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Water Street Solutions

Water Street Solutions Daily Report 2017.10.19
2017-10-19T01:49

Corn followed beans’ lead and found support in exports, + ½(Dec). USDA weekly corn export sales were above the range of estimates of 750K-1.1 MMT at around 1.3 MMT. Of the total, Mexico made up about half, with Japan and Latin America comprising the difference. However, corn exports still lag behind last year by 34%, as Brazil has a price advantage to Asian destinations. The talk about possible reductions by the EPA to the RFS mandate, which would negatively affect U.S. biofuels, has effectively been quashed at this time which is good news for ethanol.

Soybeans found strength today in exports and a positive feeling on RFS, +2 ¼ (Nov). The USDA reported a private sale of 384K MT of soybeans to China for 2017/18. On the weekly export sales log, the USDA penciled in beans on the low end of the range of estimates of 1.25-1.75 MMT at 1.275 MMT. However, both meal and oil were on the high end of estimates. Brazil weather is still creating a measure of uncertainty with weekend rains scheduled this weekend for the western part of Mato Grosso, but it will possibly be later this month before substantial rains arrive. The Renewable Fuel Standard will stay unchanged, as President Trump called the IA Governor to affirm his support for U.S. biodiesel. The U.S. Commerce Dept. plans to announce tariffs later this week on Argentina biodiesel due to dumping into the American market.

Wheat found support in exports, as China showed up on the sales log with a purchase of two cargoes of spring wheat. The USDA weekly report pegged wheat sales at 615,400 MT compared to estimates of 250K-500K MT. Notable buyers of U.S. wheat included Mexico, China, Japan and Iraq. Egypt’s GASC was in for wheat for the third consecutive week, likely sourcing from the Black Sea Region. Chicago SRW +2 ¾, Kansas City HRW +1 ¼, Minneapolis HRS +5 ¾.

Live Cattle had a setback today, as traders position in front of the Cattle on Feed Report tomorrow, -.500 (Dec). The data will be as of October 1st and will reflect metrics from the month of September. The marketing rate has a wide range of estimates and will be essential for market direction, as it is imperative to stay current on the front end. Estimates for the report include: On Feed 104.6%, Placements 108% and Marketings 102.6%.

Hogs achieved a new high today not seen since August 15th, +.500 (Dec). A new report from Rabobank is forecasting an increase in the pork sector of 11% over the next 8 years, based on increasing efficiencies and growth in processing capacity. A good part of the expansion is based on expectations of export growth, with Mexico being a leading importer of U.S. pork. However, NAFTA negotiations are not making much progress, leaving an air of trade uncertainty.  

In Other News, the EPA came out with new regulations for dicamba in 2018. Manufacturers have agreed to label changes including only letting certified applicators with training and those under their supervision use dicamba with a restricted use label. Farmers will also be required to keep records of dicamba use and may only apply the product when wind speeds are under 10 mph to reduce drift potential, and will be limited to using only during certain hours of the day. There will also be text pertaining to tank cleaning and more language around contaminating sensitive crops.

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 2017.10.18
2017-10-18T04:28

Corn is trading in a range established by August 31st, with no bullish story to provide a way out, -1 ½ (Dec). South American weather is trending benign, with potential rain relief on tap for Brazil and Argentina’s forecast looking good. EIA Ethanol data released today for the week ending October 13th showed production up solidly over last week by 5.38%, and 2.10% over same week last year. Ethanol stocks were down slightly from last week by 0.20% but a whopping 12.80% higher than last year. Corn used for ethanol needs to pick up the weekly pace as it was announced at 104.75 million bushels, while usage of 105.041 million bushels needs to be achieved weekly to hit the overall yearly USDA estimate. Ethanol margins are still profitable, with IL and IA plants achieving around 10-15 cents/gallon profit. Midwest Senators met with EPA Head, Pruitt, and it appears that he is backing away from the idea of lowering the RFS mandate, which would be good news for ethanol.

Soybeans could not muster a rally, weighed down by U.S. harvest hedge pressure and South American planting, - ½ (Nov). Outside markets are mixed, with crude up and the Dollar down. Brazilian planting conditions are continuing to look more favorable with probable rains ahead. And, Brazilian farmers are looking to plant more bean acres, as domestic corn prices are so cheap. The market needs confirmation that the second half of U.S. soybean harvest will show lower yields, as a national yield of closer to a 47-48 bpa is likely necessary to spur market action. Harvest should make significant progress over the next few days and will be closely watched.

Wheat was looking for a story to stimulate buying without success. There has been some chatter about planting delays with HRW, with some speculating that Kansas and Oklahoma farmers are simply deciding not to grow wheat. Weather delays are partly to blame. The soft wheat growing areas are ahead of planting schedule. Russian wheat production estimates continue to get bumped up with IKAR the latest to up their prediction from 82.5-83.5 MMT to 83.2-83.7 MMT.  Look for the wheat complex to continue to be a follower of corn and beans. Chicago SRW -4 ¾, Kansas City HRW -5 ¼, Minneapolis HRS – ¾.

Live Cattle bounced back from yesterday’s loss, gaining +.675 (Dec). The Cattle on Feed report is due out on Friday with the following estimates: On Feed 104.6%, Placements 108%, and Marketings 102.6%. With the market overbought, look to see if speculative traders favor long liquidation with technical indicators pointing to sell.

Hogs corrected most of yesterday’s sell-off, +1.575 (Dec). On the minds of many is the big supply ahead and whether the market and exports will be able to absorb it. Of particular concern is the fact that China’s pork imports from Jan-Aug are down 8%. Hogs are overbought and looking like they have put a near-term top in place, only to fight off bearish pressure. Stay tuned.

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 2017.10.17
2017-10-17T03:50

Corn traded lower today closing – ½ at $3.50 (Dec). While the market may have already priced in a bearish supply outlook, with only 28% of the corn crop harvested, producer selling is a distinct headwind for the market going forward. With US weather ideal for harvesting the next seven days, a better weather outlook in Brazil and the continued uncertainty of NAFTA negotiations, the corn market continues to feel pressure. There were two sales reported by the USDA this morning. A Private sale of 146,000 mt of corn to unknown destination for the 17/18 MY, and a private sale of 115,000 mt of corn to Mexico for the 17/18 MY.

Soybeans continued to trade lower today closing -6 ¼ at $9.84 ¾ (Nov). The weekly US harvest update showed 49% complete compared to 36% last week and 59% last year. The 10-year average for this time of year is 60%. This is the third slowest harvest pace since 2000. The next week of Brazilian weather continues to be hot and dry, but looks as if dry regions are expected to get some much need precipitation relief late in Oct and into Nov. Safras & Mercado estimates Brazil’s soybean plantings at 10.8% complete compared to 17.3% last year at this time last year.

Wheat traded uneventfully today with Chicago -1 ¾ at $4.34 ¾ (Dec), KC – ½ at $4.33 ¼ (Dec) and MN +1 ½ at $6.11 (Dec). Currently the Midwest is looking dry; however, the eastern Kansas and Oklahoma growing areas are looking to receive about an inch of rain in the near future. Big crops in Eastern Europe, the black sea region and India have helped to drive world-ending stocks to a record high for the third year in a row making any gains difficult to sustain.

Live Cattle had a rough trading session closing -.550 at $111.175 (Oct). All eyes are on the USDA monthly cattle on feed report which will be released this Friday, Oct 20. Analysts expect the report to show on feed Oct 1 105%, placements during Sept 108% and marketings in Sept 103% vs 104%, 103% and 106% respectively on the previous report.

Hogs traded lower today closing -1.525 at $62.175 (Dec). Pork cutout values continue to advance in spite of supply. At any time, the large short-term supply could cause a downtrend in pork cutout values and could pressure. Increased slaughter capacity is currently helping to support the cash market but if pork product prices show weakness, the support could dissipate quickly.

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 2017.10.16
2017-10-16T02:56

Corn followed weakness displayed by soybeans, -2 ¼ (Dec). Harvest is running well behind average with the weekend offering plenty of rain across parts of IL, IA, MO and MI. With about 2/3 of the corn harvest yet ahead, the market will be watching closely to see if harvest results confirm the USDA’s view of corn yield higher by almost 2 bushels. USDA weekly inspections for the week ending October 12thwere strong and provided a measure of support to the market. They were announced at 1.593 MMT, with 2/3 of the total going to Mexico. Unfortunately, NAFTA negotiations do not seem to be making a lot of progress, with four of seven scheduled meetings completed. Stay tuned for results from these important talks.

