CORN
The pressure overnight was due to the weakness in the stock market. Corn specific news isn't particularly bearish. Crop condition rating will likely decline in this afternoon's report due to lack of rain and higher than average temperatures. USDA will likely cut the production estimate in Thursday's Supply and Demand Report. The only concern right now is the condition of the US and world economies and right now that concern is taking precedence over everything else. This morning's break is likely an opportunity to purchase September call options in the corn.
WHEAT
It should come as no surprise that the wheat market is still trading sideways. Iraq did purchase some US wheat, which is encouraging, but ins't important enough to let the wheat move independently from the corn. There just isn't enough wheat specific news to matter. The direction of the wheat will be determined by the direction of the corn market for the foreseeable future.
SOYBEANS
The soybeans are still working their way down to the bottom end of the trading range. The outside markets are the main reason for the pressure, but traders don't seem worried about crop condition ratings or the forecasts, so that is providing pressure as well. The November soybeans will have to move below $13 before there is strong support.
LIVE CATTLE
Live Cattle futures surged higher on Friday, inspired buy sharply higher cash trade. The $4.00 jump in cash cattle prices caught many by surprise, significantly tightening basis levels as we head into first delivery day on the August contract. For the wekk, futures gained around 1.25, while cash improvement was much greater. Economic concerns continue to weigh on equity markets, which will likely limit buying interest in the livestock sector.
FEEDER CATTLE
Feeder Cattle futures posted solid gains on Friday, but remained more than 3.00 lower for the week. Economic concerns, along with more than 20 cent gains for the week in the corn futures, weighed on feeder prices. Overnight corn values fell .13 which may allow for some feeder interest to develop on breaks. Numbers should continue to tighten into the fourth quarter.
CRUDE OIL
The regular energy complex gave up last week and closed sharply lower. September crude oil closed
down $ 8.82 for the week which paled in comparison to the close in gasoline. September gasoline
closed down more than 25 cents which in turn drug September heating oil down nearly 16 cents.
Natural Gas closed sharply lower for the week also losing about 20 ½ cents. Spot month crude oil in the
process posted a year to date low which is very very unusual. Typically (for the first week of August)
crude oil is back to challenging the yearly high that usually gets posted around the July 4 th weekend.
One of the worst fears for US and global economies started to come true over the weekend in the form
of a downgrade in US Debt rating. The S&P downgraded US debt status to AA+. The other 2 major
rating agencies left the US status at Triple A but one has to wonder if that is the next shoe to drop. Not
only has this pressured energy markets this morning but it has also created a major trend change in
equities. Equity markets have too posted year to date lows but more importantly have changed a 2 year
uptrend lower. Additional weakness is likely in the weeks to months to come as now the process of the
economy healing itself has likely started which could take a very long time. The Federal Reserve will tell
us this week if that will be the case as the FOMC meeting is slated for Tuesday/Wednesday. Many
traders will be expecting them to start QE3 and if that fails to materialize it will be very possible to see
$74.00 crude oil by Labor Day.
By Donna Hughes
Lone Star Portfolio Advisors, Inc. was founded by Donna Hughes. Donna began her career in the industry in 1978 after graduating High School as a member of the Chicago Mercantile Exchange’s Inspection and Delivery Department where she was responsible for scheduling and facilitating the USDA grading and delivery for various Exchange Commodities. After 1 ½ years, she was offered a position working with George Segal, a prominent hedger in the Pork Belly market. It was through this relationship that she was mentored and taught the hedging process by working with Mr. Segal as well as other leaders of the Pork Industry. In 2004, Donna moved to Texas where her skills in the industry were utilized to help individual and corporate producers with their Risk Management Goals. Her Daily Market Commentaries are heard on the AllAgNews.com Radio Network broadcasting throughout Texas. She also contributes to magazines and periodicals including PetroEvents and Ag Monthly.
Donna created Lone Star and implemented strategic relationships with Daniels Trading and R.J. O’Brien leveraging their services to enable Lone Star to Build Lasting Relationships Thru Information, Execution and Research.
