Water Street Solutions
Water Street Solutions Daily Report 7.22.14
2014-07-22T02:31


Corn

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

Soybeans

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

Wheat

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

Beef

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

Pork

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

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

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

 
Water Street Solutions Daily Report 7.21.14
2014-07-21T02:00


Corn

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

Soybeans

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

Wheat

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

Beef

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

Pork

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

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

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

 
Water Street Solutions Daily Report 7.17.14
2014-07-17T02:47


Corn

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

Soybeans

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

Wheat

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

Beef

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

Pork

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

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

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

 
Water Street Solutions Daily Report 7.16.14
2014-07-16T03:05


Corn

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

Soybeans

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

Wheat

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

Beef

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

Pork

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

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

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading and may not be suitable for all investors.
Water Street Solutions Daily Report 7.15.14
2014-07-15T02:26


Corn

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

Soybeans

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

Wheat

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

Beef

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

Pork

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

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

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

 
Water Street Solutions Daily Report 7.14.14
2014-07-14T01:52


Corn

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

Soybeans

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

Wheat

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

Beef

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

Pork

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

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

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

 
Water Street Solutions Daily Report 7.11.14
2014-07-11T01:46

Corn

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

Soybeans

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

Wheat

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

Beef

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

Pork

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

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

 All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading and may not be suitable for all investors.
Water Street Solutions Daily Report 7.10.14
2014-07-10T02:21


Corn

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

Soybeans

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

Wheat

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

Beef

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

Pork

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

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

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

 

 

 

 
Water Street Solutions Daily Report 7.09.14
2014-07-09T02:03


Corn

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

Soybeans

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

Wheat

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

Beef

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

Pork

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

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

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

 

 

 

 
Water Street Solutions Daily Report 7.08.14
2014-07-08T01:56


Corn

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

Soybeans

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

Wheat

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

Beef

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

Pork

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

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

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

 

 

 

 
Water Street Solutions Daily Report 7.07.14
2014-07-07T02:07


Corn

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

Soybeans

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

Wheat

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

Beef

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

Pork

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

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

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

 

 

 

 
Water Street Solutions Daily Report 7.03.14
2014-07-03T12:48


Corn

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

Soybeans

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

Wheat

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

Beef

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

Pork

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

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

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

 

 

 

 
Water Street Solutions Daily Report 7.02.14
2014-07-02T02:32


Corn

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

Soybeans

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

Wheat

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

Beef

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

Pork

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

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

 

 All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading and may not be suitable for all investors.
Water Street Solutions Daily Report 7.01.14
2014-07-01T03:25


Corn

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

Soybeans

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

Wheat

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

Beef

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

Pork

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

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

  All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading and may not be suitable for all investors.
Water Street Solutions Daily Report 6.27.14
2014-06-27T02:15


Corn

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

Soybeans

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

Wheat

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

Beef

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

Pork

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

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

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

 

 

 

 
Water Street Solutions Daily Report 6.26.14
2014-06-26T04:15


Corn

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

Soybeans

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

 Wheat

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

Beef

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

Pork

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

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

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

 

 

 

 
Water Street Solutions Daily Report 6.25.14
2014-06-25T03:30


Corn

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

Soybeans

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

Wheat

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

Beef

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

Pork

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

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

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

 

 

 

 
Water Street Solutions Daily Report 6.24.14
2014-06-24T02:29


Corn

Today’s focus was on bearish new-crop fundamentals, with December corn dropping to $4.3675, up a half-cent from last week’s low and just above the January low of $4.35 per bushel. Sell stops are likely below $4.35 if prices probe below it. We still could see some short-covering ahead of Monday’s USDA quarterly stocks report, but thus far rallies have been sold, with the exception of the option expiring action late last week.  

Soybeans

Traders focused on the possibility that USDA will confirm the tightest stocks of the past 35 years on Monday. Tuesday’s trade focused on expectations of a big 2014 crop, while traders also took note of the lowest soymeal prices for the July contract since March, suggesting weakening crush margins. Both July and November soybean contracts held above significant chart support, but sentiment remains weak.

