Funds Surprise Trade With Net Long Positions
Jul 17, 2017
Good Morning! From Allendale, Inc. with the early morning commentary for July 17, 2017.
Grain markets are reacting to the larger than expected net long positions by managed money funds and weather models that suggest moisture for the for the row crops.
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Model forecasts for North America July 24-31 offer additional rain in the Midwest with southwestern areas “possibly” getting some temporary relief from dryness. World Weather, Inc. is a little leery about buying into the wetter forecast for the southwestern Corn Belt and caution is advised. A high-pressure ridge aloft is not likely over the heart of the Midwest during the next seven days. World Weather Inc. says there may be some short-term ridge building next week across the Midwest, but it should not last long. This week’s ridge will extend from the Northwestern Plains into the Central Plains and Southwestern Corn Belt.
CFTC Commitment of Traders report showed managed money funds were net buyers of 263,625 contracts in the 3 major grain contracts (corn, soybeans and wheat). They were net buyers of 147,679 corn contracts making them net long 100,964. They bought 89,264 in soybeans leaving them net long 19,048 contracts and bought 26,682 wheat contracts making them net long 44,685 contracts.
NOPA crush report is expected to show 143.093 million bushels processed in the month of June. That would be 1.3% under last year and the fifth month in a row of below last year production. USDA’s current whole-year goal was just lowered on Wednesday from 1.910 to 1.900 billion bushels. That goal is 0.7% over last year.
Crop condition reports this afternoon are getting mixed ideas from trade. Heat in some areas will cause conditions to drop while the rain and cooler temps will improve crops in other areas.
US oil rig count increased by 2 last week to 765 pushing US production 9.397 million barrels per day.
US Dollar value drops to levels not seen since September 2016. Friday’s US CPI has thrown cool water on the prospects for the Fed to raise rates again this year.
U.S. markets this week will focus on anticipation of next week's FOMC meeting and this week's relatively light U.S. economic schedule.
Beef cutout values continue to slide and packer margins erode which is likely to create resistance to live cattle prices in the coming weeks. Fed cattle supplies are expected to increase as beef demand slows into “dog days of Summer” (typically the worst demand of the year). However lower prices should increase retail interest in beef.
August live cattle futures have resistance at 118.80 and trading through that area could send prices to the gap left at 120.50 level. Support crosses at the 20-day moving average at 115.90.
Ohio State officials have ordered the slaughter of nearly 300 hogs at Clinton County Fair in the state after at least two animals tested positive for swine flu. (Reuters)
August lean hog futures are now the lead contract after July expired on Friday. Currently the August futures is about 13.00 points below the cash index.
Lean hog futures closed below key moving averages on Friday but has remained in a trading range. Support comes in at 77.90 with first level of resistance 82.00.
Dressed beef values were lower with choice down .50 and select down 1.84. The CME Feeder Index is 149.74. Pork cutout value is up .81.
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