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Water Street Solutions

Water Street Solutions Daily report 2018.5.23
2018-05-23T04:11

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

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

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

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

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

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.5.21
2018-05-21T04:54

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

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

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

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

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

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

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.5.18
2018-05-18T03:41

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

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

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

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

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

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.5.17
2018-05-17T02:11

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

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

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

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

Hogs traded positive in June but negative in July and August, +.575 (June). The pork complex is under pressure from trade issues and hog weights trending too high. This coupled with futures still running at over an $11 premium to cash will be hard to overcome in the short-term.

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.5.16
2018-05-16T02:56

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

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

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

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

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

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.5.15
2018-05-15T04:12

Corn found enough positives to outweigh the negative action of beans, +5 (Dec). The bean complex is not the only interested party to trade negotiations with the PRC this week, as sorghum will likely be impacted which would in turn influence corn. A favorable outcome to the talks would likely result in U.S. sorghum being allowed back into China which in turn would increase domestic demand for ethanol and feed, according to Feltes. Also, corn will not be able to sustain a strong market without beans. Planting progress data released yesterday is showing corn right in-line, but lagging significantly in the north, specifically MN and SD. In global weather, forecasters are watching Southern Brazil, as safrinha corn is getting into pollination time and could use the rain. Informa came in with their estimate for U.S. corn acres at 89.0 million, up 950,000.

Soybeans made a big comeback from a 10 point deficit early in the session, +1 ½ (Nov). The U.S. Ambassador to China, ex-IA Governor Branstad, has said that there is still a wide divide between the two sides and resolution of trade disagreements. This coupled with a strong Dollar and a weak Brazilian currency, is putting a damper on rallies until further news is available. There were no new export sales announcements this morning. Planting progress showed soybeans off to a great start, at 35% complete, well above the 26% average and 30% expected. The April NOPA numbers showed soymeal exports at 946,291 tons vs March’s 878,582, soyoil stocks 2.092 billion lbs vs expectations of 1.980 billion lbs, and the soybean crush 161.016 mbu compared to estimates of 160.97 mbu. The crush was as expected (16% higher than last year) while stocks were significantly higher. Informa pegged soybean acres in the U.S. at 89.4 million, up 430,000.

Wheat was sluggish for most of the session before surging to positive territory. Crop conditions showed a 2% improvement to 36% G/E, but still well below last year’s 51%. Chicago +2 ¼ and Kansas City EVEN (July). Egypt indicated that Ukraine came in with the lowest offer for their tender of 60K bu, giving them the purchase transaction. Looking at world weather, the Black Sea area is slated to receive rains over the next ten days, while Australia and Canada are being watched for continued developing dryness. In spring wheat, the USDA sees the crop 14% emerged, which is well behind last year’s 37%. Informa predicts spring wheat acres will be 12.4 million, down 200,000 from previous. Minneapolis HRS finished +3 ½ (Sept).

Live Cattle continued its sharp decline after yesterday’s bearish technicals, -1.650 (June). It is within the realm of possibility that futures test lower resistance at 97.075. Packers seem to be well-stocked for their needs which is presenting as weakness in the cash markets.

Hogs followed the steep dive of cattle, but were able to bounce back for a respectable close,-1.425 (June). The last few days have exhibited a measure of volatility, with traders watching the battle of supply vs demand. June futures are still at a large premium to cash, which is holding down the market.

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.5.14
2018-05-14T01:59

Corn found itself between the competing forces of positive beans and negative wheat, - ¼ (Dec). USDA weekly inspections announced this week were in-line with expectations, coming in at 1,554,495 MT vs estimates of 1,600,000 MT. This afternoon’s planting progress update will be closely watched, as it is thought that there is yet 35 million acres (40% of crop) to be planted. Tomorrow is May 15th, and as is commonly known, yields of corn planted after this date tend to lag earlier planted crops. However, there is nothing currently on the radar to suggest that summer forecasts will be anything but normal and conducive to another bountiful harvest. However, there could still be a transfer of some of these planned corn acres to beans, as the next 7-10 days will be critical.

Soybeans found support in good inspection numbers and optimism regarding negotiations with China this week, +9 (Nov). USDA weekly loadings were above expectations, as they were penciled in at 688,195 MT vs estimates of 550,000 MT. President Trump put out an offer to President Xi regarding easing tariffs on a major company, ZTE, that would save major layoffs. This, as the Chinese delegation is headed across the Pond to Washington D.C. for further trade negotiations this week. Last Friday’s COT Report showed managed funds had liquidated a significant portion of their net long positions, as they were reduced by 50,000 contracts. What will planting progress show this week? Look for NOPA Crush results tomorrow.

Wheat does not have a story and is acting as an anchor to corn. Global weather has improved in the Black Sea, Australian and U.S. Plains growing areas, adding a bearish tone to the market. The weekly export inspection log was a positive for wheat, as analysts were expecting 375,000 MT while actual was pegged at 404,180 MT for the week ending May 10th. Although the Dollar is down today, it has been trading at the high end of the range, making it difficult for U.S. wheat to remain price competitive. The COT Report last Friday afternoon provided an element of surprise, as it showed managed funds have actually moved over to a net long position for the first time in a long time. In light of all the negative fundamentals, the results trended negative: Chicago SRW -7 ½, Kansas City HRW -8 ¼ (July) and Minneapolis HRS -2 (Sept).

Live Cattle took a sharp dive, lock-limit-down on technical selling, -3.000 (June). However, demand has remained solid with the USDA ratcheting down estimates of 2nd quarter supply. Demand is still projected to be 5.3% above last year, but about half of the original estimate of 10.2%.  

Hogs gained back a portion of what was lost in the sharp fall on Friday, +1.050 (June). NAFTA negotiations are front and center, as it is hoped that agreement can be reached this week which would give Congress time to ratify changes before the mid-term elections.

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.5.11
2018-05-11T03:14

Corn and the rest of the grains remained unfazed by what some considered a “bullish” Report yesterday, -5 (Dec). The biggest eye-popping number was the 2018/19 world ending stocks for corn at 35 MMT lower than last year. Domestic stocks also got trimmed by 500 mbu. This, in spite of a small reduction in exports and domestic demand forecasted. Good planting conditions and trade pressures are continuing to win the day in the short-term. Mexico has indicated they will not be “rushed” into a bad NAFTA deal just to get it done. Funds decided to remove risk today, as the market was not able to leg higher post-Report. What will Mother Nature bring later this summer? All things the same, expect June crop conditions to be higher than last year.