Soybeans gave back some of the gains of the last two days with improved South American weather, -9 ¼ (Nov). Yield numbers and crop progress later this afternoon will help dictate direction for the rest of the week. Short-term downside risk is still significant, and exports will also play a role. On that note, the USDA reported a sale of 227,300 MT of soybeans to “unknown” destination for 2017/2018. USDA weekly soybean inspections were above expectations of 1.250 MMT, coming in at 1.770 MMT. The NOPA Crush Report was released today, and it showed soybean crush to be a little bit lower than expected but well ahead the levels of a year ago. It was the highest September crush in 10 years at 136.4 million bushels. Soymeal exports were well above last month’s 426,896 MT at 487,397 MT. Soyoil stocks were lower than expected and well below last month at 1.302 billion lbs. vs. 1.417 billion lbs.

Wheat continues to play its role as a follower to corn and beans. The winter wheats posted losses with Chicago –3 and KC -2 ½, while the Minneapolis spring variety also relented, -5 ¾ (Dec). Large supplies continue to weigh on the market, and Russia’s numbers continue to go up, with their Ag Ministry bumping their yield to 83 MMT from 81.4 MMT. USDA wheat weekly inspections were below expectations of 425K MT, pegged at 322,860 MT. For the year-to-date, U.S. wheat exports are down 10.5 million bushels or 2.6%. The 4.45-4.50 level has proven to be tough resistance for wheat to break through.

Live Cattle featured selling, as traders position for three key reports, -.300 (Dec). This Thursday will feature monthly Livestock Slaughter data while Friday will be the Cattle on Feed report. The monthly Cold Storage report will be on Monday. The view of 4th quarter supplies is bearish while demand is holding strong.  

Hogs reached new highs in the Dec contract, not seen since August 15th, +1.500. Strong demand is winning the battle with concerns over short-term supplies. Production in the 4thquarter is predicted to be up 790 million lbs from the 3rd quarter, which is 5.8% higher than last year. Will exports be able to keep pace and support the market from succumbing to pressure?

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 2017.10.13
2017-10-13T01:52

Corn futures pushed ahead, refusing to succumb to bearish yield estimates from the USDA, +3 ¾ (Dec). Good demand is helping to offset, with the USDA reporting weekly export sales up substantially for corn, at 1.6 MMT vs. estimates of 750K-1.0 MMT. Two-thirds of the total were sold to Mexico, with Japan, Korea and Latin America making up the balance. It was also announced by cash grain sources that South Korea’s KOCOPIA purchased 60K MT of U.S. origin corn. Look for corn to follow beans, as it lacks a bullish story of its own.

Soybeans built on post-report gains, also finding support in strong export sales, +8 ¼ (Nov). Managed funds added to their net long position in both beans and meal. USDA weekly export sales were above and beyond expectations, coming in at 1.747 MMT vs. estimates of 900K-1.25 MMT. Will the Chinese reward these prices with more buying or will South American farmers now be more apt to reward the rally? With the report now in the rearview mirror, attention will focus squarely on South American weather. This will determine whether funds continue to build a long position or whether the short-term rally dissipates.

Wheat was able to find support in corn and beans, as well as a weakening Dollar. The winter wheats made the biggest gains with Chicago +9and KC +10. Minneapolis also posted positive gains at +3 ¾ (Dec). Wheat does not have a bullish story of its own, so expect rallies to be muted by the weight of heavy supplies. The weekly export log showed disappointing numbers for wheat, with a reported 175K MT compared to expectations in the range of 250-500K MT. Russian sourced wheat has proved to be a thorn in the side, as they have continued to dominate opportunities with Egypt and outbid the U.S. on a number of fronts. And, it appears Russia has been able to increase export capacity, now estimated at 34 MMT.

Live Cattle trended lower today, -.150 (Dec). Has a short-term correction of cattle’s overbought condition begun? Longer term, February should trend higher, with tighter supplies. It is predicted that 1st quarter production will drop a record 810 million lbs. from this quarter. As of the week of September 30th, beef production came in at 7.8% higher than a year ago, with average steer weights at 894 lbs, down from last year’s 904 lbs. Slaughter for that week was the highest since July of 2013.

Hogs were able to reverse course after yesterday’s negative action, +.575 (Dec). Like cattle, if hogs can thwart off selling pressure due to short-term supplies, the 1st quarter is expected to show a steep decline in production of 395 million lbs. Of note, China’s pig herd declined last month by 6.1% compared to the same time last year. This is significant and bears watching considering China is the largest global consumer of 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 2017.10.12
2017-10-12T01:57

Corn rallied off soybeans’ lead, as the USDA report was neutral to slightly bearish, +3 (Dec). NASS upped the estimated corn yield to 171.8 bpa, while lowering harvested acres by 400,000. The total corn crop is pegged at 14.280 bbu, 96 mbu higher than the last report. This is the 2nd largest corn yield predicted on record, with the corn ear weight the 3rd highest. However, the corn harvest pace is well behind, at its lowest since the 2013 season. The USDA reported a private sale to Mexico of 120K MT of corn for 2017/18. EIA Ethanol numbers were released a day later this week due to the Columbus Day holiday. The report revealed a sharp decrease in production of 43,000 bbl to 0.967 million bbl/day (equivalent to a decrease of 13 million gal/week), and a decrease in ethanol stocks of 22,000 bbl to 21.52 million bbl. Strong ethanol exports are needed to sustain high production as domestic demand alone is not enough. With a higher close today in corn futures, has a major low been achieved?

Soybeans left the other grains in its wake post-Report with a large bar to the upside, +26 ¾ (Nov). NASS lowered the soybean yield estimate to 49.5 bpa from 49.9 bpa in September. Notably, Illinois, Indiana and Minnesota all saw decreases in yield. According to AgResource, there is a strong historical case to be made for a further decline in the U.S. soy yield in November based on the trend from September into October. Soybean pod counts saw a mild increase from September while pod weights were down to .335 grams from .340. Ending stocks were reduced from 475 mbu in September to 430 mbu, which was also 22 mbu less than the average estimate. On the flip side, soybean acreage received an increase of 700,000 acres to 90.2 million. Soybeans were able to close above key resistance levels at 9.75 ½ and 9.88 ½, leaving an upside target of 10.02.

Wheat was not able to stay in positive territory, despite its effort to follow the lead of corn and beans. World wheat production was bumped up to a record 751 MMT, with both Argentina and Russia up 1.0 MMT. Additionally, world wheat stocks were seen to be at a new record, tallying 268 MMT. The report is bearish wheat and does not leave a lot of room for optimism at this time. Chicago SRW -2 ¾, Kansas City HRW -2, Minneapolis HRS -7 ¾.

Live Cattle corrected some of its overbought condition with profit-taking sellers, -1.250 (Dec). Packer margins are down modestly, supplies are plenteous and cash trade is down. On the bright side, China is expected to see a 15% rise in 2018 imports, and this market could be a huge boost if more U.S. cattle becomes eligible to move into their market.

Hogs experienced a pullback, but still traded in the newly established range, in line with the 100 and 200-bar moving averages, -.875 (Dec). The next six weeks is expecting to show record pork production of 3-4% growth. This will make it difficult for December futures to keep the $5+ premium to the cash market, when normally this time of year features a $5+ discount to 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.
Water Street Solutions Daily Report 2017.10.11
2017-10-11T01:37

Corn traded sideways to down, finishing –3 ¼ (Dec). Funds seem content to sit on their large short position heading into the USDA Report tomorrow. Corn harvest is running behind average, as yesterday’s progress report showed corn harvest 22% complete, compared to 37% complete on average. In daily exports, Mexico stepped up to the plate and purchased 150K MT of corn for 2017/18. This in conjunction with NAFTA negotiations that reconvened today through the weekend - may be a subtle reminder to the U.S. of how valuable they are as an Ag trading partner? Brazil weather continues to be a focus, as the market is monitoring the possibility of a developing La Nina pattern, and hot/dry conditions in Mato Grosso.

Soybeans gave it one last effort pre-report, finding support in daily export sales, but could not finish above water, - ¾ (Nov). The USDA reported two sales this morning – a private sale of 132K MT to “unknown” destination and a private sale of 264K MT to China for 2017/18. There is some chatter about China rejecting two Brazilian soybean cargoes for poor quality due to storage in silo bags that overheated. Will this influence their choice of destination? As with corn, South American weather is coming into focus, as traders are looking for new developments to spur action. If Brazil stays hot and dry and soybean planting is delayed, this could have a negative impact on S.A. double crop corn, changing the timing of its pollination window to the hottest time of the year. On the U.S. front, basis has started to stabilize, as the flow of river traffic is showing improvement.

