Morning Commentary

Sept corn down 7 ¼ at $4.3375

Aug beans down 10 at $8.9175

The DOW is up

USD is stronger

Crude oil up $.35 at $59.93

Good morning,

Corn traders continue to debate U.S. yield and total production. Somewhat surprisingly, the USDA’s weekly crop condition report showed a net overall improvement from last week, jumping from 57% to 58% rated “Good-to-Excellent” vs. 72% last year. The trade is also deeply debating the fact just 17% of the entire U.S. crop has entered the “silking” stage vs. 42% on average.

Soybean bears are talking about yesterdays weak NOPA crush number and a sightly improved weekly crop-condition report. The crush number was the weakest in the past couple of years. While the USDA’s Crop Progress Report showed a slight improvement jumping from 53% to 54% rated “Good-to-Excellent” vs. 69% rated GD/EX last year. States showing some of the worst coverall conditions the past several weeks, such as Illinois, Indiana and Ohio, are starting to show some small signs of improvement.

Cattle Comments: Cash trade advanced last week for the second consecutive week and did so on larger volume than the week prior. The industry continues to expect better prices and news as we move forward and many are hoping summer lows are behind us. The northern fed supplies are abnormally smaller while the southern supplies are much larger than typically expected. With a choice-select spread of 24.01/CWT the packer is working diligently to procure better grading cattle out of the north at this time. Furthermore, cattle feeders remain current as a result of the strong basis and weights are average to below average from south to north. The beef cutout lost approximately 5.00/CWT last week and is expected to lose additional ground this week. As mentioned in previous commentary, the sluggish tone to the beef market is not out of the normal for this time period. The question will be, how will this seasonality affect margins, slaughter totals and cash market leverage? Cattle on Feed and Cattle Inventory reports are due out this Friday at 2pm central. The inventory report is inconsistently monitored across the industry, but non-commercial traders tend to give it credence and watch for macro trends/shifts. Futures markets have rallied quite nicely over the last couple of weeks. The current levels are viewed as fairly significant resistance because of the May highs and upper end of the spring/summer trading channel. The shorter term momentum has shifted higher for now, but we are technically overbought at this time. Something to keep an eye on is the daily deferred LC charts (Dec, Feb, Apr) suggest that an inverse head-and-shoulders pattern may be developing and taking out this resistance would project an additional 2.00-3.00/CWT rally. Open interest between Aug19 LC and Oct19 LC has swapped in the last several sessions with long roll moving out of the spot contract. The winding down of the roll will possibly support the front spreads as basis strengthens and pressure from long roll subsides. Total open interest has declined from over 450,000 in April to 332,000 currently. We are nearer a more normal open interest level, but could certainly lose another 30,000 before any concern will arise. Trey Warnock-  Amarillo Brokerage Company


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