Soybeans need summer weather to provide an impetus to rally, -16 ¾ (Nov). A failure to respond positively to a bullish report could be viewed as a bearish development. Traders continued to liquidate length ahead of U.S.-Chinese negotiations next week in Washington D.C. The talks will likely be a lengthy process, and in the short-term the best news may be to “kick the can” down the road by the U.S. agreeing to delay imposing $50B in tariffs. This may cool things off a bit. There were no new export sales announcements this morning. And, the idea that more soybean acres may be planted due to delays up north is not helping matters.

Wheat continued to see the addition of more short positions after the crop report showed wheat production on the high end of expectations. The size of the planting intentions is offsetting some of the poorer yields. The complex finished: Chicago SRW -7 ¾, Kansas City HRW -9 (July) and Minneapolis HRS -4 ½ (Sept). Winter wheat production was seen as less than last year (by 6%), at 1.2 bbu, with a 2 bushel/acre reduction from last year predicted. The level of the Dollar and the wide gap between U.S. and Russian pricing for HRW wheat ($.80), leaves the U.S. in a less-than-competitive position. Stats Canada released data showing all wheat stocks below expectations of 16.9 MMT at 16.392 MMT, and less than last year’s 17.06 MMT.

Live Cattle saw the continued battle between large supplies and strong demand, trading both sides of unchanged, +.100 (June). A late session rally brought futures back to parity. Although demand has been strong enough to stave off the weight of supplies, are we now seeing a peak in futures?

Hogs exhibited a strong move to the downside with a bearish engulfing bar on the chart, -2.225 (June). As with cattle, hogs have been battling the optimism of strong demand against weak supply factors. It is hard to see too much upside with the slaughter pace running 4.4% ahead of last year for the week.

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.5.10
2018-05-10T02:53

Corn succumbed to weakness after achieving a new short-term high, as the USDA Report lacked the firepower to sustain a rally, EVEN (Dec). Favorable weather and uneasiness over unresolved trade disputes are doing their part to hold down the market. From a global perspective, 2018/19 corn stocks received the biggest haircut of the grains, estimated at 36 MMT less than previously (down 20 MMT in China). U.S. corn production is estimated at 14.04 bbu with a 174 bpa yield, and acres of 88 million unchanged. USDA weekly export sales were light, coming in at 785,600 MT compared to estimates of 750K-1.4 MMT. Expect corn to be the leader and to gain on beans and wheat, but it will be difficult to get beyond near-term resistance without a bigger U.S. or world problem.

Soybeans had the biggest gains today, +6 ¾ (Nov). Of note, WASDE downgraded U.S. soybean 2018/19 stocks by 114 mbu. The trendline yield of 48.5 bpa was used with overall production down 112 mbu from last year. Exports were downgraded 10 mbu from the February forecast, but the uncertainty with China leaves a lot of question marks. World soybean stocks were below estimates of 90.9 MMT at 86.7 MMT. Brazil’s crop is predicted to be a record 117 MMT with Argentina at 56 MMT. USDA weekly sales were in the lower half of the range of estimates of 450K-900K MT, pegged at 632,600 MT.

Wheat traded weakness across the board post-Report: Chicago SRW -4, Kansas City HRW -4 ½(July) and Minneapolis HRS -2 (Sept). Ending stocks in the U.S. were both over estimates while world ending stocks were below, with Russia projected to be well below last year’s record of 85 MMT at 72 MMT. Even though 2018/19 U.S. stocks were above expectations, they were at a 4-year low, coming in at 955 mbu. A weather problem overseas will be necessary to sustain any kind of long-term rally. All wheat production in the U.S. was seen by WASDE to by 1.821 bbu, higher than estimates of 1.774 and last year’s 1.741. Sales reported on the weekly log were weak for wheat as they were announced at 83,400 MT, which is well below the range of expectations of 250K-700K MT.

Live Cattle broke out to a new high not seen since March 23rd, June +1.850. The two factors struggling for the upper hand include large supplies on the one hand, and a large discount of futures to cash with strong demand on the other.

Hogs also jumped up and closed above yesterday’s high and through key resistance, +.750(June). Like beef, pork has solid demand and gaining values underpinning trade. It is critical that demand remain ahead of big supplies to keep the market from rolling 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 2018.5.9
2018-05-09T02:05

Corn traded sideways as traders adjusted positions pre-Report, EVEN (Dec). NAFTA negotiations have stalled with the U.S. taking a firm stance, making it less likely that an agreement will be reached by mid-May. This would make it difficult for Congress to ratify the treaty before mid-term elections. This coupled with a Mexican Presidential election in July, could also complicate the process. Ethanol is also a hot topic, as an agreement was reached in principle between lawmakers, Big Corn and Big Oil that would involve adding RINS to exports in exchange for E-15 blending year around and further scrutiny of the “hardship waivers” (that had been generously approved by the current EPA Administration). The EIA weekly report was released today showing ethanol production up 0.78% over last week and 3.38% over last year. Stocks were down 0.80% vs last week and down 4.73% from last year. Corn used for ethanol was a solid 108.37 mbu, which is well over the 103.148 mbu average needed to hit the USDA annual target.

Soybean traders took a risk-off approach today, by liquidating length ahead of the USDA Report tomorrow, as trade tensions with China loom in the background, -1 (Nov). The May Report is one of the more important releases of the year, as WASDE will give a glimpse into their view of updates to the U.S. crop balance sheets as well as a first look at 2018/18 world stocks. It will help to establish a trading range into summer, where beans will need to see a story develop affecting U.S. crop potential. Look for more volatility tomorrow and into the end of the week.

Wheat fell on weakness from the Dollar and news of moisture over the next two weeks for Russia and the Black Sea Region. Additionally, it is expected that WASDE may ratchet down the export estimate, which would increase ending stocks. World wheat supplies are plenteous, and it will take some kind of a world issue to instigate a longer-term rally. Adding weight to the market, is the rising U.S. Dollar, which is making it even harder for the U.S. to compete on the global stage. According to AgResource, the premium of U.S. Gulf HRW to Russian equivalent wheat is $1.40/bu. Results from today: Chicago SRW -4, Kansas City HRW -6 ¾ (July) and Minneapolis HRS -3 ¾ (Sept).