 Wheat

Fund managers were able to reinstate the trend toward lower prices this week, which keeps them happy. The hard wheat crop will likely get smaller, with the soft red winter wheat encountering major scab and vomitoxin problems. However, traders are focused on they consider to be abundant global competition. As such, they’re showing now interest in a seasonal post-harvest bounce at this point.

Beef

Live cattle futures received a lift today from USDA’s Monday afternoon cold storage report. That report confirmed that beef supplies are at 7-year lows and continuing to trend lower. Additional support came from the Conference Board today, whose survey put U.S. consumer confidence at its highest level since January 2008 and well above trade expectations. That suggests that the consumer may have greater willingness to pay for steaks in the weeks ahead, requiring higher prices to ration that demand.

Pork

 The cold storage report seemed to embolden traders to be bullish going into Friday’s USDA quarterly hogs and pigs report, which the trade expects to confirm a hole in supplies as we move into July. The lead July lean hogs futures contract surged above $130 to its highest level ever recorded for a lead contract, although the August contract remains about $1 higher.

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

  All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading and may not be suitable for all investors.
Water Street Solutions Daily Report 6.23.14
2014-06-23T02:26


Corn

Rain makes grain and it’s difficult to convince the trade otherwise prior to August. Traders were worried about being long (bought) December corn near $4.50 on the possibility that this afternoon’s USDA data would fail to show a significant decline in crop ratings. Significant support continues to be at $4.35, although I still believe that traders are reluctant to push prices to that level or lower before seeing next Monday’s USDA quarterly stocks and acreage reports.  

Soybeans

July soymeal was down sharply today, although it held support at $450 per ton. That created significant questions about strength in the old-crop soybean contracts, which is largely due to both speculative and end user fears next Monday’s numbers. The aforementioned Reuters’ survey revealed trade expectations that USDA will put soybean ratings at 71% Good to Excellent, down 2 points from the previous week, but still up from the five-year average for the week of 64%.  

 Wheat

Reports of vomitoxin are abundant in the Midwest soft red winter wheat belt. Hard red winter wheat harvest results are confirming a short crop, but nothing that captures the trade’s attention as new. As such, wheat prices succumbed again to bearishness that has hung over this market for weeks, resulting in renewed selling. Next support for Chicago is a penny below today’s low, while KC has support at the double-bottom of $7.02. Winter wheat ratings typically firm during harvest, but they have thus far been stagnant this year. That will likely continue today as well. Spring wheat crop ratings will likely remain near average for this time of year, creating no significant headlines to sustain a rally on at this point.

Beef

Live cattle futures firmed today after posting bearish signals to close out last week’s trade on expectations of seasonal weakness. Today’s gains were encouraging, but they don’t negate bearish signals on the charts until/unless they take out last week’s high of $148.025 on the August chart, leaving prices vulnerable this week. The trade continues to anticipate a seasonal downturn in product demand combined with a seasonal uptick in slaughter supplies. However, Friday’s USDA cattle-on-feed report confirmed that supplies continue to shrink. We will likely continue to place smaller numbers of cattle than the previous year for another 12 to 18 months, continuing to tighten supply.

Pork
The deferred lean hog futures contracts rallied today on expectations that Friday’s USDA quarterly hogs and pigs report will confirm declining numbers of pigs due to the PED virus. The exception was the August contract, which is already at lofty levels, leaving it vulnerable to profit taking ahead of the report. July lean hogs found support from the cash market, but it has significant resistance at $129 and is at an $8 to $9 premium to the cash market already.
 Sign up for MarketSense Weekly, a free weekly e-newsletter written by Arlan Suderman, at www.waterstreet.org.

