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Water Street Solutions

Water Street Solutions Daily Report 2017.12.12
2017-12-12T01:56

Corn showed modest gains post-report before succumbing to pressure, -1 ¼ (Mar). The report did not produce any fresh news that will move the CBOT out of a sideways trading mode in the near-term. Ethanol demand was raised by 50 million bushels, resulting in U.S. corn ending stocks being lowered by 50 mbu. World corn ending stocks got a small increase, up 500K MT. Keep any eye on whether rains materialize/dissipate over Southern Brazil and Argentina over the next few days, as it will be essential for a South American weather narrative to emerge in order to see any kind of a sustained recovery.

Soybeans responded as expected to a mildly bearish report, -6 ¾ (Jan). WASDE cut U.S. bean exports by 25 million bushels, resulting in ending stocks being raised by 20 million bushels to 445 mbu. World soybean ending stocks were upped to a record 98.3 MMT, directly attributed to the cut in U.S. soybean exports, as the South American soy crop production was left unchanged. USDA daily export sales on the board today included a private sale of 168,300 MT to “unknown” destination for 2017/18. Also, a previous sale of 492K MT to “unknown” was changed to “China”. The hope is China is as under-bought as rumors have purported, with U.S. export sales needing a shot in the arm.

Wheat responded in kind to burdensome report results, -2 ¾(Chicago Mar). WASDE increased U.S. wheat stocks by 25 mbu to 960 mbu, tied to a reduction in U.S. exports. The U.S. is positioned relatively well to compete on the world export stage, but a lot depends on Russian and European export pace. If Russia can continue on its record pace of export loadings, it will be difficult for the U.S. to make headway. World wheat ending stocks were also upped by 1 MMT to a record 268.4 MMT. European and Canadian wheat output were both viewed to be higher, while the Australian crop was viewed steady with last estimates. Other wheat results: Kansas City HRW -1 ½ and Minneapolis HRS -3 ¼.

Live Cattle had a Turnaround Tuesday, reversing course from multiple sessions to the downside, +1.425 (Feb). Trade action took a corrective posture today, as long liquidation selling has been the recent trend, with specs still holding a large net long position.

Hog futures were up modestly in the expiring Dec contract, but down in the deferred months, -.500 (Feb). Speculators continued to shed length, as confidence has been dampened by recent losses. Dec futures will go off the board on the 14th. The recent slide can be contributed in part to a weak pork cut-out and producer selling pressure before the holidays. 

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 2017.12.11
2017-12-11T03:55

Corn felt the pressure of languishing wheat prices as traders bolstered short positions ahead of the report tomorrow, -3 ¾ (Mar). The December USDA report is not typically a market-mover, as no adjustments are expected to production, with the focus on demand estimates. Record ethanol production will be considered in contrast to lagging exports, and the net result will likely add to stocks’ totals. Weekly Export Inspections gave corn a boost today, as loadings were reported to be 658,403 MT, besting estimates of 625K MT. The USDA also reported a private sale of 110K MT of corn to Mexico for 2017/18.

Soybeans battled forecasts of wetter weather in Southern Brazil and Argentina, -7 ¼ (Jan). Expectations for the report tomorrow include WASDE increasing estimates of ending soybean stocks, due to poor export numbers thus far. However, there are rumors that China may be way behind and under-covered for their needs – will the next few weeks bring a flurry of sales? Regarding South American weather, the general prevailing thought is that La Nina is here to stay, but it is still early to make too many deductions. Weather is the main story left with potential lasting impact, with meal crushing rates and soyoil also possibly providing support. The USDA reported a private sale of 132K MT of beans to “unknown” destination for 2017/18.

Wheat sunk to new lows on technical selling, as traders piled on short positions, -5 ½ (Chicago March). Russia is continuing its dominance over the rest of the world with record exports resulting from record yields. In that vein, the USDA announced weekly wheat loadings for the week ending Dec 7th at 316,867 MT, under estimates of 400K MT. Kansas City hard red winter and Minneapolis spring also lost ground again today, -5 ¼ and –4 ½ respectively.

Live Cattle continued its orderly march lower, -.575 (Feb). From a technical perspective, the market is oversold, but speculative investors still hold a large net long position. The cash market is exhibiting weakness, weather is leaning bearish, and consumer demand may wane into the holidays.

Hogs fell down to the 100-bar moving average on long liquidation selling before finding their footing, closing –1.825 (Feb). The Commitment of Traders report on Friday, showed managed funds as of Dec 5th, holding large net long positions. The market is in correction mode as animal weights and slaughter are both up from last year, giving the market a bearish tilt. 

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 2017.12.8
2017-12-08T02:38

Corn has reverted back and found support at the magnetic 3.50 price level, as the dust is settling from the move in contract month from Dec to March. Today futures eked out a small gain, +1 ¼. The current price level may offer some value as we get further into the South American growing season. Will La Nina lower yields there and provide the market with opportunities? Here stateside, the drought monitor is starting to expand, as a mere 5-30% of normal precipitation has fallen across the Plains in the last 60 days, and the Midwest is still completely dry. Outside markets provided a boost to sentiments, as crude and raw materials were higher, the DOW up, along with gasoline and ethanol markets.

Soybeans have fallen down to a level that may invite some fund liquidation if they fail to support, -2 ¼ (Jan). However, futures rebounded into the close and held above previous lows. The GFS weather model today is showing a much wetter trend in Argentina beyond Dec. 17th, but there are mixed feelings in the meteorological sector as to whether these rains will come to fruition. In the meantime, it gave cause for a pause in the market, with the focus on Sunday’s weather update to confirm. Look for Monday’s trade to reflect any significant changes. A couple of export sales were announced (to China and unknown) that totaled 331K MT. U.S. soybean exports have catching up to do, and hopefully China has more unfulfilled needs. Brazil may have exhausted its inventories for now, as South American premiums are on the rise.

Wheat futures continued their pattern of weakness, as the winter wheat complex finished in the red: Chicago SRW –2 ½ and Kansas City HRW -2 ¾. Minneapolis spring wheat was able to inch  above breakeven, + ¼ (Mar). In global news, China’s wheat production is estimated by the National Bureau of Statistics to be higher than the USDA’s projection, 129.8 MMT vs. 127.25 MMT. Australia is still battling heavy rains and related quality issues, while India announced their winter wheat plantings are down from 20.36 million hectares to 19.09 million hectares. Wheat continues to be an uninspired follower of the rest of the grains.

Live Cattle has been under a lot of pressure the last few sessions, trading both sides of unchanged before settling, -.375 (Feb). Both beef and pork production are expected to be up about 4% in 2018, so pressure will be on demand to rise to the occasion. The value of the Dollar and the economy will be key moving forward, as both are trending “favorable” at this time. The USDA is expecting beef exports to increase in the coming year, which is also supportive.

Hogs featured a modest correction after the recent tumble in Feb futures, +.375. An important factor in 2018 will be for producers to keep feed lots current, as extra animal weights add to supplies and pressure on demand.  Once spring arrives, one would expect a little boost as grilling season kicks in. It will likely be tough for prices to appreciate much in 2018 above this year’s levels. 

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 2017.12.7
2017-12-07T04:16

Corn felt the weight of a falling soybean market today, inching back down into the lower half of the trading range, - 1 ¼ at 351 ½ (Mar). Exports were announced in the lower half of the range of expectations at 876K MT vs. estimates of 750K-1.2 MMT. While this is not a negative number in and of itself, corn exports continue to lag on a yearly basis, down 28% from last year.  There were no new export sales announced this morning. Look for the next USDA balance sheet on next Tuesday’s  WASDE report, but no new production numbers are expected until the January report.