Live Cattle saw red across the board today, with June -.625. Cattle futures have followed a gentle up-sloping trend the last month, as short-term demand factors have been strong. Will the market be able to absorb the surge in beef production in the 2nd quarter?

Hogs were mixed across the months, with on June trading in the green, +.275. News that NAFTA may not meet the U.S. self-imposed deadline of mid-May to reach an agreement did not help matters. And, China export inspections are slowing down the flow of pork, according to Hightower.

USDA Report tomorrow at 11am CDT – industry expectations are bullish corn, neutral soybeans and bearish wheat.


All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.5.8
2018-05-08T04:07

Corn was able to springboard off Turnaround Tuesday, with December futures up +3. Planting progress is showing corn at 39% complete, which was in-line with expectations and not far off the average of 45%. IL and IN are ahead of average, with IL farmers touting big numbers, planting 42% of the state in one week. The northern states are well behind but should be able to make up ground the next few days. A question to be answered on Thursday by the WASDE Report is how much the USDA will reduce Brazil’s production, with safrinha corn light on precipitation and receiving downgrades almost across the board from private analysts. Ethanol has continued to be a bright spot with margins around 5-10 cents/gallon, along with strong DDG prices. President Trump is meeting today with lawmakers and industry reps to continue discussions centering around RINS/RVP waivers and expanding E-15 sales during the summer months.

Soybeans experienced a modest turnaround from yesterday’s free fall, +7 ¼ (Nov). Funds have maintained a sizeable net long position, which has seen long liquidation this week from the lack of resolution between the U.S. and PRC. However, on a positive note a Chinese delegation with be coming to Washington D.C. next week to continue negotiations. Planting progress went from 5% last week to 15% complete this week. This is ahead of the 13% average, with the northern states bringing up the rear.

Wheat showed mixed results: Chicago SRW +3, Kansas City HRW –1 ¼ (July) and Minneapolis HRS +2 ¾ (Sept). The Plains have received more favorable weather, taking the edge off HRW concerns, while soft wheat had a small bounce back after two days of large losses totaling around 25 cents. Wheat conditions yesterday showed virtually unchanged, with 34% good/excellent and 37% poor/very poor. Spring wheat is running behind on planting, at 30% complete vs the average of 51%. The Dollar is not helping, as it is into near 6-month highs, making U.S. wheat that much less price competitive. Russian dry weather and other global areas of concern seem to have gotten some reprieve, as SW Russia and Ukraine look to be receiving rain the next 10-14 days.

Live Cattle broke out to a new short-term high in the June contract, +1.125. Beef prices have also continued to appreciate to the highest level since June 28th. The USDA estimated cattle slaughter last week to be up 5.2% over last year same time.

Hogs gapped higher from the opening bell, with June finishing +2.125. Even though supply is stout, the pork cut-out has gained to its highest level since March 20th on strong demand. The CME Lean Hog Index has continued to climb, up to 63.13, and more into normal alignment with June futures.


All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.5.7
2018-05-07T03:03

Corn closed -4 ¾ @ 416 1/4 (Dec18). Corn is following suit with the rest of the grain sector today. Good weather over the last week for planting progress and better rains expected for the dry areas of Brazil is taking away from the positive momentum we have seen. USDA report this Thursday is expecting tightening old crop stocks around 2.177 billion bu. vs. 2.182 currently and 1.628 billion bu. for new crop stocks. China sold 1.96 million tonnes of corn out of 4 million offered from state reserves. An additional 8 million will be auctioned off next week. Traders are expecting to see planting progress come in at 35% today compared to the 5 year average of 44%.

Soybeans closed -17 @ 10.20 1/4 (Nov18). Traders expect to see old crop stocks on soybeans tighten in the upcoming report as well but only marginally. Average trade guess is 541 million bu. vs. the current estimate of 550 million bu. New crop estimates even with reduced acres expected to be 435 million bu. because of lackluster demand. Planting progress is expected to come in at 10% vs. average of 14%. Chinese demand fears continue as they have cancelled some sales in the past few weeks. We are entering a time frame where China purchases most of its soybeans from South America.

Wheat closed -16 1/4 @ 5.26 ¼ (Jul18). Wheat sets back on lack of new story in the U.S. and some rain relief for the Black Sea region and Australia. This market needs constant headlines to keep its momentum. The report this week is expected to show an increase in old crop stocks with slow demand. The big story for this report will be the expected new crop stocks number.

Live Cattle followed the negative grain market trend today closing -.725 @ 105.325 (Jun18). June futures have been pressed to a pretty steep discount to cash at this point so a downturn is already priced in to the market. We have a large supply as we all know but demand has been exceptional as well. If we get any steady action in cash it would seem futures are over sold.

Hogs closed +.55 (Jun18). Increased demand and improving packer margins are providing support. We showed you yesterday that March exports hit a record high for any month and up 2.7% from last year. South Korea imports jumped to 87.7 million lbs. from 66.9 million last month.


All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.5.4
2018-05-04T02:50

Corn closed -1 ¼ @ 421 (Dec18). Given the +20 ½ cent move in the last nine sessions, the market is experiencing some profit-taking going into the weekend; however, the trend remains positive. U.S. ethanol exports for the month of March were released yesterday showing 215.09 million gallons which is just shy of last months’ record of 218.68 million gallons. Mato Grosso and Parana remaining dry for the next week is a supportive fundamental and Argentine corn production estimate remains unchanged at 32.0 million tonnes as heavy rainfall continues to slow harvest. FC Stone has cut corn production in Brazil to 83.9 million tonnes compared to 86.5 million previously.

Soybeans closed -12 ¼ @ 10.37 ½ (Nov18). Giving back yesterday’s late session gains is partially based on China’ cancellation of 133,700 tonnes of old crop US beans and persisting China demand fears. The trade is still waiting on news from the US delegation in China. Talks are said to be progressing; however, traders are not confident that a conclusion is anywhere in near sight. Changing gears, Buenos Aires Grains exchange left their soybean estimate unchanged at 38.0 million tons and provided harvest progress at 61.8% up from last week’s 54%.