Wheat is still battling the fallout from the bearish news of the Sept 29thcrop report. Even if the report tomorrow is bullish corn or beans, wheat is likely to be a follower and has a good amount of overhead to account for that will mute rallies. If there is a surprise in store, look for it to be in U.S. ending stocks for 2017/18. On the farm, wheat is seen by the USDA as 48% planted compared to 58% average this time of year, with winter wheat 25% emerged vs. 30% normal. The U.S. continues to struggle to compete with Russia on the export front, as their exports through August were announced at 16.743 MMT vs. 13.967 MMT last year at this time. However on a positive note, Mexico booked a HRW sale this morning for 104,202 MT for 2017/18. SRW -2, HRW -3 and HRS +1

Live Cattle is struggling with short-term supply in the weeks ahead, --.275 (Dec). But, the market has found support in strong seasonal demand and solid slaughter margins. The outlook into the 1st quarter is more positive as supply will slow. In the meantime, keep any eye out for a short-term peak.

Hogs built off yesterday’s gains, +.950 (Dec). The market seems confident that demand will offset production in the near-term. Also giving support is firm cash as well as gains in pork values, including bellies. The market may be susceptible to selling when the cash market trends lower, as it is at a discount to futures, which is atypical for this time of year. To maintain current levels, the market will need to see a growth in export business.

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 2017.10.10
2017-10-10T02:30

Corn, along with all the grains, traded both sides of unchanged, - ¼(Dec). Weekly corn inspections for the week ending October 5th were well below expectations, coming in at 524,168 MT vs. estimates of 750K MT. South Korea bought 320K MT today of optional origin corn, thought to be going Brazil’s direction, as they have a $5-10/MT advantage over the U.S. PNW bids. Brazil’s CONAB came out with their first estimate showing corn production at 92.2-93.6 MMT compared to 98.5 MMT last season. Managed money positions have stayed fairly steady, around 175K contracts short, as traders anxiously await the Thursday USDA report. In South American weather, Brazil is hot and dry but recent rains have helped while Argentina is expecting more sunshine, which will help with planting.

Soybeans continued their sideways trade, consolidating in a narrow range ahead of the Report, - ¾ (Nov). USDA weekly inspections provided support for beans, with a whopping 1.484 MMT announced compared to estimates of 1.1 MMT. China also was on the board this morning for another purchase of 131K MT, after a quiet few days. Brazil’s CONAB’s first stab at soybean estimates for the coming season showed production at 106-108.2 MMT compared to 114 MMT last year. This is due to expectations of more normal production after last year’s record, with acres expanding by 2.7%. The concern in Brazil is over delayed planting in the center and north due to dry conditions, which could play out with double crop corn pollinating in the hottest part of the summer, if delays persist.

Wheat saw mixed trade, finding some support in Egyptian demand, a weak Dollar and rising crude prices. Wheat weekly inspections were a disappointing 350,632 MT compared to estimates of 550K MT. Russia was able to garner in another Egyptian order, with the GASC announcing a purchase of 170K MT of Russian origin wheat at tender today. The USDA report on Thursday will be focused more heavily on corn and beans, so expect wheat to follow their direction. Chicago SRW – ¾, Kansas City HRW + ½ and Minneapolis HRS -6(Dec).

Live Cattle futures pushed to new heights, finding support from strong domestic demand, a strong export pace and recently huge profit margins from packers, according to Hightower. The beef market is at its highest level since August 15th, with the USDA boxed cut-out to $198.13, ninety-one cents higher than the previous close. Dec Cattle +1.875

Hogs followed the lead of cattle and forged out gains, +.600 (Dec). Even though technical action is poor, cash and pork values are up. The USDA pork cut-out was up 90 cents to $72.82, higher than last week’s $72.33. Look to see if the market can continue at this pace in spite of the large discount of cash to futures and with growing supplies. October is National Pork Month.

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 2017.10.6
2017-10-06T04:14

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Corn could already be in the wait and see mode ahead of the USDA report next week.  Funds seem to be building their net short positions with open interest is up 53,237 contracts in the last five trading days. Support in the market could be coming from heavy rains expected for most of the Midwest slowing harvest down. Already hearing some reports of basis improving as elevators clear out of old corn without receiving new. The extended forecast after this rain event looks to be clear. Buenos Aires exchange reports corn plantings at 16.5% complete and acres expected unchanged at 5.4 million hectares vs 5.1 million last year. Monsanto has said they believe that first crop summer corn planting will be down due to slow seed sales with some estimating a decrease of 20-30%. Dec corn + ½

Soybeans closed strong today. A slow start to harvest could be even more supportive for beans as beans move through the pipeline quicker with stronger demand. Yields have started to come in mixed with a lot of questions still out there because we haven’t gotten to the later planted beans at this point. Central Brazil which has been drier is expecting some rains and those forecasts will be watched closely. Excess rain in Southern Brazil continues to delay planting efforts. Brazil exports showed them up 196% versus last September at 4.27 million tonnes. Shipments to China were up 313%. We continue to lag behind pace on exports at 38.1% of the USDA forecast compared to the 5 year average of 54.2%. Nov soybeans +4

Wheat made a small comeback today. Weakness yesterday due to beneficial rains into soft red wheat areas of Ohio, Indiana, and Eastern Illinois from Tropical Storm Nate. Buenos Aires reported that wheat planted area is unchanged at 5.45 million hectares but also stated that 51% of that is challenged with heavy rains that could limit fertilizer application. Areas of Australia could pick up ½ of rain over the next five days but Wester Australia could remain dry and any rain may be too late to save that area. Dec Chicago +2 ¾, KC +2 ½, MN +8 ¼   

Live Cattle finishing strong today and through yesterday’s high. No significant cash trade today. Carcass weights on cattle continue to trend about 7 to 8lbs under last year at this time. This will continue to be closely watched as we move forward with hefty up front supplies. Exports are up 9.9% over last year’s pace. Dec cattle +.875

Hogs close lower and give back a decent portion of the weekly gain. The recent move up in futures puts Dec hogs at a premium to the cash market by $7.20 when the average for this time of year is a discount of $8.00.  If the market does continue to rally in October it would be against seasonal tendency. In the last 20 years the market has gone down 17 of those years in the month of October. Dec hogs -1.875.

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 2017.10.5
2017-10-05T03:08

Corn found strength in export sales and action in soybeans, +1 ¼ (Dec). Futures were able to close on trendline support in the 3.49-3.50 area (Dec). Weekly export sales did not disappoint as they were a net 814,100 MT compared to expectations of 500K-700K MT. Mexico and Korea in particular stood out with larger demand than anticipated. Informa came out with their monthly update, showing corn yield increasing slightly to 170.5 bpa compared to 169.7 bpa in September. The Commitment of Traders report tomorrow will show corn’s most recent fund position, as the shorts have increased by around 80,000 contracts since August.

Soybeans enjoyed double-digit gains today paired with solid soymeal gains, +10 (Nov). USDA weekly export sales were on the low end of expectations between 1.0-1.3 MMT at 1.016 MMT. Expect sales to pick up the second half of October as China comes off their holiday week and U.S. river transportation starts to free up. Yield reports over the last few days for some of the later planted beans have not been as impressive. However, Informa came out with their most recent numbers, and they gave soybeans a slight bump, up to 50.0 bpa from 49.9 bpa. According to AgResource, the key will be combined reports from later planted crop in the E Midwest where they received only 20-30% of normal rainfall in August and September.

Wheat struggled against the rising Dollar and large supplies in the two winter varieties, Chicago -1 ¼ and Kansas City -1 ¾. Minneapolis spring wheat was the star of the complex, gaining +5 ½ (Dec). Russia’s Ag Ministry sees their crop at 81.4 MMT vs. the USDA’s 81.0 MMT. The large Russian crop is not fresh news, but continues to weigh on the wheat complex. The European Commission and the U.K. farm ministry both upped their production forecasts. Weekly export sales were on the high end of estimates, as they were announced at 492,300 MT compared to thoughts of 250K-500K MT. The most notable buyers this week were the Philippines, China and Japan.

Live Cattle found support in continued strong packer margins, +1.125 (Dec). With these margins, packers are keeping the slaughter rate up and have been willing to pay higher cash. But, keep an eye on large short-term supplies and the premium Dec cattle is holding to the cash market.

Hogs continued to find buyers, in spite of the large premium futures are holding over cash, +.900 (Dec). Traders took futures to the highest close since August 16th. Will cash rise to justify the premium of futures, or does the market have more downside in store?

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 2017.10.4
2017-10-04T02:50

Corn benefited from soybeans’ rise and a positive EIA report but still could not finish out of the red, -1 ¼ (Dec). Ethanol production for the week ending September 29th was up to 1.010 million barrels/day from last week’s 996K bpd. However, it only made up for less than half of last week’s decline over the previous week. Nevertheless, it was 3.1% above last year’s same week production and weekly ethanol is on target to eclipse the USDA annual estimate of 5.475 billion barrels. On the flip side, ethanol stocks also gained 6.8% over the same time last year. Keep an eye on this metric as continued growth of stocks could indicate a slowdown of ethanol exports, especially to Brazil, due to changes in their tariff structure.