Soybeansreceived pressure from the Chinese Dalian market seeing a decline in futures to the lowest level in 9 years, -10 ¾ at 992 (Jan). This was the largest single session loss in a year. On the logistical side, the PRC has been slow to issue offloading certificates to incoming cargoes, but that has loosened up as soybean vessels are arriving with increasing numbers. Weekly export sales came in very strong, as the USDA announced 2.085 MMT, with the vast majority slated for 2017/18, vs. expectations of 1.0-1.5 MMT. Soybeans still have some “catch-up” to do in order to meet the USDA export yearly estimate.
Wheatpushed yet lower into uncharted territory, -3 ¾ at 421 ½ (Chicago Mar). The weak tenor of grains in general was not helpful to the wheat complex, as it traders are hard pressed to find fresh news to latch onto. The USDA reported weekly export sales at 322K MT, on the low end of the range of estimates of 250K-500K MT. As with corn and beans, wheat sales are considerably weaker this year, as the two previous weeks featured very poor export sales results. Regarding a technical outlook, the RJ O’Brien Bullish Sentiment Index is at its lowest level since 1999. Kansas City HRW and Minneapolis HRS finished – and – respectively.
Live Cattle traded both sides of unchanged as the market tries to find a short-term low, -.600 at 118.675 (Feb). There is a large supply of beef to consume, and if consumer demand drops off after holiday order bookings, it may provide impetus for more erosion in the cash market.
Hogs are struggling to stop the recent decline of futures’ values, -.475 at 68.475 (Feb). The burden of supply seems to be winning the day, with weights up 2% and slaughter expected to be up 4-5%. Not to mention, the supply of all meats is running at a high level. 

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 2017.12.6
2017-12-06T02:34

Corn is struggling under the weight of large supplies and a lack of substantial news, -1 (Mar). Some positive factors providing a measure of optimism include a hot and dry outlook for the next couple of weeks in Argentina, a sixteen month high in Chinese corn futures, and a potential cut in Brazilian second crop corn acres by 20-30%. Managed money continues to hold a very large net short position, and is cautiously monitoring any changes to the market dynamics. The EIA Ethanol report came out today and it showed production up a solid 3.94% over last week and 8.31% over last year. Ethanol stocks are also up (2.27% over last week and 21.66% over last year), so demand will be key to maintain these levels. Corn used for ethanol needs to average 103.76 million bushels weekly to hit the USDA yearly target, and this week eclipsed that by over 11 million bushels. Stats Canada predicted their 2017 crop to exceed last year’s by almost 1 MMT.

The Soybean complex had a correction after yesterday’s strong action, -5 ¾ (Jan). Soymeal and Soyoil futures fell in step. January futures ran into resistance at 10.13 for the second consecutive day and failed to sustain. It is a weather traded market, and today featured scattered showers across Central Argentina. It is premature to expect weather to prop up the market indefinitely, even with complete dryness on the map in the near-term. There were no new export sales announced today, other than a reported correction to a Nov 30th sale to China from the 525K MT originally reported 393K MT. Stats Canada’s latest soybean estimates are for a yield 7.717 MMT, down from the last projection of 8.32 MMT in September, but well above last year’s production of 6.55 MMT.

Chicago Wheat pushed into new lows, influenced by the crop report out of Canada, -7 ½ (Mar). KC hard red winter and Minneapolis hard red spring varieties followed, -8 and –13 ½ respectively. Stats Canada’s “all wheat” estimate came in at 29.984 MMT compared to the expected 28.00 MMT and 27.1 MMT in November. This is still behind last year’s 31.73 MMT production, but considered bearish vs. expectations.

Live Cattle continued to affirm bearish mindsets, with February down for the 5thconsecutive day, -1.250. Long liquidation selling is continuing in the absence of supportive supply news. January feeders are at the lowest level since September 15th, with poor chart technicals. Seasonal strength in beef is providing a measure of support.

Hogs pushed lower, filling the gap left on the February chart from trading the day after Thanksgiving, -1.550. It is a battle between short-term large production and recent positive exports and firm cash markets. The pork cut-out yesterday at $84.03 is at the highest level since September 5th and the Lean Hog Index is on the rise. The large premium of Feb futures to cash is causing some indigestion, as traders are not comfortable with this ratio at this time of the year, with growing supplies on the horizon. 

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 2017.12.5
2017-12-05T01:46

Corn tried to follow beans, but was barely able to stay in positive territory, + ¼ (Mar). The USDA reported 162K MT of sorghum was bought by China for 2017/18, as Chinese feed buyers are capitalizing on soon to expire import licenses to bring in U.S. grain at a profit. Chinese corn is currently considerably higher than the U.S. market. In ethanol, producer margins are staying right around breakeven, with some producers losing 10-15 cents/gallon. If beans can sustain new highs, corn is likely to follow to some extent. WASDE will release a report on Dec 12th, highlighting demand, while the January report will give final numbers.

Soybeans got a boost from continued South American weather concerns, taking out the October highs on the chart after failing yesterday, +10 (Jan). The extended European weather model forecast this morning showed persisting dryness in Argentina and Brazil all the way into March. Undoubtedly, this was on the mind of fund managers as they seek to take off risk to the upside. It is still early to draw too many conclusions though, as the Australian Bureau of Meteorology confirmed La Nina exists, but is signaling that it will be a weaker version. And, the timeframe is still early in the growing season, comparable to June in the U.S. Nonetheless, the correlation between La Nina and yields in South America is well established and worth respecting.

Wheat was not able to jump on the bean wagon today, pressured by a rising Dollar and weak metal markets. Chicago SRW -2 ½, Kansas City HRW –2 ½ and Minneapolis HRS -3 ¾. The large Russian crop and their expansion of export capability is also putting a damper on the wheat complex, as the Russians are able to win most competitive price bids. Keep an eye on declining Australian yield prospects, due to drought in the beginning and now extreme moisture threatening the quality of unharvested wheat.

Live Cattle made yet another large move to the downside, approaching support at the 100-day moving average, -.650 (Feb). Cash is weak and the supply of all meats is large, particularly poultry cold storage. Boxed beef cut-outs were up $2.20 to $208.19 yesterday, but down from last week.

Hogs experienced a correction today, as the market has been in a short-term uptrend, -1.175 (Feb). The CME Lean Hog Index is up to 63.26, but down from last week and at a significant discount to Feb futures, 70.550. Managed money continues to hold a large net long position, which leaves the market vulnerable if technical support levels are violated. Will large supplies turn cash weaker? 

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 2017.12.4
2017-12-04T02:52

Corn exhibited weakness in the latter part of the trading session, -5 ¼ (Mar). USDA weekly corn loadings were disappointing, coming in well below the expected 850K MT at 586,213 MT. In that vein, NAFTA talks will resume later this month with Mexico and Canada. Sonny Perdue, Ag Secretary, says the President is a tough negotiator and NAFTA talks may go to the brink, but in the end the U.S. will have a better deal. He reassured that the President understands how important agriculture is to the U.S. economy.

Soybeans gapped higher on the chart before settling back down for a modest gain, +4 ¼ (Jan). Traders seemed to be driven by concerns of dryness in Argentina and Southern Brazil, as well as favorable technicals. Soymeal had a breakout day, providing additional support. Regarding weather, it is a little early to get too bullish, as South American beans are “made” in the late Jan-Feb timeframe. With premium being built in to soybeans’ price, the market is at an equal risk to go down if no stories develop.