Wheat closed -11 ¾ @ 5.26 ¼ (Jul18). The Wheat Quality Tour continues to provide bullish support/findings as it progresses. KC wheat closed -12 @ 5.55 ¾. Although studies show positive momentum, this market is now moving into overbought territory. A correction could be looming. MPLS wheat closed -7 ½ @ 6.29. Like KC, this is also in over bought territory, but a close over the 9-bar moving average is a positive signal for trend short term.

Live Cattle followed the negative grain market trend today closing -.475 @ 106.050 (Jun18). Although today’s session was not positive, it does not feel as if the market is ready for a downtrend. June 28th of 2017 was the last time that beef prices were this high. In the short term, look for choppy to higher trade.

Hogs closed +.025 (Jun18). March US pork exports hit an all-time high for any month at 538.1 million pounds. Over the past ten days, there has been a strong uptrend in the cash market which has provided some support. Watch for choppy to higher trade short-term.

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.5.3
2018-05-03T02:20

Corn was propelled forward today by strong export sales and positive action in wheat, +2 ½(Dec). The USDA reported weekly export sales at 1,069,200 MT, on the very high end of the range of estimates of 650K-1.1 MMT. World weather is offering a bullish slant with Ukraine and Russia light on rain with excessive heat and S Brazil laboring under dryness in Parana which could cause a yield decline. Traders are also closely watching NAFTA negotiations, which have a mid-May deadline to find a resolution. Things have been looking more positive on that front, but still cause for unease. The next important date on the calendar is May 10th and the WASDE Report.

Soybeans were able to overcome pessimistic mindsets over trade, up over 11 cents the last thirty minutes of trade, +8 ¾ (Nov). The U.S. delegation to Beijing has been in deliberations since yesterday with their Chinese counterparts, and there is hoped to be some kind of word soon on results. The main issues being discussed are the trade deficit of $550B, intellectual property theft and access to financial markets. USDA weekly exports were on the high end of expectations, with the total split fairly evenly between 2017/18 and 2018/19. Sales were pegged at 886,200 MT compared to the range of expectations of 450K-900K MT. There were no new soybeans sales this morning, but Peru booked a private purchase of 30K MT of soyoil for 2017/18.

Wheat was strong into the close with Minneapolis spring joining the winter wheats in the green. Wheat has been driving corn, as weather has been leaning bullish, with U.S. Plains hard red winter under pressure, Australia very dry and the Black Sea Region of Russia and Ukraine well below normal precipitation with hot temps. This has caused managed funds to build some premium into their net short position in wheat. The Wheat Tour is continuing to show low yields and stunted development in height and head size with poor root systems - Kansas, Nebraska and Colorado all showed decreased potential. On the bearish side, next week could bring a downward adjustment to wheat exports in the WASDE Report, which would also increase ending stocks. However, this week’s sales were very respectable at 445,100 MT vs estimates of 100K-600K MT. Chicago SRW +11 ¼, Kansas City HRW +12 ½ (July) and Minneapolis HRS +3 ¾ (Sept).

Live Cattle picked up what it lost yesterday, as futures continue to trade in a sideways range,+1.675 (June). Beef values are the highest since last June. Is the market underestimating the strength of demand?

Hogs showed early enthusiasm before running out of buyers, EVEN (June). As with beef, demand is providing support under the market. This coupled with declining seasonal supplies should help neutralize higher production. Technically, the market appears oversold. If good news comes from NAFTA in the next few days, look for an opportunity for a bounce.

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.5.2
2018-05-02T03:03

Corn was mixed but succumbed to negative pressure from the other grains, - ½ (Dec). Wheat has been driving the corn market of late, along with heightened concerns that Brazil’s second crop could see a yield reduction in Parana. However, it has been reported that subsoil moisture is still adequate in S Brazil. Planting is continuing in earnest in the U.S., as some IL farmers are 75-95% planted. EIA Ethanol data showed weekly production up 4.77% vs last week and 4.67% over last year. Stocks were up 2.03% compared to last week and down 4.61% from last year. Corn used for ethanol was a solid 107.53 mbu, well over the 103.453 mbu needed to meet the USDA annual projection. With slowing ethanol export demand from Brazil and China, will ethanol stocks climb in the weeks ahead?

Soybeans saw short-covering and profit-taking, finishing the session poorly -9 ¾ (Nov). The world is watching as trade representatives from the U.S. and China face off today in Beijing. Some type of press release regarding progress is expected tomorrow. Trade is nervous about a potential impasse or delay that could continue to put a lid on Chinese buying. Soymeal has been helping to lead the recent soy rally, but meal took a step back today while oil bounced. No new daily export sales were announced this morning. The next important date on the calendar is the May WASDE Report on the 10th.

Wheat saw short covering early, as funds balanced positions with less-than-positive conditions not only in the U.S. Plains, but Australia and the Black Sea Region as well. The market rebounded off of overnight lows that followed the re-opening of the European markets after the May Day Holiday before fading late session. A negative factor is the rising U.S. Dollar, and its negative relationship to price competitiveness on the global scene. Look for more reports through the rest of the week from the Kansas Wheat Tour to influence trade. Kansas is the focal point as it has the highest concentration of hard red winter wheat. An initial assessment of Oklahoma’s HRW was dismal, with abandoned acres seen as high as 46%. Chicago SRW -2 ½, Kansas City HRW +2 ¼ (July) and Minneapolis + ¾ (Sept).

Live Cattle had a pullback in June and August, while gaining in the deferred months. June ended-.975. The long-term trend is negative but strong demand and a steady, firm cash market should help support the near-term.

Hogs gave back some of yesterday’s gains, -.400 (June). The CME index has continued to gain on June futures, cutting the premium held by June down to $11. If NAFTA is resolved soon, with large supplies now built into the market, there could be upside potential  for a bounce ahead.

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.5.1
2018-05-01T01:48

Corn rode the strength of wheat and a somewhat friendly crop progress report, +4 ¼ (Dec). As of the end of Sunday, farmers have planted just 17% of the crop, compared to the average of 27%. This may not end up being a big deal, with favorable conditions allowing for major catch-up the first half of this week. However, this coupled with South American weather being dry in Parana, Brazil, with declining safrinha crop yields, gave an optimistic flavor to trade. After today, it is likely that managed funds will have extended their net long position back over 200,000 contracts. Technically, corn option volatility continues to grow. Not much selling is occurring from producers, as they are out planting in earnest.