Soybeans were able to find buyers in this very quiet news environment, also showing strength in  oil futures, +3 (Nov). There were no new sales announcement this morning, as China continues their holiday week. Look for a strong rebound in exports the second half of October. Brazil’s Abiove, soybean crushing association, gave new soybean estimates showing next year’s crop at 108.5 MMT compared to the USDA’s estimate of 107 MMT and soybean exports of 65 MMT, one MMT over the USDA. Continued rains in the Midwest will slow harvest progress through the weekend, but should help restore river levels and resumption of barge traffic.

Wheat corrected yesterday’s bounce, settling safely below resistance at the moving averages. On Monday, wheat received supportive news from a positive export inspection figure. Unfortunately, the U.S. has not been able to compete with Russia for the coveted Egyptian cargoes. Wheat plantings are running 8% behind the 10-year average, and may be slowed by snows in Kansas. Chicago SRW -6, Kansas City HRW -5 ¾ and Minneapolis HRS -1 ¾.

Live Cattle added more points to yesterday’s gains, +.025 (Dec). It is a duel of strong packer margins and rising beef values against large supplies of market ready cattle. The 1stquarter of 2018 looks more favorable, and this is evidenced by the February cattle holding a $10 premium to the cash market. The Fed Cattle Exchange today will be a closely monitored barometer for price direction for the remainder of the week.

Hogs showed indecision today, -.175 (Dec). December futures hold a large premium to the cash index, which may cause producers to feed hogs out to higher weights and increase the overall tonnage, according to Hightower. This would be potentially bearish to the market, as normally this time of year, the December contract is showing a $9 discount to cash. Recently the market has shown technical prowess on the charts, but will new buyers wane with recent lows in pork product prices?

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 2017.10.3
2017-10-03T01:58

Corn continued range-bound trade as producers battle with weak interior basis levels, -2 (Dec). Corn harvest results reported by the USDA yesterday were much less than expected at 17% complete, which is 9% behind the 5-year average. It was found that 68% of corn is black-layered, which is down significantly from 84% last season at this time and 78% average. Crop conditions were upped by 2% to 63% good/excellent. FC Stone, who had come out with one of the more bullish projections earlier in the season, gave an update showing corn yield improving to 169.2 bpa from their original 166.9 prediction. In this scenario, the overall crop would be 14.129 bbu, which is not far off from the current USDA stance. River transportation issues continue to be a problem on the Illinois, Ohio and Mississippi Rivers, with low river levels and slow movement to the Gulf.

Soybeans traded both sides before finishing in the red, -2 (Nov). Soybean harvest was reported by the USDA to be 22% complete, slightly behind last year’s 24% and 26% average year-to-date. Harvest reports have indicated early planted beans are showing the best results so far. There were no new export sales announced today, as China continues their Golden Week festivities. Brazil is getting much needed precipitation which will help with planting and germination over the next couple of weeks. The important growing area of Mato Grosso is also predicted to receive much needed rain.

Wheat was back in a more positive frame of mind, up across all three varieties. Yesterday finished on a more positive note for the winter wheats and this combined with Russian prices coming up were positive factors for the market. Winter wheat planting made good progress over last week according to the USDA, as they announced it at 36% complete compared to 41% last year and 43% average year-to-date. Egypt also announced they are back in the market for another shipment of 3 cargos of wheat for early November shipment. Russia won the sale, with the six lowest bids. The strengthening U.S. Dollar is not helping the American cause in the competitive international market. Chicago +3 ¼, KC +2 ½ and MN +1 ½.  

Live Cattle was able to stay positive in the face of a soft cash market, +1.475 (Dec). Technical indicators are weak. Futures are holding a large premium to the cash market. Supply is also burdensome, which will likely mute short-term rallies.

Hogs continue to rally in spite of the large seasonal supply ahead, led in large part by the front month, +2.625(Oct) with Dec also gaining +.100. Technical action on the charts is strong, but will it sustain? Normally, this time of year there is a downtrend in cash. December hogs are building a large premium in futures vs. the cash market. Typically, the trend is a futures discount to cash by an average of $10.15, while this year there is over a $7 premium of futures to the cash 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 2017.10.2
2017-10-02T02:30

Corn could not find support in any fresh news, but found weakness in soybeans, falling crude oil and an appreciating U.S. Dollar, -3 ¾ (Dec). Corn was slightly below the target on USDA weekly inspections, as they were announced this morning at 782,346 MT for the week of September 28th vs. estimates of 800K MT. The USDA reported a large sale of corn to Mexico for 2017/18 for 597,464 MT. The U.S. has a large freight advantage over South America, so it is hard for Mexico to take sales to the South in the foreseeable future. Corn harvest continues to progress and is expected to be announced at 21% later this afternoon, compared to 11% last week. Basis has been very wide, with elevators lacking grain ownership, river logistical issues, and the aftermath of hurricanes disrupting the Gulf - will this tighten up post-harvest?

Soybeans cannot seem to get follow-thru commitment from bulls or bears, giving up gains from Friday’s positive post-report action, -11 (Nov). Although this week was thought to be slower due to China being on holiday, the USDA reported a new sale to the PRC for 132K MT of beans for 2017/18. However, weekly inspections were off of expectations, as they came in at 894,250 MT against expectations of 1.1 MMT. This afternoon’s crop progress update is expected to show soybean harvest at 25% complete, up from 10% last week. Heavy rains ahead for parts of IL, IN, and OH should help with river transportation concerns with low water levels, as barges are a growing vehicle of choice this year. As always, keep an eye on South American weather as their planting progresses through October and November.

Wheat does not have much of a story, with the bearish Grain Stocks report results being released last Friday. This afternoon’s crop progress update is expected to show winter wheat planting up to 38% complete compared to 24% last week. The weather forecast is expected to show more moisture for the Central and Eastern Midwest, which is essential for newly planted wheat, and will also help replenish river levels for shipping. Wheat weekly inspections were the lone bright spot on the log this week, as the USDA pegged them at 691,971 MT for the week ending September 28th vs. estimates of 450K MT. Chicago soft red winter -3 ½, KC hard red winter -3 ½ and Minneapolis hard red spring -12.

Live Cattle was down across the near and deferred contract months, -1.825 (Dec). Burdensome supply is the topic of late, although positive packer and retail margins are providing market support. Supply fundamentals are expected to improve from the 4th to the 1stquarters.

Hogs persisted on a steep trajectory upward, with the December contract leading the way, +2.025. Export demand is slowing down and there is a big slaughter planned in the coming weeks. Will the market be able to absorb 3.9% more pork than 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 they may not be suitable for all investors.
Water Street Solutions Daily Report 2017.9.29
2017-09-29T03:01

Corn received welcome bullish news from the Quarterly Stocks report, +2 ¾ (Dec). September 1st stocks were pegged at 2.295 bbu compared to average estimates of 2.346 bbu. Last year was at 1.737 bbu. Because the market is oversold with managed funds short an estimated 145,000 corn futures and options contracts, this triggered a positive correction, as Dec corn reached a high not seen since September 12th. Next up will be the all-important October 12th USDA Supply/Demand and Crop Production report.

Soybeans also received supportive news from the USDA report, as trade estimates as of September 1st were for soybean stocks to be at 339 mbu, while the USDA weighed in today at 301 mbu. This compares to 197 mbu last year. If yields disappoint as growers get into the later planted crop, the trend could stay up. There were no new export sales announced today, but it is estimated China still needs about 6.0 MMT of beans for the Nov-Dec timeframe. Next week will feature more harvest data, and traders will be positioning for the Oct 12thUSDA report. November soybeans finished +8 ¾.

Wheat was the surprise of the grains, as many thought the spring wheat would be the bull in the fight. However, the USDA September 1st report showed wheat stocks at 2.253 bbu vs. the average estimate of 2.203 bbu. All wheat production was pegged at 1.741 bbu, which was also above estimates of 1.724 bbu. Spring wheat stood out the most against expectations, as it overwhelmed average estimates of a harvest of 384 mbu with 416 mbu, in spite of reduced acres. Harvested spring wheat acres were trimmed back from last report’s 10.5 million acres to 10.15 million acres. Chicago SRW -6 ¾, Kansas City HRW -10 ¼, Minneapolis HRS -21 ¼.   

Live Cattle showed indecision today, settling on a modest gain, +.125 (Oct) and +.200 (Dec). December cattle was able to find support at the 100-bar moving average. The growth in the meats has been steady, and cattle are being slaughtered at an impressive rate, with combined steer and heifer kills totaling 519,863 for the week ending September 16th, the largest one week total since July 2013, according to AgResource.