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

 

 

 

 
Water Street Solutions Daily Report 6.20.14
2014-06-20T02:39


Corn

Corn futures sank into negative territory in overnight trade, but posted modest gains for the bulk of the day session. Traders continue to square their positions ahead of USDA’s June 30 quarterly stocks report, which is known for its surprises. Short-term, they were focused on positioning for today’s expiration of the July options. Today’s close just above $4.50 puts a number of call options into play, with option owners now long (bought) positions. Frequently we see the market try to knock these new weak longs out of the market in the next trading session, but I expect the overall tone to remain somewhat supportive ahead of USDA’s June 30 stocks report.

Soybeans

Cash soymeal prices continue to tumble in response to the collapsing DDGS market. That pressured the soybean market for most of today’s session, with the July contract targeting the $14.00 strike price for option expiration. However, a late-day surge in July soymeal supported a turnaround in soybeans, with the July contract quickly targeting the $14.20 strike, finishing the day just below it. Look for traders to remain quite nervous ahead of USDA’s June 30 quarterly stocks report. USDA’s reports to this point argue for the tightest old-crop stocks on record as a percent of annual usage, but the cash market doesn’t “feel” that tight, raising questions about whether the June 30 report will provide evidence of a future increase in the size of the 2013 crop. This leaves the market quite vulnerable to a surprise in either direction on June 30.

Wheat

Wheat prices remained under pressure throughout the day, with traders expecting active harvest progress this weekend. Late-week reports from Plains Grains, Inc. indicate that harvest progress remains sluggish for the previously drought-stricken areas of the central and southern Plains. Texas harvest progress stood at 55% at the end of the week, with combines beginning to roll into the later-maturing Panhandle. Oklahoma is 72% harvested, while progress in Kansas reached 18%, with some combines running as far north as better wheat near the Nebraska border.

Beef

Futures prices surged to new contract highs on the strength of the cash market Thursday. However, traders pocketed some profits today as they waited for this afternoon’s release of USDA’s cattle-on feed report. That report revealed that cattle-on-feed on June 1 totaled 10.6 million head or 98% of year ago levels. The trade had been expecting 98.4%. Placements in May totaled 1.91 million head or 93% of the previous year, when the trade was expecting 92.4%. Marketings in May totaled 1.87 million head or 96% of the previous year. The trade was looking for 95.7%. Overall, a pretty neutral report.Feeder cattle futures followed the lead of the fat cattle market. Yet, the cash market continues to push higher.

Pork

Lean hog futures pulled back today as the roller coaster ride continues in the pork complex. However, the pullback ahead of the weekend shouldn’t have been a surprise. The lead July contract traded to $128.85 per cwt this morning, falling just short of resistance at $128.95, with traders then noticing the contract’s premium over the cash index. First significant support is just above $124.The latest CME 2-day lean hog index rose to $118.46 per cwt, up $1.13 on the day and its highest level since April 21. It was the 12thstraight increase in the cash index, with gains over that period totaling $8.12 per cwt. Yet, the cash index is trading more than $9 below the lead futures contract that it must converge with over the next several weeks.

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

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

 

 

 

 
Water Street Solutions Daily Report 6.19.14
2014-06-19T02:49


Corn

July corn probed briefly above the $4.50 strike price, before consolidating near that level going into the close today. Barring any other significant driving factors, one would expect the market to consolidate near the strike as we head into July option expiration tomorrow. However, we could see follow-thru strength ahead of USDA’s June 30 quarterly stocks report, particularly if traders can point to declining crop ratings on Monday as justification.

Soybeans

 July soybeans posted double-digit gains following Wednesday’s bounce, but the contract struggled once it moved above the previous session’s high of $14.19, suggesting that traders may want to consolidate near the $14.20 strike price going into Friday’s option expiration. The gains were impressive, but they came amid losses in the July soymeal contract, with soymeal basis softening as well. November soybeans are nearing significant resistance stacked just below $12.30.

