AgriVisor Morning MarketWatch

Thursday, July 14, 2016
***** Corn up 8 to 9; soybeans higher by 12; Chi wheat up 4 to 6. *****

   # Grains set up for a third straight day of gains.  Technical momentum is building on the rebound out of fresh contract lows for corn and wheat while soybeans bounce after a three-week corrective phase.  Action in outside markets is supportive.  A friendlier weather narrative remains the major driver.        
   # The outlook for a hot, dry last-half of July outweighs the currently-favorable weather setup.  Rain fell in wide coverage over the Corn Belt during the last 24 hours.  A large swath of central Illinois and central Indiana collected over an inch.  
   # Only a handful of spots across the Midwest run short of normal rainfall.  Pockets of dry cropland currently sit in southeast Iowa and west central Illinois with those areas having collected about 75 percent of normal precipitation totals over the last 60 days.  Drier conditions outside of the Midwest are notable in Texas and the heart of Mid-South region.  
   # This week’s export sales report featured another strong tally for corn.  New sales were 53.4 million bushels, evenly split between 2015/16 and 2016/17 marketing years.  The average trade guess called for something near 45 mbu.  Sales for soybeans were 13.4 mbu old-crop and 20.1 new, with the combined total slightly short of expectations.  Wheat sales were also a bit short of expectations at 11.7 mbu.  
   # Traders are bullish on the prospects for soy demand, agreeing that rising crush and export targets will lead to future cuts to the USDA’s 2016/17 soybean carryout estimate.  Tuesday’s WASDE report had that number rising to 290 million bushels.  Some of the most aggressive views already see it below 150 mbu.  
   # A bullish soy attitude has fund traders back to being net-long the oilseed by nearly 200,000 contracts, a level that had been maintained for several weeks before the post-July 4th washout.  The hedge funds hold a net corn long of approximately 120,000 contracts but also maintain close to a record net wheat short.
   # Wheat futures are still mostly playing tag-along with the corn market, not gaining a foot holding of their own despite a slightly improved outlook for feed use and export potential.  Better feed prospects were corroborated by changes made to the WASDE tables on Tuesday.  Exports are currently running at a pace comfortably above last year’s.   

***** August live cattle opening with a test of resistance from the major moving averages; August hogs start with a test from the 200-day MA. *****  

   # Cattle futures are enjoying a tentative technical bounce after having fallen again to new contract lows at the start of the week.  The fundamental outlook remains unfriendly as supplies continue to run high because of margins running high enough to keep marketings elevated.  
   # Falling cattle prices help pressure hogs at a time when pork production is expected to beat beef for a second year in a row.  Like for beef, exports are a silver lining for the pork market, relieving the domestic market from at least 5 percent more meat this year than a year ago.