Wheat could not overcome corn’s pull down, as all three complexes finished in the red: Chicago SRW -3 ¼, Kansas City HRW –3 ½ and Minneapolis HRS -2 ¾. The USDA reported wheat weekly inspections at 409,569 MT, well above expectations of 350K MT. Big rains in Australia over the weekend, put 4 MMT of wheat in jeopardy as predicted. And yet, investors continued to pile on to short positions. Stats Canada will release their latest production estimates on Wednesday, so look to see if numbers are increased as expected.

Live Cattle continued to show weakness after a sharp drop and a new low on Friday, -.850 (Dec). Exports last week, although respectable, were not enough to prop up the market. Beef demand post-Thanksgiving has been disappointing, as normally the industry would expect firm demand and declining production into the holiday season.

Hogs showed weakness in Dec (-.325) while gaining in the deferred months, Feb +.950. Managed money traders hold a substantial net long position, and Feb futures are priced well above the Lean hog index (71.550 vs. 62.990), leaving the market vulnerable if technical support levels are violated. Supply fundamentals continue to look bearish for the next several weeks. 

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 2017.12.1
2017-12-01T03:23

Corn began the new month with a gain, +3 (Mar). Funds have turned to buying, as they are building in some weather premium, with La Nina uncertainty ahead and the South American growing season just getting started. Corn notched another sale today, with the a reported 130K MT to “unknown” destination. In outside markets, crude oil rose due to OPEC maintaining previously established production cuts and turmoil in Venezuela, and the Dollar showed weakness. Look to see if corn can get through current resistance - if so, 3.85 March may be achievable.

Soybeans found fresh enthusiasm with the new month, finding support in South American weather premium, +8 ½ (Jan). Argentina is not about to go quietly on the biodiesel import front, as government officials plan to travel to Washington D.C. next week to discuss eliminating or reducing the tariffs that have been imposed by the Commerce Dept. If they are unsuccessful, and the Commerce Dept. makes their final ruling in early February, Argentina’s only recourse would be to appeal to the WTO, which could involve years to resolve. Domestic soyoil supplies will continue to tighten and be supportive to the soy complex.

Wheat followed the lead of the other grains, with a move to the topside across all three complexes: Chicago SRW +5 ½, Kansas City HRW +6 and Minneapolis HRS +8 ¼ (Mar). Australian rains are giving the market a measure of strength, as excessive precipitation over southeastern Australia is putting 4 MMT of wheat at risk. This in an already greatly reduced production year due to an earlier drought, and will likely produce a wheat yield that is the lowest in a decade.

Live Cattle was down across near and deferred months, as Dec contracts will see “First Notice Day” on Monday. February was lock-limit down, -3.000. Beef exports were reported at a five week low, and recent sales are light. This, against a backdrop of large supplies and record-level production is pressuring the market.

Hogs have featured volatile trade of late, with big bars on the chart in both directions the last several sessions. Today, futures gained back a majority of what was lost yesterday, with Dec +1.000. Like cattle, large short-term supplies are keeping the market in check, while demand continues to provide support. 

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2017.11.30
2017-11-30T03:19

Corn found some support in a neutral EPA announcement, +2 ¼ (Mar). The EPA stayed with the statutory maximum cap of 15 billion gallons for corn ethanol. In this case, keeping the status quo was not a bad thing. However, weekly export sales were disappointing, as they were down 45% from last week at 599,200 MT, below the range of 750K – 1.2 MMT. This puts corn export sales 27% behind last year. Sales were mostly to Japan and Mexico, however, China inked a purchase of 110K MT of sorghum for 2017/18. Managed funds seem to be shedding off some of their exposure due to the large short position they hold (250K contract), as even yesterday’s “Position Day”, which would tend to be bearish, showed price appreciation.

Soybeans saw a correction with mixed news, -6 ¾ (Jan). The USDA reported two private sales, a 525K MT sale to China for 2017/18 and a 132K MT sale to “unknown” destination for 2017/18. However, there is still catch-up needed in order to come into alignment with USDA targets for the year. The weekly export sales report had soybeans well within the range of estimates (750K – 1.2 MMT) at 942,900 MT. Also, the EPA announced long-awaited biofuel mandates, which offered no significant changes. This was not the welcome news hoped for, as many in the biodiesel industry had lobbied tirelessly for growth in volumes. However, soyoil supplies should tighten up domestically, as tariff’s are taking effect against Argentina and Indonesia in the midst of growing biodiesel demand. South American weather still remains the biggest opportunity and threat to the market.

Wheat traded with mixed results: Chicago -1 ¾, Kansas City EVEN and Minneapolis -1 ½. Weekly export sales were unimpressive, at 187,400 vs. estimates of 250K-500K MT. Recent action includes Saudi Arabia tendering for 480K MT of milling wheat, Iraq buying 100K MT from the U.S. and Australia, and Algeria purchasing 570K MT from primarily France.

Live Cattle traded lower, especially in the deferred months, with Dec closing -.575. Big supplies looming are tempering recent optimism. The Sterling Profit Tracker showed feedyards at a $90 profit/head last week and packers are at $120 profit/head. Cow/calf producers are realizing $136 profit per animal. Low feed prices are helping to drive the market, with beef production in 2018 forecasted to be 5% higher. This would be a record amount of beef produced in the U.S. and the highest since 2002. Exports will be key, as they were up 11% in 2017 and are expected to be up another 4% in 2018.

Hogs are descending quickly after a sharp uptick last week, -.800 (Dec). The recent jump in weights has helped to confirm that there is a large short-term supply to digest. February hogs have held a large premium over Dec, but they gave up some of the advantage, losing -1.125 today. In other hog related news, Kansas State is researching a cure for PRRS, which is a deadly virus that takes the lives of young pigs, costing the pork industry over $600M/year. A new study is showing promising results of stopping the virus cold, by preventing it during pregnancy of sows. Piglets born healthy have a much better chance of resisting PRRS through vaccinations later. 

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2017.11.29
2017-11-29T04:27

Corn got through liquidation ahead of First Notice Day for Dec with a modest gain, +3 ¾ (Mar). Ethanol production continues to outpace last year, in spite of concerns over declining exports to Brazil and China, as positive ethanol margins are encouraging more output. The EIA Ethanol report showed production up 5.34% over the same week last year, the 2nd highest weekly output on record. Stocks are up slightly over last week, but in a large way over last year by 19.49%. Corn used for ethanol is impressive, at 110.93 million bushels, well over the weekly average of 104.06 million bushels needed to meet the USDA overall yearly estimate. In exports, the USDA reported a private sale of 101,600 MT of corn to “unknown” destination for 2017/18.

Soybeans traded both sides of even before finishing – ½ (Jan). If concerns about dryness in Argentina began to get “legs”, soymeal would be hit the hardest from a major crop loss. In U.S. terms, Argentina and Southern Brazil’s growing season now is equivalent to the May timeframe. So, there is still a long ways to go, but the soil profile is being closely monitored. Funds do not seem to be eager to find themselves in a short position with time and risk on the table. In exports, the USDA announced a private sale of 263K MT of soybeans to China for 2017/18. While South American weather has not been threatening to-date, Brazil still has 15% of its soybean crop to plant, and with a possible La Nina pattern looming in the future, it is still too early for analysts to get too overconfident about yield prospects.

Wheat was able to benefit from a bounce, with buying occurring in the winter wheats, as prices have been trading in areas of new lows. Chicago SRW +5 ½ and Kansas City HRW +3 ¾ (Mar), while Minneapolis spring wheat joined the party, +1 ½(Mar). The upcoming week will feature a more active export trade, which should provide some support to the market. Also, keep in mind that managed funds are positioned very short, so there is less incentive for them to drive the market lower. The USDA long-term baseline projections released yesterday indicated that U.S. 2018 all-wheat acres will be down from 46 to 45 million acres. In South Africa, the crop estimating committee is predicting their 2017 wheat production to be 4.4% lower than their last estimate, while India is expecting a 5% increase to 2018 production.

