are into new lows.

Winter Wheats exhibited a similar trading pattern to corn, with a sharp dive to new lows in the overnight, and a recovery during the day trade. Chicago was not able to muster a close above $5, finishing 4.99 ½ (-2) while Kansas City ended -2 ½ (July). Spring wheat took a bigger hit, with Minneapolis –9 (Sept). Today’s Chicago wheat lows need to hold, with the Black Sea Region continuing to exhibit very dry conditions with no relief in sight. Typically, the seasonal low is in the 2nd or 3rd week of June followed by a late August high.

Live Cattle had a bullish engulfing bar on the chart, with a near limit-up gain, +2.900 (Aug). Today’s trade was a correction seemed to be a resounding response to yesterday’s loss. Providing support is the premium the cash market is holding to futures. On the other had beef values have fallen and it may lead to a bearish outlook for the cash market ahead.

Hogs jumped out to solid gains early before retreating to near breakeven, +.100 (July). The market has been focusing on the surge in pork values, with escalating trade wars with important partners, Mexico and China, looming. The export situation may allow the bears the upper hand if not resolved this summer. July futures are up around $7 since June 5th.


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 2018.6.14
2018-06-14T01:46

Corn is feeling the squeeze along with beans and wheat, -12 ½ (Dec). Deep anxiety and fear among traders and farmers is dominating the mood at the CBOT, with President Trump expected to make some kind of announcement tomorrow regarding whether tariffs will be enacted on China and to what degree. Mike Pompeo is in China continuing negotiations in an attempt to salvage the situation. China has indicated that if the U.S. levies tariffs, all promises they have made to increase purchases of U.S. products by up to $70B are off the table. On a positive note, weekly export sales announced this morning were strong, coming in at 936K MT, above the range of expectations of 600K-900K MT. Buyers of note included South Korea, Japan and Mexico.

Soybeans also felt the heavy weight of trade tensions, hitting a new short-term low, -8 ¾ (Nov). It is hoped that more clarity regarding tariffs will result before the end of the week. Sometimes fear is worse than the situation itself, and a degree of patience is required. But,  coupled with rising interest rates announced by the Fed yesterday and declining farm incomes, the pressure is compounding on the American farmer. President Trump needs the backing of constituents from the Corn Belt, and it is hoped this will influence his approach to Ag trade. Additionally, the U.S. needs China’s help with N Korea which should help motivate a positive outcome. Soybeans had a good week on the export sales log, showing above expectations with an announced 520K MT compared to expectations of 100K-400K MT. The largest chunk of orders went to “unknown” destinations, followed by Egypt, Japan and China.

Wheat was down sharply again today on weak chart action and a strong Dollar. Results included: Chicago SRW -15, Kansas City HRW -16 ¾ (July) and Minneapolis HRS -7 ½ (Sept). Chicago wheat dipped below support at 5.00 but was able to close above it. Like the other grains, wheat is also trading politics, and traders are not showing any willingness to extend length in the market. Wheat continues to have weak export showings, pegged at 302K MT with expectations of up to 450K MT. All three classes of wheat are running behind last year, soft red lagging by 12%.

Live Cattle gave way to selling pressure, -2.025 (Aug). The meats also were under the spell of trade fear and political uncertainty. The chart pattern looks weak and beef prices are in retreat, with the cut-out losing $1.02 at yesterday’s close.

Hogs leaked away some of its recent gains, -1.150 (July). Market pressure was too much to overcome, with pork heavily impacted by export relationships with Mexico, China and others. A couple positive forces in the market are a drop-off in weights and production.


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 2018.6.13
2018-06-13T02:32

Corn fought hard to overcome the bearishness of beans and wheat, finishing –1 ¼ (Dec). While yesterday’s Report was positive for corn and this was evidenced by the double-digit gain, the reality of the impending Friday deadline for potential tariffs to begin on Chinese products won out. It will be difficult for corn to lose much more ground at this time in the season leading up to pollination, as managed funds have already significantly reduced net long positions and there is still weather premium ahead as it is hard to envision the next four weeks being as favorable as the last four with regard to weather and crop conditions. EIA weekly ethanol totals this week indicated production is up again, 1.15% vs last week and 5.09% over last year. Corn used for ethanol was 109.7 mbu compared to the weekly average of 100.729 mbu needed to hit the USDA annual projection. Ethanol stocks also rose modestly by 1.27% over last week but were down 1.63% from same time last year.

Soybeans dropped sharply lower as fund liquidation continues and new shorts pile on, -15 ¾ (Nov). Meal also dipped down to a new low not seen since February. Beans have lost $1 since May 29th, as the uncertainty of trade status with China has overwhelmed the market. Traders are not willing to stick their necks out any farther until more concrete resolutions have been reached. President Trump is determined to change “norms”, and to do that he is willing to shake things up a bit. We all know is that he likes to “win”, so hopefully the trade wars will end positively, but the ride there may be bumpy. Conversely, many view this as a buying opportunity and a place to re-own new crop sales. On a positive note, the USDA announced a private sale this morning of 177,000 MT to “unknown” destination, with 5,000 MT for 2017/18 and 172,000 MT for 2018/19.

Wheat seemed to be back to reality today, as the Report yesterday was not bullish and wheat traders may have outkicked the coverage with the excessively large gains in winter wheat. Some called yesterday’s session a “relief” rally, but profit-taking and long liquidation were in full swing today. Keep an eye on world weather, as the market needs a bigger story. Results included: Chicago SRW -18, Kansas City HRW -14 ½ (July) and Minneapolis HRS -7 (Sept).

Live Cattle traded in a sideways pattern, while continuing to incur losses, -.400 (Aug). There is not a new story and the market continues to struggle with the competing factors of large supplies and an overbought market vs the support offered by the large discount of futures to the cash market.

Hogs gapped higher on open, refusing to put in a short-term peak, +1.325 (July). The cash market has made strong gains on the back of surging pork values, picking up over $5 in a week’s time. This is helping to underpin the market. Although the U.S. is very dependent on pork exports, the market seems to care not at all about trade tensions leaving one to wonder how good news from NAFTA and China might propel the market?

