Futures File

May 22, 2015

Soybeans Stuck Lower

Soybean prices have collapsed to a seven-month low this week on expectations that this fall’s US bean crop will overwhelm global markets. The USDA recently predicted that global stockpiles will reach an all-time record before the US harvest this fall on the back of rising production in Brazil and Argentina, the world’s biggest growers of soybeans, after the United States.

Meanwhile, the US is prepared to grow another large soybean crop, and it’s off to a good start. Just like corn, soybean planting is well ahead of normal pace; analysts expect that the USDA’s next weekly crop update will show well over half the bean crop planted.

While some weather concerns linger, especially for farmers in Minnesota and the Dakotas who got slammed with freezing temperatures this week, the outlook is good for the bean crop, and bad for prices. Without increased soybean demand from the livestock or food industries or a serious threat to production, many fear that prices will languish.

Corn prices remain under pressure near $3.60 per bushel as the crop is almost completely planted and looks to be in good shape. Meanwhile, wheat is holding onto last week’s big rally, trading Friday for $5.12, as weather issues still plague the market.

 

Crude Gushes Higher

Crude oil prices rose for the tenth consecutive week, trading Friday near $59.75 per barrel.

On the domestic front, stockpiles of crude oil have declined for three consecutive weeks, indicating that the record-breaking crude oil glut may be waning as US drillers cut back production.

Globally, prices were sparked higher by news that the Islamic State is continuing to gain ground in Iraq, while the Iranian navy is threatening to interrupt oil shipments out of the Middle East, either of which could pose dangers to global oil supplies.

 

Cattle Supply Remains Tight

US cattle inventories are continuing to remain constrained, despite multiyear efforts to boost the US herd size to meet strong meat demand.

On Friday, the USDA released its monthly Cattle on Feed Report, which showed only a one percent growth in the total number of cattle in feedlots over the last year, an indication that beef prices could remain elevated in coming months. As of midday Friday, live cattle for delivery in June were worth $1.52 per pound.

For over 18 years, Walt taught his method of trading at Purdue University. His comments on the markets have been featured in USA Today and other national outlets.

Walt's weekly commentary has been published for nearly 25 years. Futures File, written on Fridays for Saturday publication, provides a brief summary of commodity futures market highlights for the week.