Soybeans traded both sides of unchanged before a solid finish, +5 ¾ (Nov). Volatility is rising as uncertainty is dominating the thoughts of traders. Next week’s WASDE Report is shaping up to be impactful, with world supplies tightening. Most of the world is celebrating May Day, and will return to work tomorrow. Export sales have been seasonally slow, but some unexpected purchases by Argentina have helped fill the gap. In the bigger financial picture, Goldman Sachs reported commodities to be the top performer in 2018. It would be logical to think this will lure more investment into the sector.

Wheat led today’s May Day rally with world weather the lead story. Chicago SRW +18 ¾, Kansas City HRW +15 ½ (July) and Minneapolis HRS +8 ¼ (Sept). Chicago eclipsed the high achieved on March 1st (July contract). Dryness in Australia and the Black Sea Region are a concern for soft wheat while the U.S. Plains’ drought has impacted hard red. Many countries in Europe and other parts of the world are on holiday today, which likely has had some effect on trade. Wheat conditions announced yesterday afternoon showed small improvement, with winter wheat trending from 31% to 33% good/excellent. The hard red winter variety improved by 2% and hard red spring by 1%. Spring wheat planting is well behind the long term average of 36% complete, pegged at 10%.

Live Cattle showed weakness as trade cannot get past the idea of large supplies ahead, -.275(June). Selling liquidation was seen across all contract months. However, the cash market and packer margins are being well supported by strong gains in the beef market according to Hightower. Will the short-term trend remain up?

Hogs were mixed with strong gains in May and June, +1.200 (June). The CME cash index has continued to rally, coming closer into alignment with June futures, reducing the large premium. Pork values are at the highest level since April 4th. Positive news from NAFTA this week would go a long way to aiding recovery off lows.

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.4.30
2018-04-30T02:51

Corn broke out to a new short term high of 4.18 ½ before retreating to 4.16, +1 ½ (Dec). Weekly corn inspections were solid again, coming in at 1,465,265 MT vs estimates of 1,400,000 MT. Strong exports and tightening world inventories are providing strength under the market. Additionally, there are concerns for yield loss with a dryer trend for S Brazil’s safrinha corn. The corn volatility cash index has gone from around 12 to 21 since April 13th. What does this mean? Volatility is needed in order to get market opportunities, and last year volatility peaked in early July around 37. Look for crop planting progress later this afternoon. It is expected that the range will be 15-20% completed. According to a meteorologist interviewed by Ag Day, long periods of heat and dryness are not to be expected this season across the Corn Belt.

Soybeans traded in a wide range, hitting 10.57 ¾ before plummeting back to 10.44 ¾, -2 ¼ (Nov). Early gains were boosted by soymeal, which continues to benefit from the port accident story in Rosario, Argentina, last week. Soybean weekly loadings were better than predictions, as they were pegged at 679,379 MT for the week of April 26th, compared to expectations of 400K MT. Argentina also posted a daily private sale of 120K MT of U.S. beans for 2018/19. Argentina’s shortages this year and purchases from the U.S. have helped fill the gap from lacking Chinese interest due to the trade war. Speaking of the PRC, trade uncertainty is still acting as a check and balance to rallies until further progress is made between the two sides to resolve the tariffs. Will we get more than just an extension when trade representatives meet in Beijing this week?

Wheat gapped higher in Chicago wheat at the overnight open, and was able to maintain a double-digit gain, +12 (July). Kansas City was +7 (July) and Minneapolis +5 ¾ (Sept). Some of the gains may be the result of short-covering at month-end, as well as deepening drought in the Western U.S. Plains and the Black Sea region. The weekly export inspection log was disappointing, as it showed wheat loadings at 376,256 MT compared to estimates of 450K MT. Look for crop condition ratings later this afternoon to influence trade to follow. The hard red winter wheat tour starts tomorrow. Minneapolis seems to have gotten past the negative Stats Canada acreage report, which showed more spring wheat than expected. However, the market had fallen 35 cents prior to that and much of that acreage was already built-in to the price.

Live Cattle and feeders set back today, although the overall trend is still in an upward direction, -.900 (June cattle). Buyers were very active at the end of last week with cash cattle trading $3 higher in TX, KS and NE. Underpinning the market are very good packer margins and a strong beef market.

Hogs were mixed with May and June positive but July and August negative. June finished+.075. Hogs seem to be hunting for a short-term low, as they are technically oversold. Hogs need positive news to reverse sentiments, i.e. a quick resolution to NAFTA! Stay tuned.


All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.4.27
2018-04-27T02:15

Corn drafted off beans with buying on large volumes, achieving its 2nd highest close of the year +3 ¼ (Dec). Volatility rates were also up, as funds were active buyers of out of the money options in all the grains. The market seems to have put positive planting weather in the Central U.S. aside, as more focus is on Parana safrinha corn that will not see rain for 11-15 days. In the U.S. the Drought Monitor is showing normal to above normal soil moisture across most of the Midwest. Funds are quite net long corn contracts, and it appears they are intending to hold the risk of weather premium for now. Stats Canada reporting came in above expectations, showing estimated corn acres planted in 2018 at 3.758 million acres vs expectations of 3.5 and last year’s 3.57. Look for weather and talks with China to drive price direction next week.

Soybeans were up significantly with a positive geo-political atmosphere, less Stats Canada acres and a logistics issue in South America +13 ¾ (Nov). North and South Korea announced that they will plan to denuclearize with the help of China and the United States. This coupled with a U.S. delegation on the way to China for meetings early next week to begin to resolve the trade dispute boosted optimism. Soymeal led the rally today as large South American meal premiums will likely shift demand to the U.S. The news of the disabled Argentina dock at a port in Rosario (that exported 22% of the country’s soymeal) is starting to sink in. Not to mention that Argentina is already short on supplies with the severely reduced crop this year. The PRC will be celebrating May Day through next Tuesday, so this may be reflected in the daily export log. Stats Canada 2018 soybean acres are estimated to be 6.452 million acres, less than expectations of 7.1 and last year’s 7.28.