In Other News, the FOMC voted 8-0 to increase the Fed Funds benchmark lending rate a quarter of a percent to a range of 1.75% - 2%. This to support the strong labor market and a sustained return to 2% inflation. The policy signals further gradual interest rate hikes – two more expected this year and three next 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 investors.
Water Street Solutions Daily Report 2018.6.12
2018-06-12T03:31

Corn started out positive in the overnight on bargain-buying and this strengthened on bullish news from the USDA Report into a double-digit gain, +10 (Dec). Funds had shed a good amount of length per the last COT report, which also helped fuel buying. To summarize the Report, U.S. 2017/18 ending stocks are down from last year by almost 200 mbu and lower than average estimates. 2018/19 stocks are also viewed as declining, and with Brazil’s smaller crop than last year, this is good news for price. U.S. exports were raised by 75 mbu, the largest amount in a decade. World ending stocks were also trimmed for both this year and next. Brazil’s CONAB report today was favorable to the market. They downgraded all three categories: yields went from 5.369 MT/hectare to 5.10 MT/hectare, 2nd season corn production down from 62.94 MMT to 58.22 MMT, and total corn production reduced to 85.00 MMT from 89.20 MMT. The USDA also sees Brazil’s corn crop at 85.0 MMT. The USDA reported a sale to Mexico for 114,000 MT for 2017/18 and 38,000 MT for 2018/19. July weather is the key!

Soybeans were able to stem the tide of losses of the past four sessions with a small gain, + ¾ (Nov). The general positive vibes from Singapore and optimism regarding Asian partners helped support beans. The Report today showed 2017/18 ending stocks to be 200 mbu greater than last year, but less than estimates. Next year looks like a further reduction of 115 mbu. Even though Brazil’s numbers ratcheted up, overall world stocks are expected to be less for both this year and next. The main thing holding beans back is the trade war with China. It will be key to see if threatened tariffs planned for the end of this week are pushed down the road. If they are, look for aggressive buying next week. Brazil’s CONAB results also showed an increasing bean production (but less than the USDA), as they showed yields up slightly from 3.333 MT/hectare to 3.359 MT/hectare and production up to 118.05 MMT from 116.9 MMT in the previous report.

Wheat catapulted to a big recovery led by the winter varieties: Chicago SRW +20, Kansas City HRW +18 ¾ (July) and Minneapolis HRS +3 (Sept). The USDA Report pegged wheat ending stocks in the U.S. pretty much right in line with expectations. All wheat production was slightly over expectations and higher than last year by 86 mbu. World ending stocks for 2017/18 and 2018/19 are expected to both be up, but not by a large margin. It may be that many feared yields and production would be upped in the U.S. due to more than expected positive yield reports so far, and today’s action is somewhat of a “relief rally”. The big issue with wheat is global weather, and traders today were taking advantage of the recent break to buy a value. Egypt’s GASC reportedly made a large purchase on the daily log, booking 420,000 MT of wheat in a tender today. Of that total, 300,000 MT will be sourced from Russia and 120,000 MT from Romania.

Live Cattle broke lower before recovering for a small gain, +.125 (Aug). It continues to be a power struggle between the bearish forces of an overbought market with large supplies and the bullish support offered by the large discount of futures to the cash market.

Hogs gained back what was lost in yesterday’s trade, +2.050 (July). Exports were a record high in April and it is key for that trend to continue. Are hogs nearing a short-term peak with cash making a strong move to catch up with futures?


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 2018.6.11
2018-06-11T02:01

Corn traders were in all-out long liquidation mode, against a backdrop of weekend showers and uncertainty over the Trump/Kim summit and other world trade dynamics, -9 ¾ (Dec). Traders are very risk-averse heading into the monthly USDA Report tomorrow. The pivotal monthly Supply/Demand Report will be tomorrow and analysts average expectations are as follows: 2017/18 U.S. ending stocks at 2.162 bbu vs 2.182 bbu previously; Brazil corn production 83.8 MMT vs 87.0 previously; Argentina corn production 32.4 MMT vs 33.0 previously; 2017/18 World ending stocks 193.7 MMT vs 194.9 MMT previously. Weekly inspections announced by the USDA for the week ending June 7th showed a strong number for corn, coming in at 1,408,902 MT vs estimates of 1,350,000 MT.

Soybeans were under the same spell as corn, with traders unwilling to buy with so many world dynamics in play that could swing the market in large directions either way, -16 (Nov). This will be a very important week to setting short-term direction, with Central Bank meetings, Trump/Kim summit as well as the USDA Report tomorrow. China plays a heavy hand in the outcomes, as they are influential to North Korea and the U.S. may need their help to broker a disarmament deal. This could help the Ag industry, because this may require President Trump to play “nice” and hold off on the impending tariffs that have been threatened against the PRC. This may buy some more time to settle intellectual property issues with China. If that happens, one would assume the Chinese would resume buying U.S. soybeans as promised.  

Wheat made a valiant effort early, but could not overcome the duel threat of corn and beans’ plunge lower. All three complexes bled red today: Chicago SRW -5 ½, Kansas City HRW -3 ½ (July) and Minneapolis HRS -1 (Sept). The NASS report tomorrow will be important to watch as the U.S. winter wheat production may go up based on better numbers than expected. However, global weather issues are also weighing in, with the Black Sea, E Australia and other locations causing concerns.

Live Cattle followed in step with the grain complex, sporting a bearish engulfing bar on the chart, -1.600 (Aug). Investors seemed bent on profit-taking and long liquidation mode. The market was able to achieve a short-term high before selling off into the close. Watch to see if the cash market can continue to provide support this week.

Hogs exhibited a very similar trading trend to cattle today, achieving a new high before experiencing a sharp sell-off late in the session, -1.325 (July). It seems the market in general is on pins and needles with big geo-political stakes on the line and trade wars escalating with Canada and Europe, in addition to Mexico and China. If the dust settles and favorable deals are crafted, hog exports should be a big beneficiary.


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 2018.6.8
2018-06-08T02:00

Corn took the lead today, as traders balanced positions ahead of the USDA Report next Tuesday, +1 ¼(Dec). It seemed for a while that futures were going to sustain a deeper setback, as a new low was put in at 3.94, before buyers stepped in. Central U.S. weather looks rather benign, with showers to moisten a good part of the Corn Belt over the weekend. The next few days will be pivotal, with new numbers from the USDA as well as fluctuations of weather models a given. If the market can get to July 10th without a real weather issue, it is likely the U.S. will see another 170+ bpa yield. The end of the month acreage report coupled with weather will help determine the fate of corn prices.