Live Cattle futures tried to push lower yesterday but were met with selling indecision. Today, futures continued the recent uptrend, finishing +.825 (Dec). While federally inspected cow slaughter is up 7.3% over last year and supplies are up, the market is still trying to get a handle on cattle herd liquidation/expansion in the year ahead. Demand for beef is good, and opportunities abound with China in the future. Will big supply ahead limit a technical bounce in the near-term?

Hog futures had a setback from their sharp ascent this week, -.675 (Dec). Bearish news this morning related to increasing hog weights were a reality check to long speculators. The weekly Iowa/Minnesota average weights for the week ending November 25th came in at 285.8 lbs, up 1.3 lbs from last week and 5.3 lbs above the same week last year. What does this mean? Some hogs were backed up in the country and there could be a short-term surge in pork production, according to Hightower. 

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 2017.11.28
2017-11-28T04:27

Corn found more weakness heading into First Notice Day on Thursday, -2 ½ (Dec). Tomorrow will be “Position Day” for Dec delivery, with expected more market pressure. The final crop progress report of the 2017 season showed harvest 95% complete, compared to 98% on average. Iowa and Wisconsin have the largest amount of acres left to be shelled. Based on the Commitment of Traders report and action of the last few days, corn shorts held by funds are estimated at 260K contracts. China has surprised with recent large corn orders, as it is thought 10-12 cargoes of U.S. corn were purchased, due to their domestic prices being high. With corn this cheap, China may be in for more – stay tuned.

Soybeans trended lower but were able to pare losses coming into the finish, -3 (Jan). This brings futures back to below even for the week, as traders await news that could spur action. Will the rumor of Chinese imports slowing down due to their GMO safety certification process or their need to buy heavily in the next 2-3 months (to catch them up for the Dec-Jan-Feb timeframe) win the day? Demand continues to be the key for beans, and traders are a bit anxious over the deficit of export sales to what was expected over the first ten weeks of the marketing year. Watch for the EPA RFS mandate announcement and also how tariffs on biodiesel imports will influence the market in the near future.

Wheat pushed down into new lows, led by Minneapolis spring wheat, -7 ¾ (Dec). The winter wheats were able to rebound into the close with Chicago SRW +1 ¼ and Kansas City HRW +2. The COT report showed managed funds are still holding significant shorts as of last Tuesday, at around 109K contracts (Chicago). Russia won another bid for Egyptian business, as the GASC announced they bought 120K MT of Russian wheat. Egyptian offers were a couple dollars lower than their last tender, which is not a positive for the wheat complex. Russia is vying aggressively to sell their record-size crop and are willing to meet low price levels, making it difficult for the competition to keep up.

Live Cattle had a small setback, but also showed selling indecision, as evidenced by the “hammer” bar on the chart, -.175 (Dec). Expected large 4th quarter production is keeping things in check, while the Christmas season will help to support retail beef sales.

Hogs rose sharply for the 4th consecutive session, +1.225 (Dec). While the trend is up, the market seems to have adequate supply, assuming accuracy of the Hogs & Pigs report. The CME Lean Hog index has continued to drop (63.66), and Dec futures have now risen above the Index by over 2 dollars. 

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 2017.11.27
2017-11-27T04:05

Corn felt pressure from the impending First Notice Day this Thursday, -3 ½ (Dec). Traders holding long December positions must exit by FND, or risk being delivered upon. Thus, whether they decide to roll out to a deferred month or just exit their position, a sale against the long in Dec is required to offset the position, applying downward pressure to the market. This is not atypical, following the Thanksgiving holiday weekend. The USDA announced corn export inspections under expectations for the holiday-shortened week, as they pegged them at 638,711 MT vs. the estimated 650K MT. In ethanol, futures are close to multi-month lows, which is cutting into producer profit margins.

Soybeans and soymeal trended positive today, with January beans finishing, +2 ¾ (Jan). On the world scene, veg oils are under pressure from India’s announced tax restructure on imports. However, the domestic oil story is positive, with biodiesel imports coming under new tariffs and the October crush report due out at the end of the week. It is also expected that the EPA will be announcing the new RFS mandate by the 30th. Fundamentally, it is hard to understand why beans are not breaking, but demand continues to chew up supply. Demand is the key to future action, and the idea that China is very under-bought for Dec-Jan-Feb is helping keep things in check. Weekly export inspections came in a little under the expected 1.7 MMT, with the USDA penciling them in at 1,578,592 MT. South American weather continues to be a non-issue at this time, especially in Brazil, but there are some concerns developing of dryness in Argentina.

Wheat continued its lackluster performance from last week, with another down day. Chicago SRW -6 ¼, Kansas City HRW –7 ¼ and Minneapolis HRS -13 ½. Weekly export inspections for wheat were above projections of 300K MT, at a solid 344,721 MT. A positive vibe for exports involves China, where in October their imports were up 49.3% over September, with the U.S. being the leading provider. The PRC’s imports for Jan-Oct is almost 27% higher than last year. For this period, Australia is the largest source, but the U.S. is right on their heels. 

Live Cattle pushed higher, as the market carved out a short-term bottom last Monday and has been in an uptrend since, +1.250 (Dec). All the meats have experienced a flood of speculative buying, which has helped to buck seasonal trends. The beef market is still battling large supplies, with slaughter and production both up from last year. The Cold Storage report was also considered bearish with frozen stocks up. Look for results from the COT report to indicate whether the market is overbought.

Hogs moved in step with the cattle complex, with more gains, +1.275 (Dec). Helping to drive the market is strong domestic demand along with concerns of lower slaughter numbers than expected. However, slaughter and production are both up over last year. On the hand, the Cold Storage report was supportive with frozen stocks below expectations. Today’s trade saw the Dec contract eclipse the Lean Hog Index, which it has been lagging for some time, 64.525 vs. 63.980. 

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 2017.11.22
2017-11-22T02:47

Corn benefited from a strong day in beans, + ¼ (Dec). Trade tends to be lighter pre-holiday, and there is little fresh news to spur action. Getting some attention is chatter of a high probability of a La Nina pattern forming, which typically leads to dryness in the Southern hemisphere. EIA Ethanol numbers were positive overall for corn this week, showing production up 1.90% compared to last week and up 5.92% over last year. However, ethanol stocks continue to grow, up 1.86% compared to last week and 15.54% over last year. Corn used for ethanol is running at a solid pace, estimated at 111.77 million bushels, well over the 104.231 million bushel weekly bushel average needed to meet the USDA yearly estimate. Healthy production margins are encouraging U.S. producers to up their game.

Soybeans followed strong seasonal trends that normally give a boost the day before Thanksgiving, +8 ¼ (Jan). Soybeans and soymeal were on the receiving end of active buying by funds, while soyoil trended negative. This was due to traders unwinding their long soyoil/short soymeal spreads, according to AgResource. South American sellers have been opening their grain bins to selling, as the relationship of the Brazilian Real to the Dollar is favorable. Normally this time of year, Brazil is starting to run low on supplies to offer for sale, but due to their record harvests last season, product is readily available. Given a choice, Chinese crushers prefer the higher quality Brazilian soybeans.

Wheat was mixed, giving back some of the gains achieved yesterday. Chicago SRW -2, Kansas City HRW + ¾ and Minneapolis HRS + ¼. The concern over radiation in the Russian crop seems to be in the rearview mirror for now, and likely will not have much of an impact on global grain production moving forward. This was not a new story, as it had started to circulate in late September. Russia will need to explain the radiation leak at some point, or it could have ramifications down the road.

