AgriVisor Morning Marketwatch

Monday, July 25, 2016
   ***Good Morning***

***** Grains are mixed to slightly higher to start the day; soybeans fractionally changed, corn 1-2 higher, with wheat 6-7 higher. *****

   # Wheat is leading the way, with concerns about the European crop continuing to reverberate throughout the trade.  Paris wheat futures are still leading the way, with their premium to Chicago now the widest since 2003.  Our winter harvest now being 80% complete(numbers later today), is taking some harvest hedge pressure off the market too. But the focus is on EU, France in particular, both quantity and quality.   Some have dropped French yields more than 20% and production under 30 mmt.
   # Amid this, expectations for the Russian crop continue to rise, with some estimates now as high as 67 mmt.  Australian expectations are edging higher as well.  
   # Friday’s trader data will loom large in the mix.  Friday’s data showed hedge funds held a record short futures/options position in Chicago wheat, adding potential buying fuel to any rally.  Hedge funds shifted slightly short in corn futures/options.  They trimmed soybean positions, but still hold a sizeable long position(although we suspect the late week break was more fund liquidation).
   # There’s lots of discussion about Chinese govt auctions for corn and soybeans, a discussion that will be sustained with each new auction result. While corn is important, we do think the trade might be exaggerating the implications of the soybean auctions.
   # Crop condition ratings will be out later today.  The mixed variables of weather, heat vs. rain, make the change a hard call, but we wouldn’t be shocked at a 1 point dip in the ratings.  They will still be high, sustaining corn/soy yield optimism. Spring wheat ratings could drop slightly as well, but it’s a harder call with the crop maturing.  Harvest has started in S. Dakota. 
   # The 6-10 day outlook for temps has a donut hole for normal temps in the heart of the Corn Belt, and warmer temps around it.  Precip is normal/above normal.  The 8-14 day shifts to warmer than normal across the eastern two-thirds of the country, but especially the South and East.  Precip is forecast above normal across much of the Midwest, but the Southern Plains is showing a drying trend. 
   # The Fed watch is ramping up again, with analysts trying to decipher whether they might raise rates.  The FOMC will meet this week, with analysts watching their post-meeting comments for clues about changes coming in Fed policy.  BOJ meets at week’s end as well, with eyes shifting to them as the week concludes for policy clues. The Dollar held near steady at the higher levels of last week in the overnight/early morning trade.
***** Cattle should start higher; lean hogs slightly higher. *****  

   # Wholesale beef was slightly lower at week’s end.  Cash cattle prices were still soft late week.  But Friday’s Cattle on Feed report, especially for placements, was positive.  Heat/humidity is reducing feedlot performance. 
   # Wholesale pork was lower as well at week’s end, as were cash hog prices. Data is suggesting the seasonal low in supply is behind, although numbers won’t pick up significantly until mid-August at soonest.  Weather has been impacting animal performance.