Soybean traders liquidated long positions, as uncertainty over trade wars has left them feeling vulnerable, -5 (Nov). That, coupled with a lack of recent buying from China, is a real “gut check” for bullish sentiments. Beans have broken through key support, but at the same time could rebound quickly on the next soundbite from Trump and Beijing. It has been quite a freefall the last nine days, with Nov futures losing over 70 cents from the high of 10.60 achieved on May 29th. There is still a lot of growing season ahead, which will give beans plenty of chance to sport the price volatility of which they are so well known.

Wheat traded a wide range, with nice gains early, only to fall coming into the close as profit-taking prevailed. Chicago SRW -6 ¾, Kansas City HRW -6 ¼ (July) and Minneapolis HRS -4 (Sept). While wheat does have developing world weather stories building, traders do not seem willing to extend net length. There is still a good amount of world feed supply to chew through. As with the other grains, the WASDE report next Tuesday will be important to determining short-term direction. Look for results from the Commitment of Traders Report later this afternoon to indicate changes in fund positioning for all the grains.

Live Cattle was able to resume its overall trend of higher highs since bottoming on May 18th, +1.625 (Aug). With firm cash trade, traders have been in short-covering mode. Will seasonal demand peak soon, and if so will this allow supply to weigh down the market? Lighter slaughter numbers are helping to keep the bears at bay.  

Hogs gapped higher from the opening bell, and the early optimism held up for a solid gain, +1.275 (July). The near-term futures contract months do not seem worried about tariffs from Mexico or China at all. In April, Mexico imported a record amount of U.S. pork, so a NAFTA resolution is key!


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 2018.6.7
2018-06-07T02:33

Corn was pulled in opposite directions by soybeans and wheat, without a story of its own as Central U.S. weather looks favorable the next ten days, -3 (Dec). Dec futures reached a new short-term low of 3.95 ¼, as today marked the fifth consecutive session of lower closes. The market seems bent on dipping deeper to test the low from March 23rd at 3.91 ½. Losses have totaled over 30 cents in the last two weeks. USDA weekly export sales were at the top of expectations, pegged at 1,256,900 MT vs estimates of 800K-1.3 MMT. Two-thirds of those sales were in the current marketing year. Korea has been an especially active buyer of late.

Soybeans traded fear and uncertainty over trade wars with China and a poor export report showing, -18 ¾ (Nov). Futures broke through and closed below key support at 9.97 ¾. The market is on edge for more definitive actions from both China and the U.S. If Trump holds off on tariffs and China fulfills their intentions to vastly increase U.S. A-g purchases, Katy Bar the Door to the upside! But, with a USDA report next week and an uneventful planting season to-date, traders are wary to be over-exposed with large net long positions. Soybean sales were weaker than expected, as China has been holding off on rewarding the U.S. market, with threatened tariff threats looming on June 15th.

Wheat jumped out to double-digit gains early on weather and a weak Dollar, but fell back under pressure from the other grains. The story that continues to be front and center is the Black Sea Region, as it is so influential to global supply and an export heavy-weight to contend with. It looks like the dry pattern they have been experiencing will continue for the near-term. If they do receive a wetter pattern in a couple of weeks as some forecasters are predicting, this will be a crop-saver and could swing the market sharply back into negative territory. The USDA report next week will be closely watched, as some of the dry areas here, i.e. Oklahoma, are showing better yields than expected. Will NASS offer a bearish surprise? Today’s results: Chicago SRW +7, Kansas City HRW +4 ¾ (July) and Minneapolis HRS EVEN (Sept).

Live Cattle showed early gains before running out of buyers late session, -.425 (Aug). The overall trend of high demand and light slaughter has been providing support. Also, it is important to watch the cash market, because futures are at a significant discount, and if cash remains strong, short-covering is likely to follow.

Hog futures caught their breath after yesterday’s near limit-up performance, -.500 (July). The CME Lean Hog Index has put together a long run of steady gains, dating back to mid-April. What was once a huge premium of futures to cash, has now been narrowed notably. However, Fall dynamics are shaping up for a substantial decline in the cash market which may limit hedging opportunities.


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 2018.6.6
2018-06-06T04:08

Corn trudged down to a new low below 4.00 on weak technical action, -4 ¼ (Dec). With so much uncertainty in the market, sideways chop is likely to continue. It appears that President Trump is putting the biofuel policy talks and changes on hold, which actually may be a positive for Ag. EIA Ethanol weekly reporting today revealed production up 0.00% over last week, but 4.20% up over last year. Stocks were up over last week by 2.98% and down 0.39% from last year. Corn usage for ethanol keeps chugging along at a good clip, as 108.44 mbu were used last week compared to the 101.468 mbu average needed to hit the USDA annual usage estimate. Keep an eye out for tomorrow’s weekly export sales report, as Korea, Taiwan and Japan have been very active buyers of late. It was announced that exports in April were an all-time record of 304 mbu. The Goldman roll out of July contracts starts tomorrow.

Soybeans were positive in the overnight but were not able to sustain positive momentum, -7 (Nov). It is really hard to imagine that the crop is made on June 6th. However, mixed messages circulating from all parties regarding trade intentions has investors on edge and unwilling to extend their risk exposure. While China has proclaimed a willingness to up their Ag and energy purchases to $70B according to some sources, the looming deadline of June 15th set by President Trump to enact tariffs is not far away. The hope is that this gets kicked down the road while positive negotiations are taking place. The PRC, however, has not indicated they will do anything about the intellectual property theft, and this is a big sticking point for Trump. With regard to exports, April’s totals were disappointing as they came in 35 mbu less than last year. 

Wheat was the clear leader today and provided a good measure of support to corn. The entire complex showed gains with the winter varieties leading the way – Chicago SRW +9 ¾, Kansas City HRW +10 ¾ (July) and Minneapolis HRS +2 ¼ (Sept). World weather has everyone’s attention, including areas of E Australia, the Black Sea and even China. The Black Sea forecast looks more favorable after June 13th, which could be a perfect window of precipitation for them if it pans out. One must not forget that there are still plenty of stocks on hand to chew through, but once that happens the table could be set for a more bullish longer term trend for grains as global demand just keeps on growing. With regard to HRW, Oklahoma’s harvest is trending higher than expected – will this lead to a bearish surprise in next week’s NASS report?

Live Cattle continued its steady climb up the chart, +.525 (Aug). Although it may take some time, look for hedging opportunities in the 108-112 price range. Demand and the economy are strong, and seem to be outweighing concerns of large supplies. Other factors providing support are very strong packer margins and the large discount of futures to cash. 

Hogs ripped off a sharp move to the topside, +2.925 (July). This, in spite of Mexico announcing tariffs on a large percentage of their pork purchases from the U.S. in response to steel tariffs. Pork cut-out values are at highs not seen since March 5th.