Live Cattlegapped higher at the open and found support in the stocks report today, +1.075 (Dec). The Cold Storage report released by the USDA showed total red meat supplies in freezers for October was down 1% from September and down 2% from last year. Total beef supplies were up 2% over September but down 5% from last year. Next week it is expected that cash cattle trade will continue steady/firm as packers up production in preparation for the Christmas holiday season.

Hogs were able to reverse course after a bearish engulfing bar on the charts yesterday, +2.125 (Dec). The Cold Storage report was favorable to trade, showing frozen pork supplies down 3% from September and down slightly from last year, according to the USDA. However, stocks of pork bellies were up significantly, 54% greater than September and up 58% over last year.

The Chicago Board of Trade will be closed tomorrow for Thanksgiving and will have abbreviated hours on Friday, opening at 8:30 AM and closing one hour early. 

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 2017.11.21
2017-11-21T02:40

Corn traded in the lower half of the range established over the last two months, finishing even(Dec). Exports are making a valiant effort to catch up, as year-to-date sales are well behind last year’s 11.74 MMT, at 6.58 MMT. Will WASDE have to adjust U.S. stocks “up” next report? There is significant opportunity with China on the horizon with unconfirmed reports of them booking 500K MT last week. Managed funds are still holding a very large net short position, estimated at 245K contracts leading into today’s trade. Crop progress reported yesterday afternoon indicated we are 90% harvested, with an estimated 7.8 million acres to go.

Soybeans have experienced choppy trade this holiday-shortened week, -1 (Jan). South American weather has become a non-issue at this juncture, as both Brazil and Argentina are in decent shape with promising forecasts in the near-term. However, there is talk of La Nina forming, which could have a definite impact later in the growing season. The bears have cast their short lots with corn and wheat, while funds have remained long in beans. The market got a boost from a USDA reported private sale to China of 130K MT for 2017/18. However, this is the first reported sale since 10/27 and beans exports are running behind year-to-date.

Wheat was up across the winter complexes today, finding support in crop ratings and news out of Russia. USDA winter wheat crop conditions released yesterday by the USDA showed the rating reduced from 54% good/excellent to 52%. This compares with 58% last year. In Russia, their weather bureau confirmed a drastic increase in radioactivity on the heels of some sort of nuclear event in late September or early October. There is denial by Russians and Kazaks of any kind of accident at nuclear facilities, and it was likely related to the processing of spent fuel for research purposes, according to AgResource. This is not a new story but recent headlines gave it some traction today. The Ukraine wheat crop is actually in better shape than last year, due to better topsoil moisture this year. Chicago SRW +2 ¾, Kansas City HRW +4 ¼ and Minneapolis HRS – ½.

Live Cattle took a pause from their steep decline, +.875 (Dec). Large supplies and no sign of a short-term low have been propelling the market lower. Aggressive selling has been the focus, as the Commitment of Traders report showed speculators with significant long positions heading into the Cattle on Feed report, which was bearish. Traders are anxious over potential increases of already plenteous short-term supplies.

Hogs rallied yesterday on smaller than expected slaughter pace the past few weeks. Pork values are trending higher and hog weights bear monitoring to confirm the theory that hog supplies backing up. If not, the recent Hogs and Pigs report may have overestimated the pig supply, according to Hightower. However, today showed a large correction to the downside with a technically bearish engulfing bar on the chart, -1.325 (Dec). Stay tuned to see if hog futures can resist the impetus to roll over. 

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 2017.11.20
2017-11-20T02:59

Corn traded right around break even today, before finishing positive, +2 (Dec). Managed funds are very short, as evidenced by the Commitment of Traders report Friday afternoon, at an estimated 258K contracts heading into today – if their bet goes against them, short-covering will commence in earnest. Corn will be transitioning from supply to demand issues over the next 2-3 months. In the short-term, it does not appear that South American weather will be supportive, but there is still a 75% of La Nina forming. Corn may be close to pricing in supply, because demand is definitely present. Weekly inspections gave a little boost, as the USDA announced loadings at 632,793 MT for the week ending Nov 16th, above estimates of 600K MT. China created some recent excitement with up to 10 cargoes booked off the PNW, and room to import more under their 7 MMT current quota regime.

Soybeans found weakness in a break in soyoil but persevered to a virtual draw, - ½ (Jan). Palm oil futures led the soyoil move, based on news out of India (world’s largest vegetable oil importer) of them raising the tax on palm oil and other oils. With uncertainty over South American weather and tightening soyoil supplies, soybeans are vulnerable to long liquidation, as the COT report showed them with a significant long fund position. There is a lack of news this holiday-shortened week to spur much action though, and Argentina is forecasted to receive some much needed rain. Weekly USDA inspections were solid, coming in at 2,131,354 MT compared to expectations of 2 MMT.

Wheat seems to be taking a “risk off” approach to start the week. Minneapolis spring led the way, -9 ¼ (Dec). Weekly export inspections were disappointing again, as the USDA pegged them at 259,264 MT vs. estimates of 350K MT. Russia has been hard to keep up with, as their export prices are maintaining in the same range, and sales are up 26% over last year. The U.S. is not competitive at this level, making it that much harder for the market to rally in the short-term. However, keep an eye on the lack of rain on the red winter wheat belt, and extensive dryness developing in Europe. The winter wheats ended with Chicago SRW –5 ¼ and Kansas City HRW -6.

Live Cattle was down on a less than positive Cattle on Feed report, -1.750 (Dec). Both the On Feed and Placements for October were larger than expected, fueling concerns over large supplies. This in conjunction with the COT report showing a huge net long position by speculators, resulted in more long liquidation selling.

Hogs continued the reversal of the past few days after 10 consecutive sessions in the red, +1.375 (Dec). Technically, the daily bars on the chart are showing a pattern of higher lows, and were able to clear and close above both the 100 and 200-bar moving averages. Providing support is a large discount of futures to cash, at $5.45 compared to $0.35 on average year-to-date. Will futures come up to meet cash by contract expiration or will cash continue to push lower and come more into alignment? 

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 2017.11.17
2017-11-17T01:52

Corn benefitted from short-covering ahead of the weekend as well as some positive rumors from the Orient, +6 ½ (Dec). With the holiday shortened week around the corner and harvest wrapping up, farmers do not seem to be in any hurry to sell out of their bins. There are strong signs that China has booked 5-10 cargoes of U.S. corn and maybe 12-18 cargoes of U.S. ethanol, according to AgResource. Is China becoming a more routine buyer of U.S. ethanol? In South America, Brazil is a little too wet and Argentina a bit dry, but the bigger concern is a stronger than usual La Nina pattern coming together that may impact later on.

Soybeans also found strength in La Nina uncertainty and dry weather starting to trend across Argentina. If this continues, the effect would be felt the most by soymeal. Also creating uncertainty, is the biodiesel mandate that the EPA is required to announce by the end of this month. Both of these factors helped to boost the market and stimulate buying activity of soybean contracts. Soybeans were up sharply in the January contract, +18 ½.

Wheat joined the other grains with short-covering heading into the weekend. The winter wheats had solid gains with Chicago +5 ¾ and KC +5, along with Minneapolis spring wheat finishing +5 (Dec). A couple positives for wheat include Egypt being an active buyer in the marketplace and Informa announcing their 2018 U.S. winter wheat planting estimate at 31.92 million acres which is down from 32.17 previously.

Live Cattle saw more selling and piling into shorts with investors positioning pre-report, -.700 (Dec). NASS will release the Cattle on Feed this afternoon, so look for results in Monday’s commentary. The expectation by traders is for placements to land somewhere between 107-112%, with growing supplies of feeders out into the April timeframe. There is an awfully lot of red meat available, and it will be a challenge for demand to keep up.