Wheat

The Kansas City July contract pushed well-above the 100-day moving average Wednesday, closing just above it. The contract held a test of the indicator overnight, stimulating fresh buying once again. However, traders were disappointed that the contract was unable to challenge Wednesday’s high of $7.4175. Option open interest is high at the $7.50 strike price, followed closely by the $7.40 strike price. These strike prices make attractive targets for the market ahead of tomorrow’s expiration of July options. The same is true for the $6.00 strike price for Chicago July wheat. Chicago wheat rallied to narrow the spread with Kansas City today, but the Chicago charts are still far from bullish. Most of the strength in the wheat complex is grounded in the Kansas City market due to problems with the Plains crop, but a follow-through move above $7.45 is needed to confirm the move.

Beef

August live cattle futures pushed to a new contract high of $148.025 before pulling back in modest profit taking today. However, the contract remains below the cash market. Meanwhile, the lead June contract failed to test Tuesday’s contract high of $148.65. The market still feels top-heavy, with ideas that demand for product will begin declining soon while supplies increase. However, the bears still lack hard evidence of such to force the issue, with boxed beef prices approaching record levels, along with cash cattle trade.

Pork

Lean hog futures pushed sharply higher amid talk among traders that the vaccine for PED virus receiving conditional approval this week will not be the “silver bullet” they thought it would be. They quickly turned buyers, taking advantage of this week’s price break to grab bargains in the market. The latest CME 2-day lean hog index came in at $117.33 per cwt, up $1.20 on the high and its highest level since April 22. The index has been higher the past 11 consecutive trading days, with total gains during the period of $6.99 per cwt. Today’s cash market was mostly steady to $1 higher at Midwest terminals, with packers continuing to enjoy profitable margins estimated at $6.40 per head.

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

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

 

 

 

 
Water Street Solutions Daily Report 6.18.14
2014-06-18T02:52


Corn

July options expire on Friday, which will likely add another factor to trade to close out the week. Barring any other major driving factors, prices tend to be drawn toward the strike price with the most active open interest, or remaining open contracts. For corn, the $4.50 strike price would appear to be very attractive to traders heading into Friday’s option expiration. December corn finished the day unchanged from the previous session, with key support at $4.35. Meanwhile, the July contract found support from the ethanol data that could support a move closer to the $4.50 strike price. However, if that looks unreachable, traders may settle for the $4.40 strike price ahead of option expiration Friday.

Soybeans

USDA’s daily export reporting system today included the sale of 5.1 million bushels of U.S. old-crop soybeans to “unknown destinations. It is being presumed by many that the buyer was China taking advantage of the recent price break. That break was precipitated by a sharp drop in soymeal demand, thanks to China’s DDGS import ban. Now it is resulting in stronger export demand for soybeans. November soybeans found support today from its bounce off support at $12, but gains are limited by expectations of a record crop. July found support from fresh export business. Friday’s option expiration would suggest that prices will hover near $14, but a move to strike prices 20 cents either side of that can’t be ruled out.

Wheat

Harvest delays due to persistent rains in both the Midwest and Plains provided underlying support overnight. Gains accelerated rapidly as short-covering increased when the Kansas City July contract took out resistance at $7.20. Prices pulled well off their highs after the initial surge of short-covering, suggesting that we’re not necessarily looking at something fundamentally new here, but perhaps we are confirming a seasonal harvest low.

Beef

Live cattle futures pushed lower despite what some would see as bullish near-term fundamentals, but it is a futures market and traders are anticipating declining cash prices in the weeks ahead. Packer margins were good today, at an estimated $47.80 per head, bolstered by rising product prices. Retail buyers have been aggressive in restocking following the Father’s Day weekend. That would suggest that barbecue demand was good for Father’s Day and retailers hope that the same will be true for the approaching 4th of July holiday weekend.

Pork

The lead July lean hog futures contract continues to find buying interest at stacked support just below $124 per cwt. Meanwhile, resistance is pretty strong just below $129, with the cash market trending upward toward the contract’s trading level. The August contract traded to $132.65 before word of the PED virus vaccine hit the market, leaving it vulnerable to long liquidation. It found support, at least for today, at $126, with most markets coming well off their lows today.