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 2018.6.5
2018-06-05T03:07

Corn followed wheat higher, based on dryness in the Black Sea region, +2 ¾ (Dec). Early trade forged out a new short-term low at 4.00 ¼. However, the market stayed firm and strengthened into the close. Volatility is likely to continue with weather forecasts and Trump’s tweeting changing daily. No one wants to get overexposed either way, and so the back and forth swings continue. Looking at the extended two month forecast, the EU model is trending drier than the GFS, so it will important to watch where the high pressure ridge sets up in relation to the heart of the Corn Belt.

Soybeans traded both sides before eking out a small gain, +1 (Nov). November futures carved out a new short-term low at 10.15 ¼ before rallying. Soybean trade is very influenced by the China trade situation, and reports of progress vary along with the amount of Ag purchases they plan to make. The PRC has made it very clear that any promises to increase their buys of U.S. Ag products will be null and void were the U.S. to enact threatened tariffs on June 15th. Next week will be pivotal as it will feature a USDA Report, along with the tariff “deadline” on Friday.

Wheat was able to achieve gains today, propelled by concerns of reduced production in the Black Sea region. There is the possibility for moisture there in the longer term forecast, but nothing is certain. No one on the trading floor seems willing to overextend themselves, as everyday seems to bring a bit of news that sways the market one way or the other. Today’s action may be due in part to a correction of an overreaction yesterday. Winter wheat conditions went down one point yesterday, which only added to bullishness, along with a declining Dollar. Chicago SRW +4 ¾, Kansas City HRW +7 ½ (July) and Minneapolis HRS +3 ½ (Sept).

Live Cattle turned back higher after piercing through yesterday’s low, +1.600 (Aug). The two main competing factors are a bearish seasonal beef outlook and record slaughter margins. The beef export trade looks to be maintaining expectations, but is keeping a wary eye on trade wars as the rest of the Ag complex.

Hogs seem to be more influenced by trade concerns than beef, with such a large portion of production sold outside of the U.S. borders. Good news is needed soon from NAFTA and China! July futures finished, -.900.


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 2018.6.4
2018-06-04T04:05

Corn did not fare well, gapping lower right out of the opening gates, -10 ½ (Dec). Factors adding weakness today included, trade war tensions, a good start to the U.S. growing season and biofuel uncertainty. An announcement on biofuel is expected from the Trump Administration soon, which is intended to be a compromise by allowing year around sales of higher ethanol blended gasoline and allowing ethanol exports toward biofuel usage quotas. It is intended to be a win-win, but not many on the ethanol side are overly optimistic. USDA weekly inspections indicated a strong showing for corn, coming in at 1,554,961 MT for the week ending May 31st vs. estimates of 1,350,000 MT. Look for this afternoon’s crop progress and condition results later this afternoon.

Soybeans continued to shed length on weak chart action (gapped lower) as well as trepidation over trade with China, -18 ¼ (Nov). The limited progress with talks in Beijing over the weekend and the concerns that the PRC will retaliate if tariffs are enacted by the U.S. did nothing to calm traders’ heartburn. June 15this the date to watch, to see if the U.S. enacts actual tariffs or backs away. The weekly inspection log showed soybeans to be right in line with expectations at 557,733 MT compared to estimates of 550,000 MT. A daily private sale of 114,300 MT to Mexico was reported for 2018/19. While it is great to get a sale, it only really matters where things stand with China. Stay tuned for this afternoon’s first condition report of the season for beans.

Wheat fell hard on the action of corn and beans as well as a poor showing on the weekly inspection log. Chicago SRW -18, Kansas City HRW –19 ¼ (July) and Minneapolis HRS –8 ½ (Sept). Weekly loadings were well below expectations, pegged at 341,470 MT vs. expectations of 500,000 MT. The Commitment of Traders report on Friday showed managed funds to have a larger than expected net long position for the first time in a while. This provided a damper to trade. It is not all doom and gloom for wheat though, as Russia and Australia are experiencing continued dry conditions that are causing major angst.

Live Cattle showed indecision by trading both sides of unchanged before falling sharply at the finish, -1.175 (Aug). Even with adequate supplies, the overall mood seems a bit more optimistic (assuming trade wars can be resolved), as demand should maintain its high level due to a vibrant U.S. economy and consumer confidence. And, record large packer margins are also underpinning the market.

Hogs traded a wide range of over 2.00, with a sharp dip to the downside early before stabilizing, -.875 (July). Exports continue to be the key to success, and with so much volatility around trade relationships with China and NAFTA, it is hard for futures to gain positive momentum.



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 2018.6.1
2018-06-01T03:04

Corn showed indecision today, as the markets await more direction from weather and the U.S. – China trade talks this weekend, -2 (Dec).  While optimism abounded after Chinese officials visited Washington recently, the tone has changed back to playing “hardball”, as the Trump Administration seeks to get the upper hand. Weather is also variable, as it has definitely turned more ominous, with a developing ridge of high pressure threatening hot/dry weather for the next couple of weeks. Weekly export sales reported by the USDA were in-line with expectations, coming in at 1,142,400 MT vs the range of estimates of 800K-1.3 MMT.

Soybeans fought off the bears and were able to finish in the green, +3 ½ (Nov). All eyes are squarely focused on the trade talks in Beijing this weekend. It appears optimism has faded, and a final deal is not expected just yet. It is hoped that the two sides come closer together vs being wedged further apart, as that would be considered a victory at this point. Weekly exports sales were announced over expectations, pegged at 1,045,000 MT vs. ideas of 0-800K MT. New crop sales were mostly to China and “unknown”. However, China has vowed to not honor any long-term purchases of U.S. Ag products ahead of the next round of talks. Trump seems determined to shake things up with all the saber rattling, and it just may be that this is necessary in order for the U.S. to break the cycle of losing trade deals. Let’s hope it is all smiles and handshakes in Beijing.

Wheat was mostly in the red today, led down by spring wheat. Global weather is still a concern, but the strong U.S. Dollar is working against export sales. USDA weekly export sales were within the range of 0-500K MT, coming in at about 300K MT. The overall dry weather pattern in Ukraine and parts of Russia is not expected to change anytime soon, prompting further concerns of yield reductions. Chicago SRW -3, Kansas City HRW –1 ¾ (July) and Minneapolis HRS –4 ¼ (Sept).