Hogs had a volatile day on the board, with a large bar to the upside early in the session only to be followed by a retracement and some buying exhaustion. Hogs are battling the same story of large supplies but a strong cash market. If cash can hold up, futures will likely come up into alignment before Dec expiration. Look for next week to provide clearer direction. Dec hogs +.550

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 2017.11.16
2017-11-16T01:49

Corn continued to test the resolve of market participants, forging another low, -1 ¾ (Dec). USDA weekly export sales showed corn at about half of last week’s level, with an announced 950K MT vs. estimates of 1.25-1.7 MMT. Japan was the largest customer with South American destinations making up the majority of the rest. NAFTA negotiations are vitally important, and unfortunately appear to been strung out, with the next round called off to give participants more time to consider how to move forward after a testy Round 4 in the U.S. Mexico is the largest importer of U.S. corn, and they have been shopping South America, looking for ways to lessen their dependency on the U.S.

Soybeans capitulated to bearish sentiments and a lack of fresh news, -4 ¼ (Jan). There were no new export sales announcements this morning. On the weekly USDA export sales log, soybeans were within expectations, however they were reduced expectations. Sales came in at 1.176 MMT, within the estimated range of 1.00-1.60 MMT. Exports need to pick up significantly to avoid a downgrade by the USDA on the balance sheets later in the year. Providing some support was a surprisingly bullish NOPA crush report yesterday, but soybean oil was down today.

Wheat futures traded sideways in mixed trade. The net short position continues to grow, and may put traders in a vulnerable position at some point – but, we have not found that point yet. Russia garnered a large booking to Egypt of 240K MT of wheat yesterday at tender. Russia continues to leverage their improving logistics and bountiful crops to outmaneuver the competition for global business. They have been able to keep their pricing at a low level, out of reach of the U.S. USDA weekly wheat exports were pegged within the range of estimates, 489,300 MT vs. 300K-600K MT. Wheat sales in the crop year-to-date are down 5% from last year. Chicago SRW +1 ½, Kansas City HRW – ¾ and Minneapolis HRS +5.

Live Cattle gave back yesterday’s gains, -.650 (Dec). Look for Cattle on Feed report results tomorrow, which will include reporting on all U.S. feedlots with 1,000 head or more capacity that are on “full feed for slaughter.” Average industry estimates are for placements to increase 7.1% over last year. October is an important month, because it is the largest month regarding cattle placed into feedlots. Marketings are expected to be up 0.6% over last year, while On Feed up 5.7%.

Hogs showed a recovery bounce yesterday after 10 consecutive sessions in the red, but resumed their downward trek, -1.025(Dec). The CME Lean Hog Index has been at a premium to futures, but may have a hard time maintaining its strong cash market position, as USDA pork cut-out values and hams are down sharply the last few days. Hog weights are up for the third week in a row. If cash can stabilize, it is likely futures will rally to come into parity by contract expiration in mid-December

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 2017.11.15
2017-11-15T03:27

Corn pushed beyond yesterday’s low before rebounding for a slight gain, + ¾ (Dec). There is not a new story other than corn is getting a bit oversold, and it followed soybeans’ lead today. EIA Ethanol weekly reporting showed a slight decrease in production from last week, while ethanol stocks were up over last week and 16% over last year. The weekly decline in unleaded gasoline and crude stocks is supportive to the market. The Renewable Fuels Association is seeing growth in all forms of ethanol and ethanol exports. The U.S. domestic ethanol industry is capable of producing 16 billion gallons at full capacity. Big growth opportunities for ethanol exports include Japan, Korea, China, India and Mexico. It is said that American ethanol is the cheapest form of octane in the world.

Soybeans rallied sharply on strong gains in soyoil, +8 ½ (Jan). News out of China was also supportive, as it indicated that the China National Grain and Oils information center is predicting soybean crush will double or triple next year. Additionally, China’s COFCO grain trader announced the PRC will import 3 MMT of soybeans than last year, which is an all-time record. The NOPA crush report showed the crush in line with expectations, while soybean oil stocks were way down. This may be a reflection of lower soy oil yields than last year. South America continues to experience favorable conditions, as Brazil has seen soil moisture levels replenished in the north. Soybean planting rose to 68%, coming closer into alignment with the five-year average of 73%.

Wheat fell back into the lower end of the range they have been trading, with KC leading the way, -10 ¼ (Dec). Chicago was not far behind, -8, while spring wheat had less of a correction, -3 ¼. Managed funds are holding a large short position in Chicago wheat, which is supportive to the market not falling below the $4.10 area. The world’s largest wheat importer, Egypt, is causing confusion with their changing import standards on ergot allowance. The Ministry of Supply is working on a statement that will provide clarification to importers. Keep an eye on U.S. hard red winter growing areas, as they have been extremely dry the last several weeks and likely will continue to be through the end of the month. This could be important as the crop moves into the dormancy stage.

Live Cattle was able to recoup some of yesterday’s losses, +700 (Dec). However, the concern is over a record increase of beef supply projected for the 4th quarter and a large net long position held by funds in the cattle market. The market appears pointed downward in the short-term, but look to the Cattle on Feed report on Friday as well as Livestock Slaughter and Cold Storage reports next Wednesday to provide a clearer path forward.

Hogs saw some correction of yesterday’s free-fall with buyers stepping in, +1.150 (Dec). Global news providing a measure of support included China’s hog herd being down 6.6% from October of last year. This is notable as China produces half of the world’s pork production, and the reduction is in response to the government’s attempt to reduce pollution. The market appears to be probing for a short-term low with hog weights up again this week and concerns by traders that hog supply may be backing up in the country

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 2017.11.14
2017-11-14T01:59

Corn continued to move lower along with the rest of Ag, -4 ¾ (Dec). Today seems to be a broad-based, industry wide reduction in equities, with Crude and the stock market also down. Crop progress reporting showed corn harvest to be 83% complete, 8-9% behind last year’s pace. The market is still digesting the USDA report which is predicting an all-time record yield of 175.4 bpa nationally. A couple of positive news items included the USDA reporting a private sale of 133,096 MT of corn to “unknown” destination for 2017/18, while South Korea also picked up a cargo of 60K MT of U.S. corn.

Soybeans continued down the path of weak technical action, -6 ½ (Jan). Yesterday’s trade offered a trend-changing direction, with beans showing greater vulnerability to the downside. Soybean oil and soy meal also showed weakness today. One positive for all the grains is the currency relationship, as the Brazilian Real is up and the Dollar down, making U.S. export pricing more attractive on the world market. The NOPA crush report is tomorrow, with an increase expected from the September to October crush numbers. Harvest numbers showed soybeans 93% harvested, slightly behind the 5-year average.

Wheat found support in a sharply falling Dollar, as the winter wheats were: Chicago SRW +3 ¾ and Kansas City HRW + ½. Minneapolis spring variety lost ground, -4 ¼ (Dec). There is not much to get excited about in wheat, but the Commitment of Traders report showed funds having a larger short position than expected, which could be viewed as supportive as the market will run out of sellers at some point. Crop progress reporting showed winter wheat 95% planted, right in line with expectations, while winter wheat conditions were down 1% in the good/excellent category.

Live Cattle futures fell further, following the pattern of lower lows on the charts the past several sessions, -1.075 (Dec). Look for the Cattle on Feed report this Friday as well as Livestock Slaughter and Cold Storage next Wednesday for future direction.

Hogs had a large break to the downside, taking out closing below both the 100 and 200-bar moving averages on the way down to new areas of support below 60.000, -2.325 (Dec). Today, the deferred months also followed in-step, as Feb saw even larger losses, to near lock-limit down. Hogs need positive demand news, as short-term supplies are clouding the view.