Hogs came out of the Hogs & Pigs report unscathed, with both Dec and Feb breaking out to new highs before retreating modestly at the close, +1.675 and +1.700. October had a small decline, -.150. The report was in line with expectations across all three categories consisting of all Hogs and Pigs, Kept for Breeding and Kept for Market. The hog herd as of September 1st is the largest on record since the government began keeping track in 1988. Look for further direction next week and if hogs are able to keep momentum to the upside, in spite of large supplies weighing on the market. It is expected the hog/pork industry will continue to expand in 2018. 

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 2017.9.28
2017-09-28T01:59

Corn has been a follower of late, and this continued today with lackadaisical trade heading into Report Day tomorrow, -1 ½ (Dec). USDA weekly corn sales were a bit disappointing, as estimates ranged from 500K-800K MT, but results reported were 320,200 MT. Corn has been battling the glut of South American crops this year in comparison to last year, so the results are not surprising. For the marketing year-to-date, U.S. corn sales are down 39%. However, corn had a nice daily sale this morning to an “unknown” buyer of 233,800 MT for 2017/18. The EPA has been signaling that they may make a change that would affect the number of RINS available, which could work against higher ethanol blends in the U.S. The move would be friendly to exports but not helpful to the domestic industry. The uncertainty is not helpful, but it is not likely that corn used for ethanol would change much in the next 1-2 years.

Soybeans were not able to find any energy in spite of great export sales numbers, -6 (Nov). Weekly export sales data showed soybeans well over expectations, as it was estimated that weekly sales would fall in the range of 1.8-2.2 MMT, but instead results surprised with over 3 MMT. The USDA reported another new sale this morning – a private sale of 132K MT to “unknown” for 2017/18. Chinese demand continues to grow, as their orders are increasing to all origins. While U.S. bean sales are still 15% below last year, the gap is closing quickly.

Wheat trade featured a correction of an overbought condition heading into the key Grain Stocks report tomorrow. Chicago -6 ½, Kansas City -6 and Minneapolis -5 ¾. Wheat weekly export sales were on the high end of expectations, as the USDA  pegged them at 435,600, on the upper end of estimates of 250K-450K MT. At this pace, wheat will be able to meet the USDA expectation for the year. When Black Sea shipments slow-down in the coming winter months, U.S. wheat demand should get its usual bump up. In Australia, a large chunk of the wheat growing area is still trending dryer into the first week of October, which is not helping their prospects.

Live Cattle moved forward another small step after yesterday’s big gains, +.400 (Oct) and +.150(Dec). There is still plenty of supply to deal with, but demand is good as packer margins are remaining strong. Cash cattle have also tended slightly positive. Will the market be able to avoid a long liquidation sell-off?

Hogs fell back toward the middle of the range (deferred months) they have been trading in recent weeks after solid gains the last three days, -1.375 (Dec). The Hogs & Pigs Report later this afternoon will be key to direction moving forward. December hogs have been trading at significant premium over the October contract, which has not happened since 2012. 

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 2017.9.27
2017-09-27T01:53

Corn was able to turn positive, led by a strong move forward in wheat, +1 ¾ (Dec). Traders do not have much impetus to take risks with a big USDA report on Friday, and with the mood leaning bearish on overall world grain supplies. EIA Ethanol reported production for the week ending September 22nd to be down 3.58% vs. last week, but up 0.71% compared to last year. Ethanol stocks were down 1.88% vs. last week, but up 0.79% over last year. Corn used for ethanol was estimated at 102.34 million bushels, which is below the 104.89 million bushels needed on a weekly basis in order to hit the USDA’s overall annual projection of 5.475 billion bushels.

Soybeans found support in Chinese buying and strength in the wheat complex, +2 (Nov). The Chinese took a pause from their holiday week festivities to put in an order this morning, as the USDA reported a private sale to the PRC for 132K MT for 2017/18. Soybean yields coming in from the fields continue to be above expectations, and the market is keeping a watchful eye on whether the later planted crops will be able to do the same. Other market factors weighing on soybean futures today included a rising Dollar index and an improved forecast for both Brazil and Argentina that includes a normal outlook for rain into mid-October. It has been reported that the EPA is considering altering its mandates that could reduce biodiesel demand. However, they would have to overcome a history of Federal Court Rulings that have prevented them from doing so in the past. The first major line of defense on the charts is around 9.50 Nov, while a violation of this area would lead to resistance in the 9.20-9.30 area.

Wheat led the grains higher today, as anticipation grows for the Grain Stocks report this Friday – this is a key report for the wheat complex. Wheat may have the most potential to lead, and corn will likely be influenced. All eyes will be focused on the size of the spring wheat crop, as many are anticipating a sizable reduction by the USDA. In the last report, the USDA penned in spring wheat production at 401 million bushels, which was 10 million higher than the average trade estimate and 50 million more than many anticipated. With the crop now harvested, the USDA should have a much better handle on the actual number. Minneapolis HRS +3, Kansas City HRW +6 ¾ and Chicago SRW +7 ¾.

Live Cattle had a small gain in the front month, +.300 (Oct), while Dec and Feb had much larger gains, +1.425 and +1.225 respectively. There is plenty of short-term supply, but demand is a supportive factor long-term. While the Cattle on Feed and Cold Storage caused a sharp decline on Monday and into Tuesday, the market rebounded today. USDA boxed beef cut-out was up $2.82 yesterday to the highest level since August 16th.

Hogs had a break-out day in the deferred contracts, with Dec +1.550 and Feb +1.250. October was up a modest +.150. The Hogs & Pigs Report tomorrow will be looked to as a barometer for future price action. Expectations are for inventory to grow by 2.5%, but there is disagreement on the size of inventories. Look for answers to – how big is the supply of 120-179 lb hogs? Will the Jun-Aug pig crop show an increase, as this will affect the Feb contract? How much will the size of the breeding herd be up, which would affect the spring and summer contracts?

In Other News, AgResource reported that the Dollar’s sharp rally is tied to President Trump’s Tax Plan being leaked to news organizations. U.S. corporate taxes are expected  to drop to 20-25%, among other changes. But, the tax reform will be a long-term process, and could spur inflation along with higher interest rates, if the U.S. budget deficit grows at a faster pace. 

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 2017.9.26
2017-09-26T02:24

Corn trended higher through parts of the day but tailed off, -1 ¼ (Dec). Corn does not have a fresh story and is following the lead of the other grains this fall. Undersold farmers in North and South America are muting any hints of rallies. Crop conditions are becoming less the focal point, as the USDA released ratings yesterday that showed corn 1% improved from good to excellent. The U.S. corn harvest was reported as delayed, at only 11% complete, which is behind the average of 17%. IL is especially behind at 11% harvested compared to 24% on average. According to Hightower, China’s demand for corn is much stronger than traders have expected. For the last three months they have imported 1.67 MMT. To put in perspective, the USDA has only projected China to import 3 MMT for the entire season.

Soybeans moved lower as traders position themselves for yield results and upcoming reports, -7 ¾ (Nov). The USDA reported soybeans 1% improved good to excellent from last week – important states showing improvement included IN, IL, NE, SD and ND. Early yield reports coming in from the field are better than expected, in some case phenomenal, considering the dry conditions to finish. Sixty-three percent of plants are dropping leaves. So far, yield results reported by growers seem to be vindicating the USDA, but there are still questions swirling around whether the later planted crops (that endured heat/dryness in critical parts of August) will fare as well. There were no new sales this morning, due in part to China celebrating a holiday week. To summarize China’s standing with soybean imports, for August the PRC imported 8.4 MMT, of which 6.1 MMT was from Brazil and 1.4 MMT was from Argentina. This compares to 7.7 MMT last year. For the period of January to August of this year, China is well ahead of last year, importing 63.3 MMT vs. 54.0 MMT. In South America weather, rains have hit dry areas of Brazil, which has helped to stem some of the concerns of excessive dryness as they get into their planting season.

Wheat had its highest close since mid-August in the Chicago Dec contract yesterday, but could not hold on to gains, with a weak finish. Short-covering seems to be the topic of the day leading into the Friday Grain Stocks report. Will the record Russian crop and large ending world stocks put a damper on potential rallies? The spring wheat market was really hot earlier in the year, but the huge Russian crop has offset the potential for a bull wheat market. But, HRS may get back in the 6.50-7.00 range depending on direction from grain stocks updates. The USDA reported winter wheat planting 24% complete compared to 13% last week, but less than the average year-to-date of 28%. Minneapolis HRS – 3 ¾, Kansas City HRW -1 ¾ and Chicago SRW – ¼.  

Live Cattle experienced a sharp drop yesterday, and continued lower today, -.950 (Dec). Is this just a short-term technical correction of an overbought condition and a reaction to the bearish Cattle on Feed and Cold Storage reports? The key August Placements number from the report was higher, while the market was expecting 3% lower. The big attention-getter was a 12% increase in the larger feeder cattle, between 800-899 lbs, especially hurting the December contract. The production of all meats, including turkey and chicken, is giving the market a challenge to absorb. Exports will continue to be a key component.