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

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

 

 

 

 
Water Street Solutions Daily Report 6.17.14
2014-06-17T03:03


Corn

December remains the leader, with traders focused on new-crop. The December contract dropped to $4.3625 this morning, before selling dried up just above the January low of $4.35. That triggered some short-covering that lifted prices off their lows. The contract still ended the day in negative territory, indicative of a market still holding bearish sentiment. However, it suggests that traders may be willing to allow prices to consolidate just above $4.35.

Soybeans

July soybeans dropped to support at $4.50, settling just above that level. It was the lowest level for the contract since late March as the protein market collapses. That triggered a similar sell-off in the July soybean contract as well. The good news was in the new-crop November contract, which turned around before testing support in the $11.98 to $12.00 range, bouncing a dime off its session low.  

Wheat

Wheat found modest support today from ideas the market may be carving out a seasonal low, supported by concerns about harvest delays, both in the Plains and the southern Midwest. Harvest delay threats are greatest in the 6- to 15-day period, which could be a significant threat to the wheat harvest, with wettest areas focusing on Kansas and Oklahoma. The Kansas City July wheat contract matched its previous June low of $7.02 before bouncing more than a dime higher. A move above $7.20 would begin to confirm a possible short-term low. Chicago will likely be a follower if the market can confirm a seasonal low, based on harvest delays. The Chicago contract has support near $5.72.

Beef

Live cattle futures started the day on a firmer note, but then collapsed mid-morning. Packer margins are estimated at $29.95 per head today, up from $28.05 on Monday, but down from $50.70 the previous week. Packer margins have been supported by strong prices for boxed beef, but the trade fears that those prices will soon begin breaking. They are currently at levels that created significant rationing of demand from retailers previously this spring and they are also likely to drop once retailers finish covering their needs for the 4thof July holiday.

Pork

Lean hog futures turned lower again today after a promising start. The lead July contract remained in positive territory for most of the day, on thoughts that the cash prices will continue to firm as slaughter numbers decline over the next several weeks. However, the deferred contracts saw significant losses, aided by talk that the first vaccine for the PED virus had been approved.

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

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

 

 

 

 
Water Street Solutions Daily Report 6.16.14
2014-06-16T02:39


Corn

Corn prices tried to firm overnight, but similar to Friday, were unable to effectively test the $4.50 level. This led the market to break lower again as pit trade opened this morning, with prices poised to test last week’s low of $4.39, with next support at the January low of $4.35. Rallies have been quickly sold, despite the oversold nature of the market. The trade expects this afternoon’s 3 p.m. CDT USDA crop progress report to show the crop is still 75% Good to Excellent, unchanged from the previous week. An updated seasonal outlook released today by Commodity Weather Group supported continued favorable conditions in the weeks ahead. It indicated some degree of a drier risk for the western Midwest later this summer, but believed that seasonally mild temperatures expected at the time will minimize crop stress.

Soybeans

July soymeal dropped to its lowest level since late March on the aforementioned sell-off, with next significant support near $450. July soybeans have first support at the 100-day moving average that held the market twice last week. The indicator is currently at $14.13. Friday’s expiration of July options could create a magnet in the contract toward the $14 strike price, where option open interest is the heaviest at this point. The next active strike price is $14.20, followed by $13.80. There are also a lot of put options at the $14.50 and $14.60 strike prices, but sustaining a move to that level would likely be difficult without help from the soymeal market. Traders expect this afternoon’s USDA crop progress report to show 93% of the soybean crop in the ground as of June 15, up from 87% last week. The trade expects the crop to be rated 74% Good to Excellent, unchanged from the previous week.  

 Wheat

Wheat trades headlines more than most commodities and there was nothing to counter the bearish sentiment common in the Ag sector today. This allowed the market to drop ahead of this afternoon’s USDA crop progress report, which is expected to show stable winter and spring crop ratings. Chicago July wheat dropped to its lowest level in four months today, with eyes on support at $5.72. Kansas City needs to hold support at $7.00.

