CORN
It is still hot and dry in the Corn Belt so the corn market is still moving higher. There are some cooler temperatures in the extended forecast that will provide some hope, but at the moment, the forecast still calls for below normal precipitation. Crop condition ratings should decline Monday and that may lead to new contract highs today.
WHEAT
Wheat will continue to follow the corn. Wheat fundamentals don't appear to be particularly bullish, but with the crop losses, we are looking at in the corn, USDA may be underestimating US wheat demand and there is no reason to expect higher wheat acreage this fall. With the move through the 62% retracement in the December KW, analysts say the next upside objective should be $8.55.
SOYBEANS
Soybeans are just like the corn. The weather is shrinking the crop and USDA is overestimating the yield. One other things that the beans have going for them is that there has been good demand news recently. We will set a record for exports in the new crop year, which is very supportive. The poor Indian monsoon will also fuel the bull market. Analysts expect November beans to be over $15.00 soon.
CATTLE COMPLEX
Extreme heat across the eastern 2/3 of the US is likely hurting beef demand at what should be a one of the highest consuming periods of the year. This could pressure the closer-in contracts of cattle, even with concerns that the heat is hindering animal weight gain. The positive trade in other commodity markets and a jump in the stock market provided a bullish tilt to cattle futures for a moderately higher close on Tuesday, and further gains in the stock market overnight following a Chinese rate cut could lend support as well, but our concern is that reduced demand due to the heat could dominate the trade today. Boxed beef cutout values were down 89 cents at mid-session on Tuesday and closed $1.41 lower at $193.22. This was down from $197.74 the prior week and was the lowest level for the cutout since May 18th. Traders await cash live cattle activity this week after $116.00 trade last week. A lower showlist might normally support the cash market, but traders are concerned about packer demand. The August contract's premium to last week's cash trade may also be seen as a short-term negative factor. The estimated cattle slaughter came in at 129,000 head on Tuesday. This brings the total for the week so far to 255,000 head, down from 257,000 for the same period last week. The longer term outlook is for tighter supply into the fall, but near term demand concerns due to the hot weather could keep a lid on the market for now. Fourth quarter beef production is expected to come in 9.2% below last year according to the recent supply/demand update from the USDA. One positive is that restocking after the power outages on the East Coast could become a positive force for the beef market by next week.
CRUDE OIL
August crude oil prices traded higher during the initial morning hours, reaching their highest level since May 30th. There were a number of supportive forces working in favor of the crude oil market, with the latest coming from a surprise cut in Chinese deposit and lending rates. There were also reports that Statoil called for a lockout against oil workers in Norway, which is expected to invoke government involvement. The threat of more than 1.0 million barrels per day in lost production boosted the fear premium in the crude oil market. However, some analysts indicated that such a maneuver could ultimately force a resolution to the conflict sooner than expected. Another source of support for the crude oil market came from private industry data Tuesday that showed a much larger than expected decline in US crude stocks last week. Expectations for this morning's EIA crude oil inventory report are for a draw in the range of 1.75 to 2.0 million barrels.
There is substantial risk of loss to futures and options trading. Past performance is not indicative of future results.
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.