Hogs resumed yesterday’s correction of an oversold condition in the deferred months, +.675(Dec). October was down (-1.075), as high short-term supplies and weak Chinese demand are dragging on the market. The CME Lean Hog Index is down to 59.08 as of September 21st, with around a 1.50 discount to cash. This is very low compared to the usual discount of 15.00 for the December contract this time of 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 they may not be suitable for all investors.
Water Street Solutions Daily Report 2017.9.25
2017-09-25T02:14

Corn was able to follow the lead of wheat with a small gain to start the week, + ¼ (Dec). Harvest yields from the weekend have trended higher for both corn and soybeans, with plenty of variability thrown in the mix. Much more harvest data should be available by week’s end. The weekly corn inspections announced by the USDA were slightly under expectations of 800K MT at 738,779 MT. For the crop year to-date, corn export sales are down 51% from last year. Harvest is around 16% complete compared to 7% last week. Harvest should make great progress over the next few days due to favorable conditions.

Soybeans gave up the big gains from Friday, following below the 200-day moving average and finishing –13 (Nov). Like corn, soybeans yields have been reported better than expected, with some areas of early beans (that started very poorly and experienced dryness) surprising on the yield monitor. Soybeans are the leader of the grain complex this fall, so if big yields persist, there could be a significant downside price risk. The next week will be closely watched, as more definitive harvest numbers will be available. USDA weekly inspections were slightly below estimates of 1.2 MMT, as they were reported at 1,030,051 MT. China is on holiday this week, so expect a slowdown effect, in addition to the PRC backing off sales until the results of the crop report. The expanded forecast for Brazil is indicating showers and storms across the entire country after October 2nd, which is not adding a positive vibe to the CBOT either.

Wheat led corn and the rest of the grains today, as spring wheat is getting the focus as we near the USDA Grain Stocks report on Friday. It is expected that harvested spring wheat acres will be slashed. That combined with a cut in anticipated Australian wheat production due to poor rainfall numbers in September is leading to a buzz among traders. If the dryness continues another 14 days, another cut of 1.0 MMT is not off the table. WASDE should also trim production substantially in the October 12th report. Minneapolis was out in front, +13, while Chicago and Kansas City were +4 ½ and +3 ¾ respectively. USDA weekly inspections were above expectations, coming in at 499,995 MT vs. thoughts of 450K MT.

Live Cattle gave a volatile reaction to the bearish Cattle on Feed report after the close on Friday, closing lock-limit-down in December, -3.000. The report showed On Feed at 103.6% of last year compared to expectations of 102.7%, while August placements eclipsed estimates of 97.1% at 102.6%. The longer term outlook is more upbeat, but short term supplies are a weighty proposition to overcome. Monthly Cold Storage had frozen beef stocks at 476.3 million lbs for August, which was unchanged but up 10.3% for the month, which was considered bearish, according to Hightower.

Hogs rallied in spite of cattle’s downfall and a bearish Cold Storage report on Friday, +.800 (Dec). Frozen pork stocks were down 5.5% from last year but up 3.8% on the month. The Lean Hog Index is all the way down to 60.12, a far cry from the large premium it held over futures not long ago. The pork cut-out was also down 52 cents on Friday to its lowest level since November 17, 2016. It would appear that hog futures still have potential to go lower – stay tuned for action tomorrow. 

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 2017.9.22
2017-09-22T02:27

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Corn drafted off soybeans’ lead today, achieving a nice gain, +3 ¼ (Dec). There is not much fresh fundamental news, but some of the market movement may be tied to October option expiration and the large number of puts open in corn. With downside coverage expiring, short puts convert into long futures. Watch the market action on Monday to see if the upward direction continues. The Midwest harvest is starting to move along more quickly, with the hot/dry conditions causing a rapid dry-down. More yields should be reported after the weekend to compare to expectations.

Soybeans took out key resistance at 9.80, finding support in soymeal and a weak U.S. Dollar, +13 ½ at 9.84 ¼ (Nov). On the charts, beans are in a trend of higher highs and higher lows. Soybeans were able to tack on yet another sale to end the week, as Mexico inked a private transaction for 190K MT. Demand has helped to offset large supplies, but in order for the market to see a sustained rally, there must be a supply side threat. Answers will soon be coming from the U.S. harvest, and a watchful eye must be focused on South America as they get into planting their next crops. JCI, based in Shanghai says that U.S. spot soy into China is 9 cents lower than Brazil. On Monday, China’s soybean import data for August will be available. Arkansas is taking the lead on regulating dicamba drift with a legislative measure limiting its use from January 1st to April 15th. Some farmers are opposing the measure saying they would like to see its use approved through May 25th, with a one mile buffer required to reduce risk onto other fields. There are now lawsuits against Monsanto and BASF in 10 states, and this is expected to climb. However, the suits will be hard to prove and it is likely the product will remain on the market with use limitations.

Wheat had mixed results, as Chicago was not able to hang onto gains from earlier in the day, -3 (Dec). Spring wheat had the largest gains, with Minneapolis HRS +10 ½. KC hard red winter eked out a small increase, + ¾. The shortfall in the Australian crop estimates gave some new life to U.S. wheat this week and may provide a boost to exports in Dec-May timeframe. In other news, SovEcon is projecting Russia will export 4.1 MMT of wheat in September compared to 3.541 MMT last year same month. Russia’s wheat harvest is 87% complete and yielding higher than last year, with a total of 80.8 MMT harvested so far compared to 72.7 MMT a year ago.

Live Cattle saw solid gains across contract months, +1.225 (Dec). Analysts have been keeping close tabs on weekly dressed steer weights of barrows/gilts. The USDA posted their latest data yesterday, and it showed dressed steer weights at the inspected plants to be 7 lbs lower than last year, but also increasing at a faster clip than normal for this time of year. According to the CME, the question is will market and weather conditions propel weights above last year, and if so by what amount? Look for the Cattle on Feed and Cold Storage results later this afternoon to have market implications on Monday.

Hog futuresgapped lower led by October, -1.625. The latest USDA gilt/barrow dressed weights released yesterday had a surprise in store as more than expected weight gains contributed to the already large supplies the market is trying to digest. It is thought that if the dressed weights continue higher, there are likely slaughter hog price declines ahead. The Hogs & Pigs report next Thursday will bring clarity to the size of the U.S. breeding herd, and be key to price direction.

In Other News Creighton University’s Rural Mainstreet Index shows the farm economy dipping based on farmland prices declining for the 46th straight month, Ag equipment sales below growth neutral for 49 straight months, many farms having to restructure loans with increasing collateral requirements. Loan defaults have increased by 2.1%. Many farmers are still sitting on hefty supplies, which is not helping improve prices. Hopefully, higher than expected yields will help lower break-evens this 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 they may not be suitable for all investors.
Water Street Solutions Daily Report 2017.9.21
2017-09-21T03:08

Corn could not find any market drivers to alter its sideways course, + ¼ (Dec). The industry is waiting for harvest results to help clear the dust created by differing opinions on yield. Only about 10% of the crop is harvested to-date, with the majority of growers reporting a good crop but lower results than last year. It is likely many questions will remain unanswered until the October 12th USDA Crop Report. Weekly export sales reported by the USDA were disappointing, as they fell below expectations of 700K-1.0 MMT at 526,900 MT. The overabundant South American crop has proven to be a big hurdle this season compared to last year. So far, the U.S. has sold 11 MMT compared to 17 MMT at this time last year. Add to that a strengthening Dollar, selling corn on the world market will be even more challenging. Ethanol margins have declined slightly, but are still at a profitable level of around 15 cents/gallon.

Soybeans fought off losses in the overnight, and were able to right the ship by session end, + ¾ (Nov). USDA weekly export sales were above and beyond expectations, as demand has pushed back against bearish supplies. Sales were reported at 2.338 MMT vs. estimates of 1.2-1.5 MMT. In that vein, the USDA reported a private sale this morning to China of 132K MT for 2017/18. Bean yields have continued to roll in, and the theme continues that yields are better than expected for the conditions this year, but behind last year. Two key reports to mark on the calendar are the September 29th Grain Stocks and the October 12th USDA Crop Production/Supply & Demand. Market direction will continue to become clearer with actual data in the days ahead. In the meantime, Twitter and other social media are providing the hype!

Wheat led the grains, finding support in a weak Dollar, Australia’s continued declining crop prospects, and rising global FOB offers: Chicago SRW +2 ¾, Kansas City HRW +1 ½ and Minneapolis HRS +4. Weekly export sales came in at the low end of expectations, as the USDA tallied wheat at 307,200 MT compared to the market’s estimates of 300K-500K MT. To put in perspective, last year at this time the U.S. had average export sales of around 516K MT/week compared to only 332K MT/week this year. While the dryness in Australia has caused a rise in their wheat prices (giving the U.S. a rare advantage at this point in the season), this advantage is offset by the Black Sea Region continuing to trade well below U.S. values.