Beef

Live cattle futures were modestly lower today, after failing to challenge Friday’s contract highs. Concerns are rising that loin and rib values are beginning to drop seasonally, which will make it increasingly difficult to sustain boxed beef values at these levels if the trend continues. That in turn would weigh on packer margins, pressuring cash prices. As such, futures prices came under pressure. The lead August feeder cattle contract was steady to weaker today as it paused to allow the cash market to catch up, while the deferred contracts pushed higher on weaker corn prices. The latest CME cash index came in at a record $198.91, up $0.73 on the day. The index has posted a new record high on 26 of the past 29 trading days, with gains over that period totaling $19.35 per cwt.

Pork

Lean hog futures dropped sharply today as traders came to realize the sharp premium they held over the cash market; something I warned could happen once June went off the board. The cash market as steady to $2 higher again today, with the cash index up $1.06 to $114.75 per cwt. It was the 8th straight trading day with a higher index, with gains over that period totaling $4.41 per cwt. The lead July lean hog contract has next support layered near $123.70. Traders are beginning to look ahead to USDA’s June 27 quarterly hogs and pigs report. Those reports have become known for their bearish surprises over the past several quarters.

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

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

 

 

 

 
Water Street Solutions Daily Report 6.13.14
2014-06-13T02:11


Corn

December corn is the leader now that traders are comfortable that we will not run out of corn ahead of this year’s harvest. Traders remain bearish, but the market ran out of sellers this week as it probed below key support at $4.45 amid oversold conditions. It can correct an oversold condition by chopping sideways for a period of time, or by finding a reason to bounce higher for a time. The new-crop contract bounced to $4.4975 today, but lacked the buying interest to test psychological resistance at $4.50. Traders will soon begin focusing on USDA’s June 30 quarterly stocks and planted acreage reports. That’s probably not enough to support a sustained rally, but the reports are known for their surprises, which could lead to position squaring and price firming ahead of the reports.

Soybeans

Old-crop soybean prices led the way lower Thursday after soymeal broke below key support at $477. The collapse led to a bounce today that yielded double-digit gains at times across both old-crop and new-crop contracts. Global demand for protein remains quite strong, but the crop in the field currently looks more than adequate to meet that demand while padding stock numbers in the year ahead. The market found modest support today from Informa’s estimates, which dropped its acreage estimate slightly, but held them just above USDA’s estimate of 81.5 million acres. It also left its soybean yield estimate unchanged at 44.5 bushels per acre, which is down from USDA’s estimate of 45.2 bushels.

 Wheat

 In the end, today’s rally in the Chicago wheat market had little conviction. Kansas City is the lead to the upside, but the rally will remain suspect below $7.48 despite the poor Plains’ crop. The wheat market seasonally tends to find a reason to confirm a bottom by midway through the harvest, but it needs a significant problem in another major producing area of the world to sustain the move. There are a couple of possible stories that could develop to create that incentive, but currently they still lack substance.

Beef

Live cattle futures are pushing higher in parabolic fashion, supported by strength in the cash market. Traders are eyeing the high set by the expiring February contract at $153, but we’ll likely need to see continued strength in the cash market to see that happen. One possible threat to the current strength is the current emerging violence in Iraq that could send energy prices sharply higher if it continues to spread, while support comes from mild summer that is encouraging grilling activity. Feeder cattle futures continue to trend higher at an escalating pace as well, supported by strength in the cash market for light-weight cattle. The latest cash index comes in at $198.18 per cwt, up $1.78 per cwt.

Pork

Today’s cash market was mostly steady, to up to $2 higher, which has been the pattern lately. That’s pushing the cash index higher at an accelerating rate. The June lean hogs contract went off the board today at levels that traders believe will match up with Tuesday’s cash index. The index was up $1.23 per cwt today to $113.69, while the June contract traded near $115.825 at the end of the day. Meanwhile, the deferred contracts traded higher most of the day on the belief that slaughter numbers will continue to trend lower through the summer. Gains were limited somewhat by a fear that the futures market may have gotten ahead of the cash market, which will become more apparent next week as the June contract disappears from the board. As such, it will likely be difficult for the July contract to top $129 until we see greater strength in the cash market.

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

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