Morning Comments-Monday August 1, 2016

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Commodity Market                                                                  Monday August 1, 2016
Last week’s markets were SHARPLY lower for wheat, steady-higher for corn and soybeans. The energy markets were lower, financial markets lower and the Dollar Index was lower, closing the week at $95.52.  The US bond market continued to rally with the 10 Year Bond yielding 1.53% and the 30-year bond closed at 2.26%.  For the week, SEP Corn was 0.5 cents lower, closing at $3.345, AUG Soybeans gained 26 cents, closing at $10.325 and SEP wheat was 17.5 cents lower, closing at $4.0775.  For the week, Crude Oil lost $2.76, closing at $41.43.  The DOW lost 138 points, closing at 18,429 and the US Dollar Index closed at $95.52, down $1.94.  August Heating Oil futures closed at $1.3054, down $0.0514 for the week.  CBOT closes in the NOV-DEC contracts were $3.4275, $10.03 and $4.3575 for 2016 DEC Corn, 2016 NOV Soybeans and 2016 DEC Wheat, respectively.  SEPTEMBER 2016 soybeans traded 21.25 cents higher for the week and settled at $10.20.  MARCH 2017 corn closed at $3.515, unchanged for the week, MAY 2017 corn closed at $3.5725.  MARCH 2017 wheat lost 15 cents, closing at $4.6025, MAY 2017 wheat closed at $4.7375, JULY 2017 wheat closed at $4.805.  The Baltic Dry Index closed at 665, down 61 points from last week’s 726, 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 41.20% 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.  We received more rain than was expected last week and we are forecast to receive a fair amount of rain this coming week.  The rains have reduced the detrimental effect of high heat and they have in many cases lowered the high temperatures.  Many analysts are now starting to talk about the possibility of a national corn yield in the low 170’s per acre.  High ratings for soybeans at this time do not insure a high final yield.  Several private weather forecasters are calling for a return to high heat during the second week of August.  If the heat persists and we get into an extended dry period, we may continue to see soybeans rally.  If it cools off and we get some rain in the middle of August, we are most likely headed lower in the bean markets.  Most analysts agree that August is the month that makes or breaks soybean yields.  Only time will tell.
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, or you cab register online athttp://www.buchheitagri.com/cattle-call-registration/ it’s quick and easy!  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 energy markets are struggling with the huge crude oil inventories still remaining from the recent US fracking boom. Crude oil inventory numbers are declining, but we still are 12% above a year ago and 34% above the 5-year average.  Stockpiles of crude oil products remain very high along with gasoline supplies and distillates (heating oil and diesel fuel).  Distillate supplies are up 14.7% and gasoline stocks are up 8.8% over year ago levels.  Heating oil demand is expected to drop 2.4% this year and gasoline demand is estimated to rise 3.8%.  Natural Gas prices have risen about 50% between March and early July, but once prices reached $3, they have retreated back to $2.76 to $2.80 per MMBtu.  EIA estimates an average price of $2.36 for Natural Gas in 2016 and an average price of $2.95 in 2017.  It looks like we will have an opportunity late this summer to lock in fuel and propane needs.   The opening of the expanded Panama Canal allows the larger LNG cargo ships to traverse the canal at a great savings in both time and money.  A significant amount of the exported LNG this year has went to South America.  The trip from the US Gulf to Chile around the southern tip is 9507 miles and takes 30 days.  Taking the LNG through the Panama Canal to Chile shortens the trip to 3607 miles and 11 days.  LNG exports to Asia will be much more efficient utilizing the Panama Canal as well.  Previous options to reach Tokyo Bay were to go through the Suez Canal (Middle East) taking 47 days and covering 14,500 miles or to go around the Cape of Good Hope (Africa) and spend 50 days while covering 15,689 miles.  By shipping through the Panama Canal, the trip to Tokyo Bay takes 29 days and covers only 9214 miles.  This results in a freight cost savings of 20-25%.  It looks like we should have this same cost savings opportunity in grains and other products as well.
