Morning Comments – Monday August 8, 2016

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Buchheit Morning Comments from Dave Danker             Monday August 8, 2016

Last week’s markets were SHARPLY lower for corn and soybeans, higher nearby for wheat.    The energy markets were higher, financial markets higher and the Dollar Index was higher, closing the week at $96.30.  The US bond market softened with the 10 Year Bond yielding 1.59% and the 30-year bond closed at 2.31%.  For the week, SEP Corn was 10.25 cents lower, closing at $3.2425, AUG Soybeans lost 28.75 cents, closing at $10.0375 and SEP wheat was 8.25 cents higher, closing at $4.16.  For the week, Crude Oil gained $0.37, closing at $41.80.  The DOW gained 115 points, closing at 18,544 and the US Dollar Index closed at $96.30, up $0.78.  August Heating Oil futures closed at $1.3072, up $0.0018 for the week.  CBOT closes in the NOV-DEC contracts were $3.3425, $9.745 and $4.38 for 2016 DEC Corn, 2016 NOV Soybeans and 2016 DEC Wheat, respectively.  SEPTEMBER 2016 soybeans traded 32 cents lower for the week and settled at $9.88.  MARCH 2017 corn closed at $3.445, down 7 cents for the week, MAY 2017 corn closed at $3.5125.  MARCH 2017 wheat lost 0.5 cents, closing at $4.5975, MAY 2017 wheat closed at $4.725, JULY 2017 wheat closed at $4.80.  The Baltic Dry Index closed at 636, down 29 points from last week’s 665, a new all-time low for the index was set on 2-12-16 when the index hit 290, establishing a new low for the index stretching back thirty plus years.  The Baltic Dry Index is up 33.05% YTD.

We continue to be in a weather market and it appears that for now the majority of the corn Belt is in pretty good shape.  Many analysts are now starting to talk about the possibility of a national corn yield in the 172-176 per acre range and a national soybean yield between 48-51 bpa.  High ratings for soybeans at this time do not insure a high final yield, however, most analysts have started to lean toward a large crop and the Spec Funds are leaning negative as well.  Some talk at this time of DEC 16 Corn futures at or just below $3.00 and many analysts think that we could see NOV 16 soybean futures trade down in the lower $8.00 range.

In checking corn fields this weekend, I have discovered the early signs of Southern Rust once again.  I am hoping that this later onset will reduce the negative effects of Southern Rust.  Last year we estimated that Southern Rust cost area producers from 30 to 50 bushels per acre off of their top-end yield.  The warm, humid nights have made conditions favorable for this fungus that usually does not affect this area.  Once you see the symptoms of Southern Rust, it is too late to do any spraying to offset the effects.

Please mark your calendar for our annual “Cattle Call”, cattle meeting with some of our local veterinarians participating in an informative panel discussing the potential issues with the new VFD regulations that will come into effect on January 1st, 2017.  The meeting is Tuesday, August 9th from 5-8:00 pm in the St. Maurus Parish Hall, 10198 State Highway B, Biehle, MO.  Please contact our office at 573-547-4569 (800-622-7937) and let us know if you can attend.  We will serve an excellent meal with drinks and dinner provided free of charge.  We will have some great giveaways and expert talks on forage, reproduction, nutrition, vaccinations, management and markets.

The US dollar was stronger and the US Treasury Bonds were slightly weaker with the 10-year bond closing at 1.59% yield and the 30-year bond at 2.31%.  Mortgage rates were stable with a 15-year mortgage quoted at 2.67% and a 30-year mortgage at 3.39%.

The CIF markets are active for corn and soybeans.  Corn exports have moved up and wheat exports continue to be soft, with the off-spec HRW wheat taking over the damaged wheat and feed-wheat markets.  August corn barges are (63 bid – 67 ask) and September corn barges are (71 bid -76 ask), October corn barges are (71 bid- 76 ask), October soybean barges are (90 bid-92 ask) and SEP wheat barges are (45 bid-56 ask) and OND wheat (55 bid-80 ask).  The drop in October barge freight has increased interior basis bids.  Most CIF elevators are focused on corn and soybean programs with little regard for wheat.