Live Cattle showed moderate losses in near months with the following contracts experiencing larger setbacks. August cattle finished the session, -.325. The uncertainty of export trade along with a lack of new buying interest coupled with plenteous supplies weighed on the market. On the other hand, record high packer profits are offering support.

Hogs were mixed with the front months gaining and the deferreds showing small losses. July hogs finished +.750. Putting a damper on the market is Mexico’s intention to slap tariffs on U.S. pork legs in response to escalating trade tensions over steel and aluminum tariffs by the U.S. Mexico is the #1 importer of U.S. pork.

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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.5.31
2018-05-31T02:21

Corn found strength in U.S. and world weather uncertainty, + ½ (Dec). Weather forecasters are keeping an eye on a ridge forming in the Central U.S., which could put the great start to the planting season in jeopardy. However, chart action is weak, and it could be that the market pulls back to the 3.95-4.05 Dec area before building premium back in. EIA Ethanol weekly reporting was positive, with production up 1.26% vs last week and 2.06% vs last year. Stocks were down 3.91% vs last week and 6.59% vs last year. Corn used for ethanol continues to run well above the weekly average needed to hit the USDA’s end of year number, pegged at 108.48 mbu compared to the required 102.268 mbu needed to hit the target.

Soybeans hovered around breakeven after wide range trading, finishing –2 ¼ (Nov). It is weather vs. trade, with trade wariness winning the day. The uneasiness of market participants due to renewed chilly relations with China, is putting a damper on rallies. It is hoped this is all just posturing on the part of President Trump to re-threaten tariffs after the handshake agreement in Washington recently, to give Commerce Secretary Ross more negotiating leverage for upcoming talks in Beijing June 2-4. However, China does not like these kind of games, and retaliation is feared. Look for more clarity next week.

Winter Wheat led the complex with Chicago SRW +4 ¼ and Kansas City HRW +1 ¾ (July). Dryness developing in E Australia and the Black Sea Region is front and center, while the declining Dollar also lent support. Russia’s winter wheat crop is thought to get a 10% reduction, and the outlook is disconcerting. Of late, there are not many other bullish stories for wheat. The crop report in the U.S. was slightly better, and the U.S./China trade dust-up has spilled over to all the grains. Yesterday’s correction was not necessarily considered a big surprise, as typically markets take a breather and traders take profits.

Live Cattle reversed some of yesterday’s limit-up move, -.500 (Aug).  According to Hightower, “the turn up in beef prices this week with packer margins already extremely high suggests that the drop in cash may not be as intense as expected and the huge discount of futures to cash helped spark the aggressive buying yesterday.” Robust beef prices are indicating short-term demand is better than expected.

Hogs ended five consecutive days of gains with a sharp correction, -2.075 (July). Hogs have been gaining on solid seasonal demand and gaining pork prices have supported the market. However, as with grains, the market is looking for resolution to the NAFTA and China trade disputes, as hogs are highly dependent on pork exports to both of these important partners.

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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.5.30
2018-05-30T03:12

Corn succumbed to bearish chart divergence, busting through support at 4.12 before backing off to 4.13 ¼, -5 ¾ (Dec). This reaction is likely in response to favorable rains across the Midwest as well as a positive Crop Report late yesterday afternoon. Also, tensions with China have reared up again, as both sides are jockeying for position as trade talks continue this week in Beijing. And, NAFTA being resolved before the July 1st Mexican Presidential election is far from certain. The first stab by the USDA at crop conditions came in at 79% good/excellent, a new record high. The average for this week is 70% G/E. While it is early to put too much stock into these numbers, it definitely raised some eyebrows. Also, planting is right in line at 92% complete. There is still plenty of opportunity for things to turn bullish, as pollination is several weeks away and any perceived market changes will have implications.

Soybeans felt the weight of trade tensions, as some of the air has been let out of the balloon, -6 (Nov). When Chinese official were in Washington recently, it was agreed in principle to put the U.S. threatened tariffs on $50B of products on hold while negotiating the framework of an agreement. However, yesterday President Trump was still talking tariffs “as part of the process”, until further details can be worked out. This was not taken well by the Chinese, but so far talks are still on for Commerce Secretary Ross in Beijing, June 2-4. This news coupled with good planting progress numbers (77% planted vs the average of 62%) and recent pop-up showers across much of the Midwest left the market in a bearish mood. Also, there were no new export sales announcements this morning. It may be that Trump’s hardline posturing will yield the “good deal” we would all like to see, but it makes for some indigestion along the way.  

Wheat fell hard on technical selling, piercing through support before retracing. Winter wheat conditions reported yesterday afternoon were slightly improved over last week, but still well below average at 38% good/excellent and 34% poor/very poor. World weather is of greater concern with drought in Russia and E Australia. The posturing with China over threatened tariffs seemed to affect the whole grain complex, including wheat. While the Dollar was sharply lower today, this seemed to have no positive effect: Chicago SRW -14 ½, Kansas City HRW-15 ¾ (July) and Minneapolis HRS -15(Sept).

Live Cattle rocketed to limit-up, hitting a new short-term high, +3.000 (Aug). The board’s steep discount to cash provided strength. Large speculators have a very large net short positions in cattle, and it appears they feel vulnerable, as buying was in full swing today.

Hogs continued to build on recent gains, poking out a new high in July, +1.275. Seasonal demand is kicking in and providing support as June futures are almost $8 above the CME Lean Hog Index – will cash come up to meet them before expiration?

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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.5.29
2018-05-29T03:30

Corn trading (along with the rest of the grains) was marked by volatility post-Holiday, -6 (Dec). Futures traded in a double-digit range, reaching as high as 4.28 ¾ in the overnight session, before plummeting to a low of 4.16 ½. It seems that lack of NAFTA progress, pop-up showers across much of the Midwest over the long weekend as well as good progress expected from the crop Report later this afternoon, won over the minds of traders. The Dec contract high of 4.29 ½ has proven to be solid resistance, and likely the market will need more of a story to push through. USDA weekly inspections were strong, pegged at 1,705,190 MT for the week ending May 24th vs estimates of 1,550,000 MT. And, corn got a nice daily sale to start the shortened week of 231,248 MT to “unknown” destination.