The US dollar was weaker and the US Treasury Bonds were strong with the 10-year bond closing at 1.53% yield and the 30-year bond at 2.26%. Mortgage rates were stable with a 15-year mortgage quoted at 2.69% and a 30-year mortgage at 3.43%.
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 (69 bid – 72 ask) and September corn barges are (72 bid -78 ask), October corn barges are (75 bid- 79 ask), October soybean barges are (87 bid-92 ask) and SEP wheat barges are (35 bid-53 ask) and OND wheat (60 bid-85 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 over the last three weeks and added 31,000 contracts to their short corn position to create a short position of 69,000 contracts net short.  Spec funds added 38,000 contracts to their long bean position to make it 120,000 contracts long.  The Specs added 10,000 contracts to their short wheat position of 137,000 contracts short.  The Specs finished the week, long 62,000 contracts of Soybean Meal.  August Soybean Meal was $3.30 per ton higher to close at $346.70, down $29 per ton from three weeks ago.  Richard Brock and Associates acknowledges that a severe drought could still develop over the next 4-5 weeks and change things, but he states that based on 6 million additional corn acres, planted early and in generally good condition could continue this major selloff in corn.  He also states that the current soybean price levels are tenuous and feels that they could trade lower again.  For the next 4-5 weeks the markets will be all about weather as the corn crop finishes off a potentially huge crop and the soybean crop will try to finish the reproductive and filling phases of what could be a huge crop as well.  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.
Several major foreign currencies were stronger versus the US Dollar.  The Euro finished the week at one Euro per $1.12 US$ (up 0.02).  The Japanese Yen finished the week trading at 102.01 per US Dollar (up 4.12).  The Russian Ruble finished the week trading at 65.79 Rubles per US Dollar (down 1.00).  The Brazilian Real finished at 3.24 per US Dollar (up 0.04).  The Argentine Peso closed at 15.00 (down 0.10).  The Canadian Dollar finished at 1.30 per US Dollar (up 0.01), the Mexican Peso at 18.76 per US Dollar (down $0.23) and the Chinese Yuan finished at 6.64 per US Dollar (up 0.04).
The Cattle on Feed Report released last Friday afternoon 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 Marketing’s 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 $3.13 to $3.65; Feeder Cattle were $2.85 to $2.93 higher, and Lean Hog futures were $3.83 to $6.30 lower.  August Live Cattle closed at $113.08, up $3.13 and October closed at $111.73, up $3.65.  August Feeder Cattle closed at 140.05, up $2.85 and October Feeder Cattle closed at $137.73, up $2.93.  Lean Hogs were sharply lower.  August closed at $68.98, down $6.30 for the week.  Cash Hogs are called steady to $1 lower on Monday and Cash Cattle are called steady to $2 lower after late week trades at $187-189 in the beef and $114-115 live.  The Pork Cutout finished the week at $80.47, down $8.90 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 $198.15, down $2.21 and Select Beef at $190.10, up $0.14 for the week.  The Choice:Select spread ($8.05) 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 is rapidly fading away with every rain shower and additional day without extreme heat in the Corn Belt.
Check out our Daily Grain Bids (updated every 10 minutes during the trading session) by clicking on: www.buchheitagri.com/biehle-grain-bids/  or www.buchheitagri.com/morehouse-grain-bids/  or feel free to call us at 800-622-7937 (ask for Katlyn, Eric or Dave) or call 573-667-9921 or 573-768-0489 and ask for Shon.
We are providing a DP program for those producers wanting to wait for a better day in the markets.  We can help develop a marketing plan and a floor price program.  Call Eric or Dave at 800-622-7937, Shon at 573-667-9921 or 768-0489.
We have updated our test plot results on our website.
You can check out our 2015 corn yields and some 2014 soybean and corn yields at:
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.