Spec funds made significant changes to their final positions this week.  Significant long increases in soybeans and soybean meal combined pushed the soy complex markets higher, while short-selling pushed corn and wheat markets lower.  Specs removed their long position and added 38,000 contracts to their short corn position to create a short position of 107,000 contracts net short.  Spec funds removed 17,000 contracts from their long bean position to make it 103,000 contracts long.  The Specs removed 20,000 contracts from their short wheat position of 117,000 contracts short.  The Specs finished the week, long 57,000 contracts of Soybean Meal.  University of Illinois economist, Darrell Good is predicting that we could have a 15-billion-bushel corn crop.  Other analysts feel that we could have a soybean crop above 4 billion bushels.  Both of these production levels are huge and would result in lower prices.

Some major foreign currencies were mixed-stronger versus the US Dollar.  The Euro finished the week at one Euro per $1.11 US$ (down 0.01).  The Japanese Yen finished the week trading at 102.47 per US Dollar (down 0.46).  The Russian Ruble finished the week trading at 64.95 Rubles per US Dollar (up 0.84).  The Brazilian Real finished at 3.18 per US Dollar (up 0.06).  The Argentine Peso closed at 14.78 (up 0.06).  The Canadian Dollar finished at 1.31 per US Dollar (down 0.01), the Mexican Peso at 18.65 per US Dollar (up $0.11) and the Chinese Yuan finished at 6.66 per US Dollar (down 0.02).

The Cattle on Feed Report released Friday, July 29th was somewhat Bullish.  The Cattle on Feed number was 101.2% of last year versus a trade estimate of 101.6%, Placements were estimated at 103.0% versus the trade’s estimate of 106.4% and June Marketings were estimated at 109.4% versus the trade estimate of 109.0%.  Beef and Pork stocks are up, so maybe this positive Cattle on Feed Report will put a Bullish tone back into a much-oversold market.

Live Cattle futures were higher for the week gaining $3.80 to $4.60; Feeder Cattle were $6.15 to $9.60 higher, and Lean Hog futures were $0.10 to $1.53 lower.  August Live Cattle closed at $117.68, up $4.60 and October closed at $115.53, up $3.80.  August Feeder Cattle closed at 149.65, up $9.60 and October Feeder Cattle closed at $143.88, up $6.15.  Lean Hogs were lower.  August closed at $67.45, down $1.53 for the week.  Cash Hogs are called steady to $1 lower on Monday and Cash Cattle are called steady to $2 higher after late week trades at $187-189 in the beef and $114-115 live.  The Pork Cutout finished the week at $76.95, down $3.52 for the week.  Beef Feedlots are asking $118-120 in the South and $190+ in the beef after seeing some offers late week trade at $187-189.  Choice Beef closed at $199.00, up $0.85 and Select Beef at $190.20, up $0.10 for the week.  The Choice:Select spread ($8.80) has narrowed considerably from spring markets that saw the Choice:Select spread trade out to $26.00+.  The conclusion to be drawn from this spread narrowing is that we are having issues with the sale of the higher value middle meats and that we are still moving hamburger and the cheaper cuts fairly well.  The biggest risk to Feeder Cattle prices is the possibility of a summer drought that dramatically increases feed costs.  This perceived risk is rapidly fading away with every rain shower and additional day without extreme heat in the Corn Belt.
Be sure to check out our website at www.buchheitagri.com and see the marketing information available.  If you scroll down on the front page you will find our market info page supported by AgriCharts.  If you examine the left hand side of that page you will discover the options that allow you to create price graphs or charts and also to check on historical spread information.

Call us for help with marketing decisions or help in preparing crop programs!  A DP program for those producers wanting to wait for a better day in the markets is available.  Check our website or call us for quotes on DP programs.  We can help develop a marketing plan and a floor price program.  Call Katlyn, Chad, Eric or Dave at 800-622-7937, Shon at 573-667-9921 or 768-0489.