Soybeans also could not keep up the overnight momentum, taking a sharp trip down with corn, -11 (Nov). Initially, beans were on a trajectory to the topside, taking out the previous high of 10.60, before falling hard late session. While talks with China seem to be headed the right direction, traders took profits and liquidated length post-Holiday. The U.S. has indicated they plan to move forward to release a list of the $50B in Chinese goods that could be subject to 25% tariffs, despite the handshake agreement to resolve the dispute. While this was not unexpected news considering actual details have not been worked out, it added to a bearish tone over the market as Commerce Secretary Ross prepares to sit down in Beijing this week to hammer out the particulars. President Trump is keeping the pressure on the PRC to follow through on their promises. Weekly inspections reported by the USDA were under expectations, coming in at 576,406 MT vs ideas of 650K MT.

Wheat initially boosted corn but then drug it down, under pressure by outside markets (the Dow was down over 400 points), a rising Dollar and declining crude. Overnight, world weather seemed to dominate mindsets, with initial gains made on news that the Black Sea Region as well as E Australia will continue to experience dryness and drought. Chicago wheat traded in over a 20 cent range, taking out the previous high, reaching 5.54, before a steep sell-off that began in early morning trade. The weekly inspection log came in over expectations of 375K MT at 431,239 MT. Chicago SRW -6 ½, Kansas City HRW -7 ½ (July) and Minneapolis HRS -11 ¼ (Sept).

Live Cattle showed weakness to start the week, -.850 (Aug). The Cattle on Feed Report last Friday was considered neutral, but the large supplies ahead are hard to ignore. Stormy weather that plagued the East Coast may slow down retail sales in the short-term, as many folks ended up with more supplies in fridges following poor grilling weather over the Holiday weekend.

Hogs pushed higher across contract months, as it appears a short-term bottom is in place, +1.300 (July). The appreciating Dollar is not helpful to exports, and the short-term feels bearish. However, things are looking up with China, and slowdowns in Brazil due to the trucker strike may have a positive effect on U.S. pork until they get back on track with their logistics.

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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.5.25
2018-05-25T01:58

Corn piggybacked off wheat today, pushing through and settling at 4.25, +2 ½ (Dec). Traders seem cautiously optimistic, but unwilling to stick their necks out too far heading into the Holiday weekend. Tuesday’s trade should be interesting, as Monday holidays usually result in volatility to follow. Will Dec be able to close above the 4.29 ½ contract high next week? If so, the 4.50 area is in sight. Regarding NAFTA, AgResource related that autos are the main sticking point holding up an agreement. Mexico has put the odds at 40% that a resolution can be accomplished before their July Presidential election. The Commitment of Traders Report will be released later this afternoon and will show adjustments to managed funds net long positions.

Soybeans also propelled higher, but for a different reason than corn and wheat, +6 (Nov). Positive negotiations with China and thawing North Korean relations as they consider coming back to the table, have traders in a bullish mindset heading into the weekend. China has indicated that they will be increasing purchases of American beans to help narrow the trade deficit, and this has started to impact new crop sales already. Commerce Secretary Ross is on the way across the pond and scheduled to arrive in Beijing tomorrow. He will seek to hammer out more of the details that have been agreed to in principle. The truckers strike in Brazil over high diesel fuel costs has caused headaches but little impact on exports to-date, However, if it persists another week you will be hearing more about it, as President Temer has indicated he may summon the military to intervene. Brazil is highly dependent on trucking as they do not have a strong railroad infrastructure.

Wheat continues to lead the grain complex, with global weather center stage: Chicago SRW +12 ¾, Kansas City HRW +15 (July) and Minneapolis HRS +9 ½ (Sept). Areas in the crosshairs include E Australia, Canada and the Black Sea Region. These are all very important growing areas, with Russia having the biggest impact. Russia is continuing to show declines in estimates of yield and exports. Here stateside, one would think HRW would be the leader with problems experienced in the Plains and extreme heat on the way. But Chicago wheat looks stronger on the chart, and soft wheat sees a much higher volume of trade. And, even with sufficient stocks, soft wheat is vulnerable, as the world is so dependent on this important grain.

Live Cattle came through the Cattle on Feed Report unscathed, +.525 (Aug). Today’s report was considered neutral, with On-Feed at 105.1% of last year, Placements 91.7% and Marketings 105.9%. Look for cash to set the direction for next week.

Hogs were down in June but up in all the deferred months, +.775 (July). The market needs a spark from demand, as hog weights are still up 2 lbs over last year and supplies plenteous. Grilling season will be in full swing this weekend, and hopefully NAFTA partners and China will provide the extra bump needed as we head into the summer months.

Happy Memorial Day to all, and Remember to Thank a Veteran!
 
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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.5.24
2018-05-24T02:02

Corn ran into resistance at the Dec contract high of 4.29 ½, with the focus on profit-taking and consolidation, -4 (Dec). It feels like the entire grain complex is at a crossroads of trying to overcome resistance, and it will be important for closes above highs in order to maintain momentum. Corn weekly export sales were in-line with expectations at 1,127,700 MT vs the estimated range of 800K-1.3 MMT. For the crop year, corn sales are basically on equal footing with last year. There was a cancelation of sorghum of 132K MT to “unknown” destinations.

Soybeans were also unable to sustain early double-digit gains, as traders took profits ahead of the end of the week and Holiday weekend, -1 ¼ (Nov). The improving trade relationship with China is providing underlying market support, with Ag Secretary Perdue asking for an additional $25B in Ag business from the PRC in the coming years. Soybean weekly sales announced this morning were disappointing, but new demand from the Chinese should be hitting the books soon. A daily private sale of 264K MT was reported to “unknown” destination for 2018/19. For the crop year, soybean sales are down 4.5% from last year.

Wheat also exhibited a similar pattern of strong gains early before selling off. World weather in major growing areas such as Australia, Canada and the Black Sea Region, are of growing concern related to dryness and developing drought conditions. June will be an important month for determining wheat direction moving forward. Weekly export sales reported by the USDA were solid, at 452,300 MT, on the high end of expectations of 0K-500K MT. However, for the crop year to-date, wheat sales are lagging last year by 16.5%. Chicago SRW – ¾, Kansas City HRW -2 ¾ and Minneapolis HRS -7 ½ (Sept).   

Live Cattle gave back some of yesterday’s large gains, -1.025 (Aug). Upside is somewhat limited due to large supplies. The Cattle on Feed Report is tomorrow with expectations of On-Feed 104.9% of last year, Placements 90.9% and Marketings 106%.

Hogs exhibited volatility as they built on yesterday’s gains, +.550 (July). As with cattle, upside is limited due to large supplies. Additionally, the strong U.S. Dollar is providing market weakness, as this does not bode well for price competitiveness in the export market, of which hogs are very dependent.