Live Cattle was not able to sustain yesterday’s near limit-lock-up momentum, as October had the largest setback (-.850), while the deferred months mostly showed gains, save a small loss in Dec. Tomorrow will feature key reports and today saw traders jockeying for position. Reports include Cattle on Feed and Cold Storage, with Cattle on Feed expected to show: On Feed 103%, August Placements 97% and Marketings 106%.  

Hogs continued their volatile trajectory, with a large corrective move down after a couple of days of solid gains, closing -2.125 (Dec). Yesterday’s high could be important resistance if the market is to find a bottom and a new direction upward. Until then, the overall trend is down, with large short-term supplies weighing on the 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 2017.9.20
2017-09-20T03:09

Corn was able to follow beans higher, with no fresh news to encourage a rally, +1 ¾ (Dec). The limited harvest results coming in from the Midwest continue to share the theme of “better than expected but not on the level of last year”. EIA Ethanol weekly reporting showed production down 1.34% from last week but up 5.30% over last year. Ethanol stocks were up slightly over last week at 0.03% and up 5.61% vs. last year. Corn used for ethanol was estimated at 106.22 million bushels, which is easily above the average needed of 104.838 million bushels to meet the USDA overall estimate of 5.475 billion bushels for the year. Ethanol margins have continued at highly profitable levels, as producers have been able to achieve returns of 15-20 cents/gallon, including all costs and basis. On the world scene, Ukraine’s Deputy Ag Minister said that the 2017 corn harvest is expected to be off 1.0 MMT from 2016 to 27 MMT. However, this will still leave them plenty of bushels to remain a competitor in the export market. With near trendline yields so far in the U.S. and plenty of corn supply, the market is following a “normal” pattern, with harvest lows typically achieved around October 1st. Option volatility is at a record low for this time of year, making calls and puts a more attractive buy.

Soybeans found support in big export sales, +4 ½ (Nov). The USDA reported two sales this morning – a private sale of a whopping 1.080 MMT to “unknown” destinations (960K MT for 2017/18), and a second private sale of 132K MT to China for 2017/18. Egypt’s GASC reported that they purchased 60K MT of soyoil at tender today. Overall commodity markets are seeing a buying trend also, while equities are down, which also gave the grains a boost today. There is not much else in the way of fresh fundamental news, as the market is tuning in to yield results that are starting to roll in. South American weather, Brazil dryness in particular, will begin to be monitored, although it is still too early to provide much market influence. In futures, soybeans are offering a larger incentive to the farmer, as the spread from November to July is 34 ¼ cents of carry. November soybeans need to break through strong resistance at 9.80 in order to change the trend for higher.

Wheat was able to reverse its negative course, with gains across all three classes: Chicago SRW +6 ¾, Kansas City HRW +6 and Minneapolis HRS +5 ¼. On the global front, Canada has raised their wheat crop expectations to 27-29 MMT, compared to the USDA forecast last week of 26.5 MMT, while Australia’s crop continues to decline with the latest estimate at 19-19.5 MMT compared to the USDA’s latest stab of 22.5 MMT. Ukraine’s Deputy Ag Minister sees wheat production lower than the USDA estimate of 26.5 MMT at 25.7 MMT. Russia’s harvest was recently estimated at 82% complete and the yield per hectare is up 1.55 tonnes over last year. At that rate, Russia’s yield would easily eclipse the USDA estimate of 81 MMT.

Live Cattle went limit lock up in October before finishing, +2.975, while the deferred months and feeders came along for the ride. It is thought that supply may have tightened up its belt after large marketings in August. The Cattle on Feed Report will be released on Friday. Traders are looking for the following results: On Feed 103%, August Placements 97% and Marketings 106%.
Retail meat prices have fallen by ½%.

Hogs fell sharply in the October contract, -1.475, but the deferred months showed modest gains. The market seems to have priced in some of the large supplies ahead and is optimistic that strong exports and increased capacity from newly opened slaughter plants will offset seasonal declines in the months ahead. The pork cut-out has continued to fall to new lows, as it was reported down $1.30 from Monday to $75.90. This compares to $79.69 last week. Bacon retail prices rose 4% from July to August, reflective of higher wholesale values earlier in the summer.

In Other news, the U.S. Central Bank wrapped up its two day policy meeting and released a statement indicating that the key interest rate will be left unchanged. The plan previously drafted by the Federal Reserve for a balance sheet reduction will begin in October as planned. Projected interest rate hikes include: one in 2017, three in 2018, two in 2019 and one in 2020. 

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 2017.9.19
2017-09-19T03:08

Corn needs a fresh catalyst to fire up the market, -3 ¼ (Dec). NASS released crop progress results yesterday afternoon showing corn is unchanged from last week at 61% good/excellent, with harvest 7% complete compared to the average of 11%. Corn is 86% dented. Corn crop conditions at this point are not as relevant, with the maturity rating getting more attention at 34% compared to the average of 47%. Will late season heat be able to help? Adding drying costs in a tight margin environment is not attractive. Farmers may be looking at “wet” corn contracts as an alternative, offered thru some elevators and ethanol plants. Yield reports so far are trending better than expected, but not on the level of last year. Brazil’s summer corn planting is off and running, estimated at 9.3% complete compared to 9.7% last year. Planted area is expected to be less at 9.5 million acres vs. last year’s 13.1 million acres.

Soybeans could not find any fresh news to support gains, -2 ¼(Nov). Stats Canada released their soybean production estimate, well above last year at 8.3 MMT compared to 6.5 MMT. Canola also is seen higher at 19.7 MMT from 18.2 estimated in August, and just above last year’s 19.6 MMT. Soybeans received a 1% downgrade in crop conditions from NASS yesterday to 59% good/excellent, while soybean harvest is 4% complete vs. the average of 5%. Forty-one percent of the soybean crop is dropping leaves. Yield reports so far have been mixed but seem to indicate better than expected (but lower than last year), despite lower crop conditions and a dry finish. The actual results will become clearer in the days to come.

Wheat saw mixed trading, as the market turned up stronger at the close: Chicago SRW – ½, Kansas City HRW – ¼, and Minneapolis HRS -3 ¾. Adding to the gloomy day in the markets, Stats Canada revised their total wheat crop up from 25.5 MMT to 27.1 MMT, but it is still well below last year’s 31.7 MMT. Spring wheat is in line with last year at 20.1 MMT vs. 20.5 MMT. Ukraine’s Ag Minister says their expectations for total grain production will be in the neighborhood of 61-63 MMT, down from 66 MMT last year. The USDA crop progress report showed that the winter wheat crop is 13% planted compared to the average of 15%. In export news, Russia won another bid for Egyptian business, as the GASC announced they purchased 175K MT of Russian origin wheat. Egypt continues to be the grand prize that is just out of reach for the U.S. The USDA has pegged Russian exports this year to grow substantially, from 27.8 MMT to 32.5 MMT. This is thought to be about their limit due to infrastructure limitations. Wheat may be a sleeper though in 2018, as it is a very global product. Australia and Argentina, two of the world’s largest exporters, are having significant problems and caution is warranted for the bears.

Live Cattle were able to continue their orderly march up the chart, +.400 (Oct). It has been a battle of large supplies vs. a positive long-term outlook. According to the CME’s Daily Livestock Report, the first seven months of 2017 featured the highest estimated cattle feeding profitability per steer ever. This has been a huge financial reprieve for cattle feeders who bled large amounts of red ink in 2015 and into 2016. However, August profitability turned negative, and it is projected that breakeven prices may be as good as it gets for the rest of the year.

Hogs had a large break-out led by December, +1.675. The pork cut-out was up 33 cents at 78.09, while bellies rose a dollar. The market has been searching for a bottom - have prices now fallen far enough to find renewed demand interest? A wild card to consider is if Hurricane Maria’s track were to head to NC, there would be a large number of hogs in its path. Stay tuned. 

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 2017.9.18
2017-09-18T01:59

Corn chopped sideways and down as all ears are tuned to yield reports as they begin to trickle in, -3 ¼ (Dec). USDA weekly corn inspections were below expectations of 920K MT, coming in at 676,819 MT. The USDA is expected to announce corn harvest at 10% complete later this afternoon. Early yield reports seem to be adhering to the theme of better than expected, but not last year’s. Weather in Brazil is tending to a drier bias, but it is early to put too much emphasis on this. But, it does bear monitoring, as there is a greater than 50% chance of a La Nina event, which would reinforce the dry Brazil trend. Informa came out with some projections for 2018, and the big takeaway is acres planted, as they see an increase from 90.66 this season to 91.88 next season. It makes for interesting discussion, but the final number will be dependent on the corn/bean ratio used for insurance early next year.  Ethanol is a bright spot as it has continued to produce net margins averaging around 35-50 cents.