Wheat saw buying of the winter varieties, with Chicago +9 and Kansas City +9 ½ (July). The Drought Monitor is showing 37% of winter wheat growing areas in some stage of drought (poor/very poor). Hard red winter wheat conditions have continued to trend slightly worse. Spring wheat reacted negatively to the Stats Canada acreage report before a strong finish, +5 ½ (Sept). Last year’s acres totaled 15.801 million acres, while this year spring wheat acres are estimated to be 18.241 million acres. Durum wheat acres are also expected to rise to 5.777 million acres, over expectations of 5.4 and last year’s 5.21.

Live Cattle was able to post large gains into new short-term highs, as choice and select cuts are both up on solid demand, +2.650 (June). Seasonally, cattle typically makes it highs in April, as grilling season is coming in to full swing. Also, providing support is the premium cash is holding to the futures market. On the flip side, the beef market has a plethora of supplies, with steer carcass weights an average of 19 lbs over last year and 7 lbs over the five-year average, combined with elevated slaughter rates.

Hogs saw more liquidation selling, as cash is trailing futures by a large gap, -1.375 (June). Packers have been slaughtering at a brisk clip, but hogs are still running 1.3 lbs heavier than last year. The pork trade has also slowed and the pork cut-out is down. It is imperative that NAFTA and Chinese trade issues come to a swift and positive conclusion, as this could be the bullish impetus needed to get things going back in a positive direction.


All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.4.26
2018-04-26T02:29

Corn had a hard time trending positive, with favorable planting weather taking center stage across the Corn Belt, -1 (Dec). Not to mention funds are heavily long, putting pressure on the CBOT. The USDA announced a private sale this morning, with 107,600 MT sold to “unknown” destination for 2017/18. However, weekly sales came in well below the range of estimates of 1.1-1.5 MMT, around 620K MT net with a 76,600 deduction for 2018/19. This was the lowest weekly tally in 15 weeks. Notable customers included Mexico, Japan and Colombia. Corn export prospects for the U.S. will get an opportunity to grow if the Brazilian second crop corn continues to get downgraded. However, at this point the USDA estimates corn export sales to lag last year by 3%.

Soybeans got support from a logistics issue and firm meal demand but also saw weakness from the escalating Chinese trade dispute, -1 ½ (Nov). As mentioned yesterday, a dock at an important port in Rosario, Argentina, was destroyed by a ship collision. This is notable as this dock loaded 22% of the Argentine soymeal exports, and it will be out of commission for 3-6 months. USDA weekly sales reported this morning were on the light side, totaling 537,800 MT for both marketing years. Expectations ranged from 800K-1.4 MMT. This was not a surprise as it has now been 10 consecutive days without a sale to the Chinese. However, weekly sales were still above the threshold needed to reach the USDA yearly projection, with purchases from Europe and Argentina providing an offset. The USDA is estimating 2017/18 sales to be down 5% from last year. Next week’s meetings in Beijing between U.S. trade representatives and the PRC will be closely watched, as stakes are high.

Wheat gave up a good chunk of what was gained yesterday with no fresh news to stimulate buying: Chicago SRW -9 ½, Kansas City HRW -5 ½ (July) and Minneapolis HRS -3 ¼ (Sept). Spring wheat seeding is up and running in the N Plains and Canada after a slow start due to spring snowstorms. Wheat was the only grain to offer a bright spot on the weekly sales log, as numbers exceeded the range of expectations of 50K-500K MT, pegged at 577,900. The sales were equally distributed between the two marketing years. However, it is likely wheat exports will be trimmed by another 25 mbu in the May WASDE Report.

Live Cattle had a setback today with a bearish engulfing bar on the charts, -1.225 (June). Selling liquidation prevailed, as losses were incurred across all the deferred contract months. Concerns of huge beef production to come in the weeks ahead are providing a limiting factor to recovery rallies.

Hogs took a pause yesterday from their steep descent, but resumed today as June finished -1.350. As with cattle, supply issues continue to come to the forefront and smother thoughts of rallies. Also, the large premium of futures to the cash market is a large hurdle, and will need help from strong export sales.


All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.4.25
2018-04-25T01:46

Corn caught the bullish vibes from the rest of the grain complex, as trade tensions seem to be abating and there is less farmer selling due to planting, +5 ¾ (Dec). EIA weekly ethanol reporting showed production down by 2.38% vs last week (for the week ending April 20th). Ethanol stocks were up 1.67% compared to last week, but down 6.74% vs last year. Corn used in ethanol production was on the light side at an estimated 102.61 mbu. Corn use needs to average 103.655 mbu to hit the USDA annual target of 5.575 bbu. Ethanol is the lowest cost octane on the market. Ethanol demand will only continue to grow globally, as both China and Japan plan to increase its use to clean up smog in large urban areas. The University of California and North Carolina State did a study that found ethanol reduced toxic auto emissions by 50%.

Soybeans kicked up their heels today on optimism that trade tensions with China will be resolved, +6 (Nov). Also, adding to the rally, was news of a cargo ship collision with a port in Rosario, Argentina, which will no doubt disrupt the flow of grain. This dock loaded 22% of soymeal exports last year and is expected to be down 30-40 days. No new export sales were announced this morning, making 9 days in a row with no sales to China – although, this is quite normal for this time of year. Chinese crushers are paying the price trying to avoid impending tariffs on U.S. soybeans, as they are forking over a premium for Brazilian beans. President Trump is sending over a high level delegation to the PRC, which is hoped to bring results. It does not seem that anyone stands to benefit from an all-out trade war. Also worth noting, China will be out on holiday from Thursday through Monday.

Wheat had a break-out session to the topside on concerns that world wheat production is starting to decline, with all varieties posting solid gains: Chicago SRW +14 ¾, Kansas City HRW +14 ½ (July) and Minneapolis HRS +8 (Sept). It is surprising that KC is not gaining more on Chicago, as KC conditions continue to deteriorate while Chicago’s have improved. The big Wheat Quality Tour kicks off on May 1st, and should bring more clarity to the situation. On the world scene, Eastern Australia is experiencing a deepening drought with another 2 weeks of heat and dryness to come.

Live Cattle showed strength into the close, +.525 (June). The warm weather forecasted for the next several days should encourage grilling. Supporting the bounce from last Friday’s lows was a strong jump in beef prices as well as the thought that cash cattle will trade steady this week. Strong packer margins should be well supported by the upward trending beef prices.

Hogs traded both sides as the market demonstrated a degree of volatility, +.525 (June). Technical action and indicators have been weak. Futures and cash are starting to move closer together, but the June contract still holds a $17 premium to cash. NAFTA negotiations seem to be headed in a more positive direction, which is key to exports and the hog market.


