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Closing Comments

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Closing Comments

China’s stock market weakness and tripping its ‘circuit breaker’ to halt trading started the markets out on the defensive and kept pressure on the equities throughout the day. Adding to the weakness, WTI crude oil took out its low from 2008 and was found trading at 2004 levels on the global supply glut and demand concerns. Crude and energies did recover off their new lows, showing some selling exhaustion at these levels – but a weak market nonetheless.

Global market anxiety did has gold higher for the fourth day in a row from a flight to quality leaving it trading at the highest level since early November. The US dollar traded steeply lower.

With next Tuesday’s USDA report coming and the large short position held by funds, it’s been disappointing there hasn’t been more sustained short covering – but for now the weak energy prices, Argentine farmer selling and cooperative Brazil weather is keeping shorts comfortable with their position.

Corn

Corn prints new lows but struggles to find follow through selling ahead of Tuesday’s USDA report.

Option volatility continues to grow ahead of the USDA report. The large short fund position and historical lack of selling below the 3.50 futures level is providing support but not yet creating short covering strength.

This week’s corn export sales came in at 10 mln bushels, below the expectations for the typically slow sales week.

For next week’s USDA report, the trade is anticipating an almost unchanged ending stocks situation – leaving it at 1.785 with the guess range of 1.642 to 1.860.

Supportive in the calendar spreads is the strength in the March/May spread which has strengthened over the last seven sessions and near its upper end of the range – unfortunately the July/Dec spread is trading at new lows on the anticipation of amble old crop supply later this year but the need to defend new crop acres.

After closing in in the upper end of the range two days in a row – march corn has now crossed the stochastics for higher.

Soybeans

Soybeans stable on meal holding up and weaker soy oil prices.

Soybean export sales came in near expectations at 23.5 mln bu.

AGR Brasil raised their Brazil soy production estimate to 101.1 mln mt from 100.6 last month. The USDA Attache cut Brazil soy production to 98 mln mt but kept exports at 55 mln mt for 15/16.

In preparation for next week’s USDA report, the trade is expecting a soybean ending stock increase of 3 mln bushels from December to 468 mln bu.

USDA reported a private sale of 246,000 mt of soybeans to China for the 15/16 marketing year.

The smallest carry in the March/May carry in soybeans is an interesting and supportive feature. Now trading -2 ¾ at the narrowest level since September.

Wheat

Disappointing export sales didn’t keep wheat down, supported by short covering and technical buying.

Wheat is trying to come out of its oversold condition posting its third green close in a row following Monday’s break down in price. South America, Europe and Black Sea supplies and prices continue to make sustained strength difficult.

Support being found from technical buying off the lows and the expected short covering of the large short fund positions ahead of the USDA report.

This morning’s export sales of 2.8 mln bushels for wheat came in well below already low expectations.

Bueanos Aires Grains Exchange raised its forecast of Argentina’s 15/16 wheat output to 10.1 mln tonnes. Up from the previous estimate of 9.5 mln.

Chicago and Minneapolis let the price action today as wet concerns grow in soft regions and the need for quality supported spring wheat. .

Livestock

Cash price fears and technical selling weigh on cattle – pushing them limit down.

Weakness in the stock market, cash price fears and fund rolling out has cattle and feeders limit down across the board today and hogs generally weaker.

Trade sources report cash cattle bid at $133 in NE, but no trade reported. Concern is that grocers will push back against higher beef prices. USDAs export report for the week of Dec 31 showed a reduction in US beef sales of 400 tonnes in the previous marketing year

Hogs traded lower as most packers are thought to have enough for the rest of the week, but forecast for colder Midwest weather and supportive wholesale prices have somewhat underpinned prices.

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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