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 2017.11.13
2017-11-13T05:30

Corn traded sideways with a negative bent coming out of the weekend, -1 ¼ (Dec). Crop progress this afternoon is expected to show the U.S. harvest 80% complete. In South America, it is thought that corn planting is reaching the midway point. USDA weekly corn inspections came in under expectations of 600K MT at 375,951. The weekly Commitment of Traders report was delayed until this afternoon. It is thought managed funds are around 240K contracts short. However, the CFTC will not include any pre and post report activity, as it will only show results through Tuesday of last week. Even though corn was presented with a bearish picture with record yields and stocks, there does not seem to be aggressive selling at this point. How much lower will be enough for corn, with strong demand under the market?

Soybeans traded sharply lower with no fresh news and favorable South American weather, -12 ¾  (Jan). Bean futures crashed through support of both the 100 and 200-bar moving averages, and may have more room yet before bottoming. USDA weekly soybean inspections showed soybeans in line with expectations at 2,087,458 MT vs. estimates of 2,050,000 MT. While China was quiet this morning with continued port delays, the USDA reported a private sale of 135K MT of soy meal to the Philippines for 2017/18. This was well-timed in conjunction with President Trump’s visit there this week. Soyoil, which has been providing a boost, lost some steam with correction of its overbought condition. Look for trade to slow significantly as we near Thanksgiving week.

Wheat gave back the gains that had accumulated the last couple of days. The Dollar is up and so is competition with Russia, who as of last Wednesday have exported in excess of 20% over last year (as of July 1st). Weakness in the Russian Ruble is not helping the U.S. cause, as last week Gulf HRW was at a $10/MT premium to both Russian and German origin wheat, according to AgResource. In Brazil, heavy rains have impeded harvest progress as well as wheat quality, as Brazil is expected to produce 32% less than last year. Imports from production are estimated to total 7.0 MMT. USDA wheat inspections were on the low end at 301,039 MT vs. estimates of 350K MT. Chicago SRW -7 ¼, Kansas City HRW -5 ¾ and Minneapolis HRS -14 ¼.

Live Cattle fell down and closed a chart gap on Friday, and saw volatile action today before closing even (Dec). Upcoming reports to watch will be the November Cattle on Feed this Friday and Livestock Slaughter and Cold Storage next Wednesday. The choice cut-out and select boxes both showed gains on Friday. Slaughter margins are down from $128/head last year to $99/head this year, but still well above the five-year average of $5. Traders seem to be expecting a further break in the cash market with a seasonal slowdown heading into Thanksgiving.

Hogs took out Friday’s low and continued down for the 9thconsecutive session, -.175 (Dec). Although action today took the market below the 200-bar moving, the Dec contract seemed to find support there for now, as it bounced off and closed above it. The deferred months showed small gains. Hogs continue to shoulder an overbought condition and large short-term supplies. However, pork values are holding up better than expected

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 2017.11.10
2017-11-10T01:55

Corn trended positive in spite of the bearish USDA report yesterday, +2 (Dec). Managed funds are at a record net short position, well in excess of 200K contracts, and there do not seem to be many more willing sellers presently. At the same time, there is not much to drive corn much higher with large ending stockpiles, as any rallies will be met by farmer selling. Look for corn to trade in a range through the end of the year, with next possible storylines a new EPA biofuel mandate announcement later this month, South American weather and the January 12th USDA report. If corn is to break below the new low established yesterday, there is not much in the way of support all the way to 3.15. The hope is that corn holds here or does not breach the 3.30-3.35 area.

Soybeans made a modest corrective move today, finishing +2 (Jan). The market was expecting a slight decrease in bean yield yesterday, but instead got “unchanged.” This is not necessarily a bearish development, but managed funds have a net long position of approximately 50K contracts, and it will likely take a news bulletin to spur significant more buying. What could be a big deal is the deficit of exports to USDA expectations so far this marketing year. While news is positive from Trump’s trip to China and their commitment to buying more U.S. beans, we have some catch-up to do in the next 2-3 months. If exports do not come into line with USDA projections, this will result in future balance sheet adjustments which will bleed over into increased carryout. Look for how soybeans trade next week to determine if today was just a post-report “dead cat bounce.”

Wheat did not get any surprises out of the report, and really do not have a story to hang their hat on. Both U.S. carryout and world ending stocks were down moderately as expected. There is some talk of less U.S. acres being planted, but with wheat being such a globally traded crop, the market needs some good news other than hearing every day how huge the Russian crop is and Russian exports will be. The first stab at planting intentions will be next month. Both U.S. winter varieties gained today, following corn and beans. Chicago SRW +2 ½, Kansas City HRW +4 ¼, Minneapolis HRS -2.

Live Cattle saw more long liquidation and profit taking, as traders are concerned about the growing short-term supply and beef production numbers. Normally, there is a seasonal shift to lower production numbers between the 3rd and 4thquarters, but this year is expected to show a 234 million lb. increase. The 4thquarter is up 5.1% over last year same time and beef prices are up 15% over last year. December cattle -1.900

Hogs succumbed to more downward pressure in the front-month, -.700 (Dec). The market continues to deal with an oversold condition, weak exports and large slaughter numbers ahead. However, the pork-cut out is strong and packer margins have remained profitable, serving as a check to the downside. Strong demand indicators are necessary for hog futures to reverse course

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 2017.11.9
2017-11-09T02:31

Corn got a surprise from the USDA that few were expecting, with a bump in the yield estimate to a record 175.4 bpa from 171.8 bpa in the October report with production of 14.578 bbu compared to 14.280 bbu. This pushes U.S. ending stocks to 2.487 bbu from 2.340 bbu, and global ending stocks from 201.0 MMT to 203.9 MMT. States with notable yield increases included IA and IL +6 bpa and ND and IN +8 bpa. While the market was expecting an increase, the announced number resulted in a collective gasp, and it was reflected on the charts, -6 ¾ (Dec). Corn exports were left unchanged. It leaves one to wonder if a 180 bpa is around the corner if the country were to experience an ideal growing season?

Soybeans were unchanged from a yield perspective at 49.5 bpa. The U.S. production number saw a slight decrease from 4.431 bbu last report to 4.425 bbu, while U.S. ending stocks declined from 430 mbu to 425 mbu. However, world soybean stocks were up from 96.1 MMT to 97.9 MMT, influenced by a 1 MMT increase of the Brazilian crop. Soybean exports were left unchanged. Soybeans along with the other grains will likely trade in a restricted price range, as the market awaits news of South American weather heading into February. January beans -13 ½.

Wheat was the only grain with a modest amount of bullish news as both U.S. and world ending stocks were reduced on the balance sheets. U.S. ending wheat stocks are estimated at 935 mbu compared to 960 mbu in October, while world ending wheat stocks are projected to be 267.5 MMT compared to 268.1 MMT in the last report. Wheat exports also got a boost, as they were increased by 25 mbu to 1.00 bbu. Chicago SRW +2 ¼, Kansas City HRW +1 ½ and Minneapolis HRS +3 ¼.