Soybeans found strength in strong demand from China, but ran out of gas on the final straightaway, -1 (Nov). Soymeal was up while soyoil saw some long liquidation, as managed money holds a very long position – over 100K contracts (per the COT as of last Tuesday). USDA weekly soybean inspections were 928,575 MT compared to estimates of 1.2 MMT, below the weekly average needed to keep pace with the USDA annual export estimate. However, two private sales boosted the market. The USDA reported a private sale of 126K MT to “unknown” destination and a private sale of 261K MT to China, both for 2017/18. The Chinese crush has made a nice recovery, and their buying is reflective. November soybeans need to get through solid resistance around 9.80, which includes the 200-bar moving average, in order to achieve the next leg up.

Wheat followed corn’s weakness today, with Minneapolis spring wheat the least affected, - ¼. Chicago and Kansas City winter varieties finished –5 ½ and –3 ¾ respectively. Wheat inspections announced by the USDA this morning were the only grain that exceeded expectations, tallied at 464,375 MT vs. 400K MT. Informa released their latest production estimates, and they show this year’s wheat acres reduced by another 552K with a yield of 63 million bushels less than the USDA. Spring wheat accounted for a large chuck of this, due to weather damage/loss. However, Informa sees wheat acres increasing for the new crop by 770K acres, all from the spring wheat category. Hard red winter acres may be up quite a bit in cattle country, but it is not expected that this will increase harvested acres by much, due to feed usage. Soft wheat will likely be down slightly, and farmers that have been able to double crop acres with soybeans have come out the winners.  

Live Cattle are being held in check by large short-term supplies, +.125 (Dec). This week will feature three reports, which will help to give direction to this positive trending market. They include the Slaughter report on Thursday, and Cold Storage and Cattle on Feed on Friday. Slaughter margins have been profitable, at $144/head, which is down $19 from last week but right in line with the same week last year. The beef cut-out values both declined last week to $.46 lower on choice and $4.12 lower on select, according to AgResource. The outlook for a severe cut in production of a record 785 million lbs between the 4th and 1stquarters is keeping the bears at bay.

Hogs settled back into a bearish mindset after a break-out to the upside on Friday, -.425 (Dec). The spike was likely caused by speculation that packer demand may increase after margins leapt to an 8 ½ month high. But, hog futures are being pressured by weakness in the cash market as well as wholesale pork prices falling to new lows. Pork values will need to stabilize in order for the market to find a bottom. 

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 2017.9.15
2017-09-15T01:50

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Corn waffled back and forth on both sides of unchanged before finishing with a small gain, + ½ (Dec). Any positive gains are welcome news, as corn does not have much fresh fodder to digest until harvest numbers start to roll in. Preliminary results from Central IL are better than expected, but more results should be available following the weekend. While traders in the more bullish leaning camp believe that NASS overinflated the yield numbers in the last report, one must also consider the undersold U.S. farmer, level 2017/18 world demand compared to large gains last year and the slowdown in exports from a year ago due to the large South American crop.

Soybeans got a bump from another sale to China and a strong August NOPA report, but still could not find a way to finish the week on a positive note, -7 ¼ (Nov). The NOPA crush was an all-time record for August and soybean oil stocks were near expectations, indicating better demand than anticipated. The crush was tallied at 142.4 million bushels, well ahead of market projections of 137.5 million. The USDA reported another private sale to China of 132K MT of soybeans for 2017/18. In South America, traders are closely monitoring the weather as farmers are firing up their planters. Currently, Brazil is trending very dry and Argentina very wet – but it is too early to draw conclusions.

Wheat was the leader today, as the winter varieties both posted nice gains, Chicago +6 and Kansas City +4(Dec). Market fundamentals providing support today include a weak U.S. Dollar and the Taiwan Flour Millers Association signing a letter of intent to buy 1.8 million tons of U.S. wheat in 2018 and 2019. Worldwide, U.K. wheat protein levels are looking very good, with samples showing 13.2% compared to the 3-year average of 12.1%. Strategie Grains upped their E.U. wheat production forecast to 1.5 MMT, but downgraded export estimates by 1.3 MMT due to competition from Russia and the Ukraine. Russia has some logistical issues to address in order to be able to maximize their export capability. In Argentina, The Buenos Aires Grains Exchange is reporting that recent rains may have resulted in the loss of 370K acres of wheat. Minneapolis spring wheat continued to exhibit weakness, finishing –10 ¾ (Dec).  

Live Cattle exhibited volatility today, making a late surge, +1.050 (Dec). The beef market has seen a large decline of 25% from the highs achieved in June. Beef prices are now back down in an area that should boost demand. Both retail and packer margins are solidly in the black. With all the power outages from the two hurricanes, there is likely a stockpile of meat in fridges and freezers that has spoiled. As folks get back home and the power is restored, a spike in buying for restocking purposes could result. Long-term, supply issues could be a concern as beef production is expected to fall by a record 785 million lbs. from the 4th to the 1stquarter. The short-term trend is for higher.

Hogs were able to turn back positive, with solid moves in all contracts. December finished a strong +1.950. As with cattle, production is expected to drop significantly after the 1stof the year by a record 510 million lbs. China’s Ag Ministry reported their hog herd is 5.6% lower than last August. The large discount of October futures to cash has also been playing a supportive role. On average this time of year the discount is 120 points, while this year it is at 730 points. On the bearish side, the pork cut-out continues to drop to lows not seen since early May, which will influence cash lower. Bellies have dropped an astonishing 50% in the last few weeks. Stay tuned to see if hogs have been able to find a short-term bottom. 

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 2017.9.14
2017-09-14T02:59

Corn was able to catch a bit of soybeans’ momentum, +2 ¾ (Dec). The USDA reported weekly export sales at 1.046 MMT, on the high end of expectations of 750K-1.1 MMT. Much of this was to Mexico, with the rest made up of sales to Colombia, Japan and Korea. For the crop year, U.S. corn exports are down 38%, which is somewhat expected due to the large South American crop. September futures went off the board today, leaving a gap in the continuation chart – will this pull December futures down to fill the gap? The market is now turning to the rolling combines for future direction, as hard yield numbers are needed to bring clarity to some of the controversy that has surrounded the August and September USDA reports.

Soybeans attained solid gains on aggressive fund buying, +15 ½ (Nov). The market appears to already have processed much of the bearish news, and is ready to move on. USDA weekly export sales did not disappoint, coming in at 1.6 MMT vs. estimates of 1.0-1.25 MMT. The USDA reported a private sale to China today of 198K MT of soybeans for 2017/18. Soybean planting is underway in N Brazil, and weather will continue to receive more focus going forward. Brazil is experiencing dryness that is expected to persist in the near-term, while Argentina is overly wet. Both of these potential scenarios warrant monitoring. November soybeans are quickly approaching major resistance in the 9.80 area. Keep an eye on whether beans are able to pop up through this ceiling and into new trading strength.

Wheat was not able to sustain the momentum of the past couple of days, finishing negative across the complex. There is not much fresh news to excite traders at this time. But, wheat may be able to feed off of the positive gains of corn and beans, if they are to continue. The USDA announced weekly export sales of wheat at 316,700 MT, on the low end of expectations of 300K-600K MT. “Unknown” was the largest customer, followed by Colombia and Turkey, with Mexico cancelling 32K MT. Strategie Grains upped their European wheat crop predictions from last month by 1.5 MMT. France is expected to have excellent quality wheat, the Baltic and Central European region with adequate quality and declining quality from Germany and Poland. Chicago SRW – ¼, Kansas City HRW -2 ¼, and Minneapolis HRS –11 ¾ (Dec).

Live Cattle, like hogs, seem to be searching for a short-term low, -.625 (Oct). Once this happens, it is likely the nearby futures contracts will lead the way higher. Strong retail and packer margins have provided strength to the market. Carcass weights will be released today and this will be monitored closely, as it is thought at some point weights will catch up with last year, which will only add tonnage to already burgeoning supplies. Look for beef exports to continue to remain strong.

Hog futures have been under seasonal pressure of late, -.550 (Oct), while February was able to close higher. Is a short-term bottom on the horizon? Long liquidation has been the topic recently, as increasing hog weights and the decline in the cash market have added weakness. The increased capacity added with new plants coming online in the last week should help provide a measure of support.

In Other news, Ag Secretary Sonny Perdue has promised special assistance to producers of crops and livestock who suffered losses as a result of Hurricanes Harvey and Irma. The FSA is authorizing emergency procedures in certain situations to assist, with a Presidential Disaster Declaration. It is crucial for all farmers affected to keep meticulous records of losses as well as other “extraordinary” expenses that resulted from lost supplies and increased transportation costs. 

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.