All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.4.24
2018-04-24T02:20

Corn was able to keep yesterday’s momentum going after technicals from Friday were pointing lower, +2 ¼ (Dec). The University of Illinois took a look back to the 1980’s and found farmers are capable of planting their entire corn crop within an average of two weeks. This study included the three “I” states of IL, IN, and IA. At this point, there is not a big planting problem to worry about even though the crop is only 5% planted compared to the 15% average. However, if we get to May 7-10 and are not 50% planted, more concern will be warranted. Corn planted after May 15th is known to show declining yields. In Brazil, mounting worries are surrounding the most recent forecast, as nearly the entire safrinha second crop growing area is not expected to receive any rain in the next 10 days. If this materializes and yields are downgraded, expect to see a rising demand for U.S. exported corn.

Soybeans were able to rebound on strength realized from an important export sale, + ½ (Nov). The rising Dollar of late has been putting pressure on the market. But, the streak of eight consecutive days without an export announcement was broken this morning with Argentina stepping up and purchasing 130K MT. The quiet spell from China is not to be ignored though, and U.S. trade representatives are reported to be considering a trip to the PRC to discuss face-to-face. All eyes are squarely focused on demand and the U.S. crop. Look for more sideways trade leading up to the May WASDE Report.

Wheat gained traction from unimpressive winter wheat conditions were announced yesterday, Chicago SRW +9 ¾, Kansas City HRW +9 ¼ (July). Winter wheat rated good/excellent is unchanged from the week before at 31%, but this is well below the average of 54%, with 37% poor/very poor. World wheat prices continue to appreciate in value, with Australian wheat into new seasonal highs. Russian wheat has also risen in price. However, the stronger Dollar is negating some of this price opportunity. Wheat is a more global product than corn and beans, and supplies are plentiful. Russia’s record crops and improved logistics are neutralizing any notions of tightening balance sheets and weather elsewhere. Minneapolis HRS +3 (Sept).

Live Cattle had a weak finish after sporting positive numbers most of the session, +.175 (June). Feeders and the cattle deferred months all finished in the red. Although the Cattle on Feed Report was not considered bearish, the number of animals On Feed is up 7.4% over last year, which equates to 810,000 head. Front-end cattle supply is projected to reach a record high by August. On a positive note, rising employment and wages equal growing beef demand.

Hogs are trending lower under the weight of overbought technicals and a wide cash basis, -1.550(June). The premium of June futures to cash is a big hill for cash to climb, considering the spread is over $18, more than double the average for this time of year. As a result, sellers came out in force, driving the market lower
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All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors

Water Street Solutions Daily Report 2018.4.23
2018-04-23T03:06

Corn was able to diverge from beans’ negative direction, +1 ¾ (Dec). The Commitment of Traders Report last Friday showed fund managers had lightened their long position by 37,000 contracts. This coupled with positive fundamentals and strong demand boosted the mood of investors. USDA weekly export loading data for the week ending April 19th was strong, as inspections were pegged at 1,719,025 MT vs estimates of 1,450,000 MT. It is hard to conceive that the market has reached its high for the year with planting and pollination ahead. Look for Crop Condition reporting later this afternoon, as expectations are for planting to be running behind. In South America, the Brazilian safrinha corn crop looks to be receiving little to no rain the next two weeks, so this will be closely monitored for potential yield reductions.

Soybeans shed length with red numbers to start the week, -6 ¾ (Nov). Weekly export inspection data showed beans a little off expectations of 500K MT, coming in at 470,817 MT. There were no new daily sales announced for the 8th consecutive day. Adding to the heavy atmosphere, the Commitment of Traders Report data from last Friday afternoon showed managed funds had added to their net long position to the tune of 17,000 contracts. New buying is hard to come by. Soybeans need a fresh story, and without one all attention is focused on trade tensions with China and positive trending weather in the States.

Wheat was a tale of two different varieties, with the winter wheats mixed to negative, but spring incurring significant losses. Chicago SRW -2 ¾, Kansas City HRW + ¾(July) and Minneapolis HRS -9 (Sept). While there were weekend rains that covered parts of HRW country, it was not enough to take the pressure off. Weekly USDA inspections were solid, coming in at 619,251 MT compared to ideas of 450K MT. Winter wheat conditions will be released later this afternoon, so watch closely to see if further deterioration of HRW is noted. There is chatter that a good chunk of S. Kansas, W Oklahoma and Texas Panhandle acres will be written off by claims adjusters. Stats Canada will be coming out with their first stab at acreage estimates this Friday.

Live Cattle was able to entice buyers following a non-bearish Cattle on Feed Report Friday, +1.150 (June). Cattle on Feed were at 107% of last year vs expectations of 108%, feedlot placements were seen at 91% vs expectations of 90% and marketings were right in line. Will June/Aug cattle be able to get back to the $110 level and offer a hedging opportunity? The COT Report showed funds have continued to pare down their net length, down to around 22,000 contracts, which is the lowest since July 2016.

Hogs slipped lower today, as packer margins are down and industry expansion is moving full steam ahead, -1.175 (June). Grilling season being delayed by a cold spring has not helped. Futures are way too far out in front of the cash market, with the June contract at almost a $21 premium. Sluggish export demand needs to pick up soon, as technical indicators are indicating the market is overbought.

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.4.20
2018-04-20T01:47

Corn ended the week in a defensive posture, -5 ½ (Dec). Today marked Option Expiration for the May contract. December corn closed at its lowest level since the day prior to the March 29th Acreage Report. Favorable forecasts in the Midwest are getting all the attention, but longer term fundamentals have a more optimistic outlook. In trade news, NAFTA negotiators are hoping to find agreement “in principle” in the next few weeks. There are signs that there could be a deal in the works – auto production and agriculture are the two biggest areas that need to find common ground among the North American trading partners.

Soybeans broke lower, filling the gap on the chart left from two weekends ago, -7 ½ (Nov). In addition to negative chart action, looming uncertainty over trade wars and the possible shift of spring wheat acres in the Northern Plains to beans due to weather delays, is having an effect. From a demand standpoint, it is hard to see how the tariff situation has much impact overall. If China shifts more buying to Brazil, the U.S. will likely see a transition of European buying to the States. Also, Chinese crushers are squawking just as much as the American farmers about tariffs, as they need beans and do not want to see the flow interrupted. Is it possible that the Chinese could actually use soybeans as a concession to negotiations because of how important they are to their national appetite? No new export sales were announced this morning, as the PRC pitched a shut-out this week.

