Schwieterman: Dollar strength hinders commodities

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Corn                                         Estimated Fund Position
Trends
Short Term: Up                     Net Long Futures and Options: 56130
Long Term: Down                Change: +5000
Overnight Trade: N +4 3/4 Z +1 1/4 @7:15 AM
Opening Calls: 2-4 Higher


Corn export sales were horrible, due in part to large cancellations of new crop corn by “unknown destinations.” The lack of old crop sales and the rumors of more cancellations are not helpful to the bulls. Most eyes, however, are on the forecasts. The extended forecasts offer hope for rain, which is keeping buyers in check, but in the meantime we have to plan on lower crop condition ratings in Monday’s report. Any shift towards a drier forecast will be very bullish, but in the meantime plan on a day of consolidation.

Wheat                                       Estimated Fund Position
Trends
Short Term: Up                        Net Long Futures and Options: -65203
Long Term:Up                          Change: -4000
Overnight Trade: Chicago: N +7 1/2 KC: N +8 3/4 @7:15 AM
Opening Calls: 7-10 Higher

Wheat export sales were very good. Old crop, which doesn’t matter anymore, was only 72,400 MT, but the new crop came in at 754,600 MT, which is very encouraging. There won’t be any rain to help finish off the HRW crop, so production potential is still slipping. The July KW held at the 38% retracement yesterday, which is encouraging to the bulls. $6.85 is now critical support, and a close above $7.05 would indicate we are starting another leg up.

Soybeans                                   Estimated Fund Position
Trends
Short Term: Down                   Net Long Futures and Options: 175671
Long Term: Down                    Change: -8000
Overnight Trade: N +16 X +14 3/4 @7:15 AM
Opening Calls: 10-15 Higher


Soybean export sales were great with 800,100 MT of old crop and 153,000 MT of new crop sales. We have now sold more soybeans than the annual estimate, so we have to plan on USDA increasing the export estimate in the June supply and demand report. The charts look a little discouraging after yesterday’s new low for the move and more long liquidation by the trading funds is still possible. It is tempting to try and pick a bottom, but I would rather wait for technical confirmation of a low.

Live Cattle
Trend
Short Term: Up
Long Term: Up
Opening Calls: Mixed


Live cattle futures closed sharply lower on Wednesday, and packers secured adequate numbers of southern cash cattle $2.00 cheaper than a week ago. Northern trade was limited to some regional packers at the $193 level. Dollar strength continues to hinder commodity strength in general. Beef exports for the previous week were unchanged from the week earlier, maintaining a solid pace for the year to date. Cutout values were up more than 1.00 in the choice category, edging within a couple of cents of all-time highs.

Feeder Cattle
Trends
Short Term: Up
Long Term: Up
Opening Call: Mixed


Feeder cattle futures posted triple digit losses on Wednesday, as the selloff in the fats along with some recovery in corn prices weighed on the market. Overnight price action has been mostly firm, with modest gains out through the November contract. Corn prices are narrowly mixed, giving little direction. Higher equities and a lower dollar could renew some buying in this sector.



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