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 they may not be suitable for all investors
Water Street Solutions Daily report 2018.5.23
2018-05-23T04:11

Corn reached another high in trading today, 4.26 ¾, as Dec futures finished +3 ¼. The USDA announced a private sale to Saudi Arabia of 140K MT of optional origin corn, with half for 2017/18 and half for 2018/19. EIA weekly ethanol reporting showed production to be down 2.84% vs last week, but up 1.78% over last year. Ethanol stocks followed the same pattern, up 2.90% over last week and down 2.45% from last year. Corn used in ethanol production was more than adequate to meet the USDA annual estimate, coming in at 107.11 mbu compared to 102.365 mbu needed. It was expected ethanol may take a “pause” this week, but long-term the future is bright with improving China relations and their plans to import more from the U.S. Managed funds are estimated to be well in excess of 215K contracts net long, and it is hard to imagine that all weather premium has been built-in at this time of the season.

Soybeans stretched up yet higher in the established range, building on weekly gains, +9 ¾(Nov). Soybeans are frolicking in the newfound optimism of increased trade with China, as it is expected a substantial sale announcement will follow shortly. Two big houses that have been shopping U.S. beans again are Cofco and Sinograin. U.S. Commerce Head, Ross, will be heading over to China after Memorial Day to continue talks. Regarding acres, it is not expected that there will be a big shift of corn to beans, as corn has been holding its own in the 4.25 Dec price area. Weather and planting has been favorable so far, but it is early and there is room for more premium in the market. Soyoil also closed positive today, which is a bullish. A side story that has gotten attention but the impact has yet to be felt (if at all), is Brazilian truckers striking over unhappiness with higher diesel fuel costs. The government lowered the tax from 40% to 10% but the strike does not appear to be ending soon.

Wheat has been able to rally off improved Matif wheat values in Europe as well as deteriorating conditions worldwide. Also providing support, China wheat imports in April were reported to be at 6-month highs, and other Asian markets are looking to buy in record volumes from the Black Sea Region. Russian crop estimates are also coming in lower, adding further fuel to the fire - not to mention deepening drought and dry conditions in Australia and elsewhere. Wheat has been rather unpredictable of late, and has had a hard time sustaining action in either direction. Will we continue for another .50 to the topside? Chicago SRW +9 ¼, Kansas City HRW +11 and Minneapolis HRS +8 (Sept).

Live Cattle took up where it left off, making good progress higher, +2.150 (Aug). While there is a growth in supply, there is also a significant discount of futures to cash. Normally, this gap will close, leaving room for futures to rise. But, the turndown in beef prices will be a bearish force to overcome.

Hogs seem to be looking for a short-term low and found support, bouncing up for a nice gain,+1.100 (July). Large supplies will likely cap rallies, and it will be essential for export business to pick up to avoid a glut in the U.S. market.

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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.5.21
2018-05-21T04:54

Corn followed the lead of beans by gapping to a new high (4.24 ¾)  before settling close to even, + ¾(Dec). Corn could see benefits from a constructive relationship with China in future years, as they may have a need for more corn imports, as they plan to shift more of their domestic acres to beans. Also, they have big plans to increase ethanol usage in their gasoline blends, to help reduce air pollution, which will have demand ramifications. The COT Report on Friday showed corn is still heavily net long among managed funds, although there was a reduction in their position of around 20,000 contracts. USDA weekly export inspections had corn right in line with expectations of 1,550,000 MT at 1,527,994 MT. Crop progress this afternoon is expected to show corn planting in the neighborhood of 85% complete. In Brazil, concerns are continuing to mount regarding the safrinha corn, as Safras reduced their forecast to 49 MMT, which would imply that Brazil’s overall crop will be down from 97 MMT last year to 80 MMT this year.

Soybeans gapped higher in the overnight and the positive action continued throughout the session, +25 ½ (Nov). Fueling the rally was news from U.S. and China trade talks indicating that the trade war has been put on hold until further details can be worked out. China proposed they may increase agricultural imports from the U.S. by 35-40% going forward, which is great news for soybeans. Will there be a large purchase of beans by the PRC to follow this week? This morning offered no new daily sales announcements. Weekly inspection numbers reported by the USDA this morning pegged beans at 893,680 MT, well above estimates of 550,000 MT. Planting conditions will be released later today, and it is expected that beans will have progressed to 55% planted from 35% last week.

Wheat began the overnight session with gains off the back of beans’ positive reaction to trade news. However, this quickly turned to a substantial setback across the both winter and spring wheat. Chicago SRW -11, Kansas City HRW -12 ¼ (July) and Minneapolis HRS -4 ¾ (Sept). Wheat weekly loadings were on the light side, as inspections were pegged at 341,299 MT for the week ending May 17th, compared to expectations of 450,000 MT. Regarding crop conditions to be reported later this afternoon, soft wheat is expected to show some improvement while the hard winter should be unchanged to slightly worse. Spring wheat planting is expected to 80%+ complete. The strong Dollar does not help rallies here stateside, but this does help provide strength to the European market, as their gains help provide support. World weather is very influential, as dry areas in the Black Sea Region, Australia and Canada are being closely monitored.

Live Cattle also got a boost from positive trade vibes, +2.525 (June). This week will offer some important announcements, with the Cold Storage report tomorrow, Livestock Slaughter on Thursday and Cattle on Feed on Friday. Look for Placements to decline by 10%. According to AgResource, it appears a seasonal correction has already been priced into the market, as there has been a price decline of 21% from 2ndquarter highs to 3rd quarter lows, well below the 10-year average of 12%.

Hogs pushed lower, unfazed by friendly news from trade talks, -.700 (June). This would be considered a bearish development, as large supplies continue to outweigh other positive factors.

In Other News, Congress failed to pass a Republican version of the 2018 Farm Bill, with 30 Republicans defecting and no Democrats voting for it. Farmers have seen a 50% reduction in net farm income, and the “no-vote” is seen as a setback. In Brazil, truckers are setting up a huge protest in reaction to a hike in diesel prices by 25-30%. It is hard to estimate the impact - but if it drags out, will surely have an effect on the movement of grains to ports.

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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.5.18
2018-05-18T03:41

Corn rallied on news that China lifted the sorghum anti-dumping duties, +7 ¼ (Dec). Sorghum and corn demand are linked and getting back on track with regular weekly sorghum sales of 3-6 mbu to the PRC is positive to the complex. Sorghum stocks are not over abundant, even with WASDE predicting a big decline in exports. If the exports end up being added back in, the corn balance sheet will tighten up from the feed side. While today trended positive, the market needs a bigger story related to the U.S. growing season, as trade disputes with NAFTA and China along with a solid start to planting are making it difficult to get up and above resistance in this 4.20 area.