Wheat took the biggest hit today with all three complexes in the red: Chicago SRW -13 ½, Kansas City HRW –12 ½ (July) and Minneapolis HRS –12 ¼ (Sept). The positive condition reports for HRW earlier in the week combined with more friendly forecasts have the market in a risk-off mood. Spring wheat seems to be suffering from a poor export sales report yesterday morning which included 61K MT in cancellations. Europe’s exports are also hurting in large part to Russia’s dominance, as Strategie Grains lowered their export estimate by 900K MT for EU wheat exports in 2017/18 to 20.3 MMT. The Plains Crop Quality Tour will commence on the 30th, so look for results to be influential.

Live Cattle closed strong after early weakness, with the Cattle on Feed Report on tap this afternoon, +.725 (June). USDA boxed beef values ($211.54) have contributed to the beef market achieving its lowest level since February 2016. Cattle on Feed data will be released at 2pm CDT.

Hogs tailed off after reaching a high yesterday not seen since March 16th, -.525 (June). Technically the market is overbought, and carrying a large premium to cash. The cash market will need positive news to stimulate buying interest.

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.4.19
2018-04-19T04:01

Corn continued its sideways pattern with no fresh news, - ¼ (Dec). Weekly export sales were strong at over 1.2 MMT, and corn has caught up to now only trailing last year by 2%. Buyers included China (leading the way), Colombia, Taiwan, Japan and Korea. The drought in Argentina has been a big boost to both corn and bean exports this spring. NOAA weather forecasts do not offer anything to the extreme, and likely more sideways chop will continue.

Soybeans were able to rally off early lows to finish -3 ¼ (Nov). Also providing a measure of weakness was liquidation of fund length in soymeal. Weekly soybean sales were just above the range of expectations of 1.3-2.1 MMT, with half booked for 2017/18 and half for 2018/19. Year-to-date, soybeans are only 3% behind last marketing year. According to AgResource, soybean sales since early February are a record 386 mbu, which is up 86% from last year. However, today marked the 5thconsecutive morning with no new 8am sales announcements. Trade volumes are low as there is nothing of note to excite action.

Wheat trended positive in the winter varieties, while spring wheat gave up gains: Chicago SRW +1 ½, Kansas City HRW +6 ¾ and Minneapolis -5 ½. Weekly export sales were a net negative 66,900 MT for 2017/18, while 2018/19 were reported at 240,400 MT. The range of expectations was 100K-500K MT. For the marketing year-to-date, wheat is down 17%, and the USDA is expected to lower its 2017/18 export projection by 5-15 mbu. EU Strategie Grains lowered their export estimate, as Russia continues to dominate the globe. There does not seem to be much positive news to latch onto - how much longer will wheat trade the Drought Monitor?

Live Cattle broke to the downside on technical selling, -2.275 (June). Tomorrow will feature the Cattle on Feed Report. Beef weekly export sales were announced at 19.9 MMT. The main buyers included Japan, Mexico, Korea and Canada.

Hogs gave up modest losses today, with June -.450. The Lean Hog Index was up $.49 to $54.02. Weekly pork exports were 17.9 MMT, with the main customers including Korea, Mexico, Japan and Canada. Trade negotiations for NAFTA and with Asia are being closely watched.

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.4.18
2018-04-18T02:24

Corn managed a modest gain on lower volume trade, +2 ½ (Dec). The market seems less concerned with U.S. planting delays, while keeping an eye on emerging dryness issues for Brazil’s safrinha crop. EIA Ethanol weekly reporting today was expected to show production down and stocks up. Production was down 2.42% compared to last week and up 1.61% over last year. This is the lowest production in 14 weeks. However, stocks continued their impressive drawdown by declining 2.30% compared to last week and 7.34% compared to last year. Corn used in ethanol consumption was 105.13 mbu, well ahead of the 103.601 mbu weekly pace needed to hit the USDA annual projection of 5.575 bbu. It is thought this will level will not be difficult to maintain with summer driving season ahead and ethanol margins profitable. Look for key resistance at 4.16 and support at 3.96 December.

Soybeans struggled in sideways trading, with a lack of new export sales news to boost sentiments, + ½ (Nov). U.S. weather looks to be more moderate and warming in the upcoming days, which may create enough of a window for planting corn, which will lessen the chance of acres shifting to beans. There were no new export sales announcements for the fourth day in a row, as U.S. exports have been somewhat constrained recently with Brazil’s basis improving, a weaker Real currency and cheaper South American meal. The recent rash of sales directed to the U.S. had given some hope of a counter-seasonal rally, but there has not been follow through. Brazil announced that it has harvested 90.5% of its soy crop. The CBOT is sitting on a large amount of open interest in contracts, and with First Notice Day eight days away more liquidation is likely ahead of option expiration on Friday. Look for key resistance at 10.60 and support at 9.97 ¾ November.

Wheat took the lead today based on constantly shifting weather prospects. As of now, it is trending drier across the Central Plains, with Kansas seeing limited coverage. The market always reacts to weather news, irrespective of any net effect on the yield at this point. Almost every HRW state showed decline in condition ratings earlier this week, so it almost seems like a delayed reaction. Chicago SRW +7 ¾, Kansas City HRW +8 ¼ (July) and Minneapolis HRS +3 ¾ (Sept). U.S. and world wheat stocks are growing, so we will need a weather problem in another part of the globe to get a longer term rally.

Live Cattle sported more gains as the market has had a firm tone due to a positive seasonal outlook for beef and strong packer margins. Two important USDA reports will weigh in later this week, with Livestock Slaughter on Thursday followed by Cattle on Feed this Friday. April Cattle on Feed is predicted to be at the highest level since 2006. June +.375.

Hogs broke out to a new high, well above a 50% retracement from the late February high to the April 4th low. June finished +1.775. The June contract is at about a $25 premium to the cash market compared to the average of $7.40. Will cash experience a strong seasonal rally to come into alignment, or is this level an important selling opportunity? The concern expressed by some analysts is that June has rallied too far too fast.

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