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Closing Comments

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Closing Comments

Concerns about economic weakness in China, improving SA weather, stronger US dollar and general anxiety over global demand for US commodities had the start of 2016 trading off to an inauspicious start with March corn and wheat into new lows.

China kicked off the scary start to 2016 with a new report that manufacturing had contracted for the 10th straight month- sending Chinese stocks falling so dramatically that trading was halted for the first time ever. The Dow declined as many as 467 points and briefly fell below the 17,000 level for the first time since October.

Corn

Funds sell to start the year – adding to already large short position reported by CFTC. Farmer selling light.

Export inspections came in a disappointing 12.8 mln bushels – nearly half the four week average a third of the needed shipments for the USDA pace. Holiday shipments typically fall off, but this was especially disappointing considering the recent gains in shipments the past few weeks.

This simply added to the already bearish mindset of funds who reportedly sold another 14k contracts today in addition to the large short position reported in today’s Commitment of Trader’s report. As of December 29th, Managed Money with futures and options combined showed a net short position of -136,111. An increase in short position of more than -53k contracts and challenging the second shortest position of -140,000 from this past May and the shortest of -180,000 from the fall of 2013.

In Argentina, sub-secretary for agricultural markets stated corn output would fall to 26 million tonnes from the 33.8 mln produced in 14/15.

Historically the front months traded in corn have run out of sellers below 3.47 in May, June, August and September. Today’s low of 3.50 ½ March is back in that same area that has previously proven support.

Soybeans

Mato Grosso rains and expectation of Argentine export dominance kept pressure on soybeans.

Weekly export inspections for the week ending December 31 came in at a respectable 55.5 mln bu – above the four week average and counter to the seasonal holiday drop, but it wasn’t enough to overcome the expectation for improving crop conditions in SA and the anticipation of SA dominance in export business from here forward.

Brazil’s Mato Grosso region has received much needed rain over the past week with more on tap to relieve the area that has been in desperate need of water.

Argentine government’s reduction in export tax, devaluation of currency and new ability to turn pesos into dollars has put Argentina on the global export map as the low cost provider.

Soy oil broke December lows on weaker palm oil prices and meal continues to struggle to stabilize on weak interior demand and competition from Argentina.

CME Group stated they are declaring force majeure for soybean shipping stations because of Illinois River flooding.

Wheat

Fund selling and removal of winterkill fear had wheat in the loss leader position in today’s trade.

Higher dollar and continued competitiveness from Argentina and Black Sea coupled with ample global supplies moved wheat lower all session. Temperatures in Russia and Ukraine were expected to climb this week after falling sharply at the end of December. The less severe cold, coupled with the arrival of snowfall could limit damage to wheat crops.

Commitment of Trader’s report showed Managed Money added nearly -16k contracts to their futures and options position for a large net short position of -83,120.

Livestock

Cattle and hogs recover early session weakness. Cattle find strength in beef values and pork find support from good packer demand.

Boxed beef cutout values showed sharply higher on moderate to fairly good demand and moderate offerings. Select and Choice chuck, round, and loin cuts firm to higher while rib cuts steady to weak.

Cash hogs traded mostly $1 per cwt higher in the Midwest today, lifted by strong demand from packers who were likely to boost slaughter rates this week following reduced kills during the holiday season.

Closing Market Snapshot

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All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading and may not be suitable for all investors.

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