Live Cattle gapped lower to start the session and showed indecision thereafter, finishing –.450 (Dec). The storyline has changed little throughout the week as the market is extremely overbought and speculators have shed some long positions. However, boxed beef values have held up well, closing 49 cents higher yesterday. Stay tuned

Hogs made it seven consecutive sessions in the red, as the December contract led the way down -.375. According to Hightower, there has been a jump in average weights which confirms the slowdown in packer demand and it is adding to the overall tonnage that will need to be absorbed by the market. The USDA is predicting record 4th quarter production, up 5.8% from last year, but last week’s slaughter was actually down 3.1% from last year. Packer demand will need to increase in order to stop the bleeding

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 2017.11.8
2017-11-08T03:48

Corn was able to rebound for a small gain after testing support on the chart, + ½ (Dec). The EIA Ethanol weekly report is a closely watched barometer of corn usage, and today it reported that ethanol production was up 0.09% over last week, and 5.49% over last year. Ethanol stocks were down slightly from last week by 0.060% but up 11% over last year same time. Corn used for ethanol continues to exceed the weekly average of 104.539 million bushels needed to reach the USDA total yearly estimate of 5.475 billion bushels, as this week it tallied 109.99 million bushels. Unleaded gasoline and crude stocks are down 5% and 6% respectively from last year. The trade is expecting a boost in the national yield from the USDA’s 171.8 bpa in October to 172.4 bpa. All eyes are on the USDA at 11am tomorrow.

Soybeans found support on a surge in soyoil and pre-report positioning by traders, +2 ½ (Jan). Additionally, the Chinese have indicated that they plan to sign for more U.S. soybeans, in conjunction with Trump’s visit this week. While it is more a symbolic gesture than a binding agreement, nonetheless it is an important show of future trade intentions. Regarding the important USDA report tomorrow, the trade is looking for a reduction in yield from 49.5 bpa to 49.3 bpa, U.S. ending stocks to decline by 10 mb to 420 mb and world stocks to drop to 95.5 MMT (reduction of 550K MT). Look to see if soybeans can break through and close above solid resistance in the $10 January area.

Wheat All the wheat rebounded into the close led by a “spring break” to the topside, Minneapolis HRS +6 ¼ (Dec). Wheat does not have much fresh news to latch onto, with corn and beans not providing impetus for rallies with their sideways movement.  It was reported that Egypt’s GASC purchased 120K MT of Russian wheat today, as the strong Dollar is hampering the U.S. from vying competitively for this highly sought after business. Winter wheat finished: Chicago SRW – ¼ and Kansas City HRW +1.

Live Cattle closed sharply lower for the third consecutive day, -1.700 (Dec). It is the same storyline as yesterday featuring more long liquidation and profit taking, with the market overbought. Last year saw retailers book beef features for the holidays in large numbers due to low prices – it remains to be seen how higher beef prices will impact this year. Next up to the downside is a technical gap left on the chart from last week – will futures continue the descent tomorrow and fill the gap?

Hogs followed cattle’s lead lower, losing ground for the 6thconsecutive day, -.375 (Dec). The deferred months showed even larger losses, with Feb -1.125. Like cattle, the market is overbought and speculators have taken some profits and liquidated long positions on concerns of large supplies and record slaughters ahead. Exports are the key to the demand side, with a large percentage of U.S. production sold abroad

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 2017.11.7
2017-11-07T02:24

Corn moved yet lower, closer to support resting under $3.46 December, - ¼. Managed funds have placed their bet with a very large net short position heading into the report on Thursday. This will be the last report from the USDA on production until January 12th. While it is expected that corn yield will be raised from 171.8 bpa to 172.4 by analysts, it remains to be seen how this will affect prices as the market has known yields were rising for some time. The Thursday report seems particularly compelling this year, with many growers holding a significant inventory and hoping for an escape hatch. On a positive note, the USDA reported a new crop sale today of 130K MT of corn to “unknown” destination for 2017/18.

Soybeans seem to be the grain with storylines, as the market is anticipating a further reduction of the national yield on report day, +2 (Nov). Managed funds continue to hold a substantial net long position, as beans are not expecting any bearish surprises this Thursday. However, soybean exports are running well behind last year, with commitments down 16%. Soyoil has shown promise, and reached a high close today not seen since mid-September. Domestic demand has been helped by the duties on Argentine biodiesel, as Argentina is looking to Europe to fill the void of sales. As Argentina lowers their soyoil prices to obtain new European business, this does provide a challenge to U.S. exports. Look for January soybean resistance in the $10 area to be a key barrier for them to eclipse.

Wheat battled unenthusiastic trade by the grain complex and a strengthening Dollar. The winter wheats both had setbacks, with Chicago SRW –3 ½ and Kansas City HRW –3 ½ (Dec). The Crop Progress update yesterday afternoon showed wheat planting and crop conditions pretty much right on track with normal, 91% planted and a 55% good/excellent rating across all states. It is still a bit early for the condition rating to be taken too seriously. Minneapolis spring variety forged another modest gain, +2 ¼ (Dec).

Live Cattle continued the steep sell-off of yesterday, with more long liquidation and profit-taking, -.700 (Dec). However, providing counter-support to the market are healthy packer margins and a growing beef market, with boxed beef cut-out values up another $1.83 to $210.57. The premium of futures to cash is likely behind some of the selling, along with talk that China has lifted the ban on Australian beef.

Hogs were down for the 5th consecutive day, -.700 (Dec). Weighing on the market is the outlook for higher production in December, and a recent decline of the pork cut-out and the CME Lean Hog Index. Exports were up to 523.8 million lbs in March, but have been sluggish the last few months, according to Hightower. Like cattle the market is overbought and speculators have taken some profits and liquidated long positions

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 2017.11.6
2017-11-06T02:51

Corn finished with a whimper after trying to follow soybeans higher, - ¼ (Dec). Traders have placed their bets heading into the Thursday Report, as corn is held in a near record short position by managed funds. Adding support today was an announced private sale of 130K MT of corn to “unknown” destination. On the other hand, USDA weekly inspections were under expectations, coming in at 444,648 MT for the week ending November 2nd vs. estimates of 600K MT. With all the talk and speculation surrounding the Thursday USDA report, analysts are predicting corn yield to be raised to 172.4 bpa from 171.8 bpa and ending stocks up from 2.340 billion bushels to 2.360.

Soybeans poked through support on the chart before reversing course and regaining a good portion back of what was lost on Friday, +7 ¼ (Jan). Beans have several positive background stories including expectations that NASS will reduce soybean yield based on second half of harvest declines, China’s 2016/17 soybean imports being understated which could raise current crop by 1-2 MMT, and a portion of India’s soybean crop being lost to monsoons. Exports have not been great year-to-date though, as soybeans are down 9%, with the overall number behind growing. USDA weekly soybean inspections were right in line with projections, as they were pegged at 2.490 MMT compared to estimates of 2.500 MMT.

Wheat received a boost from a larger than expected U.S. sale to Iraq of 500K MT, Chicago +5 and KC +3 ¼. Wheat weekly inspections, however, were a bit lackluster at 284,293 MT compared to 350K MT expected. As with corn, managed funds hold a large short position in wheat at around 110K contracts, which could result in short-covering if the market were to be sparked in any significant way. There has been plenty of resistance to stifle rallies with the U.S. Dollar showing strength and huge production coming out of the Black Sea Region. Minneapolis broke positive and closed above the tight range it has been trading in the last month, +6 ¼ (Dec).

Live Cattle experience a correction and profit-taking from its recent sharp ascent on the charts, -1.975 (Dec). Managed funds hold a large net long position in cattle, as the market is in overbought territory. Can demand get even stronger ahead with fat packer margins and futures’ premium to cash? The beef cut-out continues to rise and is at its highest level since July 17th.

Hogs saw a continued decline in the Dec contract but the deferred months gained, -.475 (Dec). Like cattle, the market is overbought and managed funds hold a large net long position. Friday saw a jump in pork values and the CME Lean Hog Index gained 12 cents. Although the market is vulnerable to weakness and long liquidation selling, positive short-term forces are neutralizing negative factors. Keep an eye on the speculator and whether he maintains length

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.