Soybeans also found strength in corn and the positive trade gesture from China regarding sorghum, +4 (Nov). New export sales reported today included 56K MT of old crop and 112K MT of new crop to “unknown”. However, there was a large cancellation of a sale of 829K MT from “unknown” (thought to be China). This is not out of the ordinary for May, but sends somewhat of a mixed signal from the PRC, with trade negotiations continuing. As with corn, the market needs a weather problem or an export story, etc, to really get things fired up again. It could be awhile before there are new developments for beans.

Wheat rocketed to the highest close since May 4th. Concerns seem to be mounting for Australia, Canada, and the Black Sea Region related to inconsistent moisture over the growing areas. With Russia’s stocks whittling down from strong exports, this is raising some eyebrows. A strong U.S. Dollar is limiting export sales, but Argentina and Russia are seeing their wheat values rise. This was evident from Egypt not buying Russian wheat in their latest tender. Chicago SRW +20 ¾, Kansas City HRW +19 ¾ (July) and Minneapolis HRS +12 ¾ (Sept).

Live Cattle traded in a sideways mode today, -.650 (June). Weekly beef exports were at an 8-week low and 2nd lowest of the year, but overall sales are up 17% over a year ago. There appears to be more upside potential, with futures lagging the cash market by a substantial margin.

Hogs set back after two days of gains, -1.775 (June). China is an important customer of U.S. pork and it is somewhat surprising that hogs did not follow the lead of the grains’ positive action, with China extending the olive branch on sorghum. However, the supply side is heavy and futures are still disproportionally high in relation to the CME Lean Hog Index.

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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.5.17
2018-05-17T02:11

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Corn traded in a 6 ½ cent range, on both sides of unchanged, before faltering at the finish, -4 (Dec). Futures found support in wheat today, as well as solid export numbers. The USDA weekly log pegged export sales at 1,114,900 MT, on the high end of the range of estimates of 750K-1.2 MMT. Japan led the list of buyers along with Asian and Latin customers. Managed funds reduced their large net long position this last week, and the Commitment of Traders Report tomorrow will reveal more details on their current position. The focus is on trade disputes and weather in the Northern Hemisphere. It is thought by many that corn should have room for another rally pre-pollination, as stocks are tightening and any perceived glitch that could impact yield will get a reaction.

Soybeans continued to inch lower, mostly on concerns over the lack of perceived progress between Chinese and U.S. trading negotiators, -4 ¾ (Nov). Bean weekly export sales were not great, as they were pegged at 506,600 MT vs estimates of 400K-950K MT. Last week’s sales were mostly to Europe and Mexico, and non to China. However, a bright spot included a daily sale to “unknown” destination for 132K MT. It is estimated that China has covered 100% of May-June soybean needs, 70% of July-August and 10% of September. Their April imports this year lagged April 2017 by 1.1 MMT at 6.92 MMT.

Wheat got a lift from growing concerns related to global dryness. Both Australia and Canada are being watched closely to see if parched conditions progress to drought. Weekly exports sales were less than impressive, coming in at 194,700 MT, on the low end of the range of estimates of 150K-500K MT. The market was bound to stabilize and bounce back at some point, as KC had dropped 65 cents and Chicago 50 cents on this last trip down. Chicago SRW +3 ¼, Kansas City HRW +5 (July) and Minneapolis HRS +3 (Sept).

Live Cattle found their footing after three days of steep losses, +1.225(June). Since June futures are at a significant discount to the cash market, it would seem downside is limited. Packer margins are very high, which is also underpinning the market.

Hogs traded positive in June but negative in July and August, +.575 (June). The pork complex is under pressure from trade issues and hog weights trending too high. This coupled with futures still running at over an $11 premium to cash will be hard to overcome in the short-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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.5.16
2018-05-16T02:56

Corn relented to the strong downward pull of beans and uncertainty as to whether NAFTA members can reach agreement by the deadline, -2 ¼ (Dec). Trade apprehension is dominating the minds of traders, and funds are not enthusiastic to increase net long positions until more negotiation details are known. EIA Ethanol reporting was a positive, as ethanol production for last week was up 1.73% over last week and 3.02% over last year. Ethanol stocks were down 2.09% vs last week and 8.15% vs last year. Corn used for ethanol was a whopping 110.26 mbu compared to the 102.678 mbu weekly average needed to achieve the USDA annual projection of 5.575 bbu. Corn is off to a good start with planting, but there are still concerns as private forecasters are saying it is the driest planting season since 1979 – “plant in the dust and your bins will bust”? States that are significantly short on soil moisture include GA, KS, OK, ND, MO, AR and IN – while MN, IA, WI and SD are experiencing planting delays. Will this tighten up the U.S. stocks outlook?

The entire soybean complex was under pressure today with meal and oil also sharing in the losses. November futures were -15 ¾. Once again there were no new daily sales announcement this morning, and U.S. bean offerings are higher than Brazil. This coupled with consternation over the trade situation with China, did nothing to appease mindsets. The market is waiting breathlessly for word from the talks in Washington between the two sides this week, as any news could swing market direction.  If agreement is not reached, the U.S. could move ahead with $50B in tariffs on the PRC, which would likely evoke a response that would not be good for beans. Informa gave soybean acres a boost, estimating them at 89.4 million vs the USDA’s current expectation of 89.0 million.

Wheat and corn are closely tied, and with corn down and weather favorable, wheat did not have much of a story to build on, although it was the lone grain to show gains. Chicago SRW + ¾, Kansas City HRW +4 ¼ (July) and Minneapolis HRS +5 ¾ (Sept). Weather in Australia continues to trend dry, while the Black Sea and U.S. Plains are becoming less of a concern. The U.S. Dollar is trading at 6-month highs, also putting a damper on rallies.

Live Cattle continued to stumble as traders seem to be siding with large supplies winning the battle, -1.150 (June). Opposite of hogs, cattle futures are at a deficit to the cash market. This may be a supportive factor, but the large numbers of cattle headed to the slaughterhouses are softening the market.

Hogs were supported by short-covering and seasonal fundamentals, +1.175 (June). The premium of futures over cash continues to loom over the market, as it is unusually high, and leaves the door open for futures to decline to fall into line with cash.

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 they may not be suitable for all investors