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Closing Comments

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Closing Comments

Short covering was the feature in Chicago today as the market positions ahead of next Tuesday’s USDA report.

CFTC Commitment of Traders report showed Managed Money added to their already short positions as of Tuesday the 5th – details below.

Crude was relatively stable – albeit lower – while the dollar gave up nearly all of its early session gains and equities continue to suffer.

Corn

Corn finishes the week with short covering near the top if its weekly range.

March corn lost 1 ¾ cents this week, a considerable feat considering how it started the first day of the trading year. Short covering squaring in preparation for Tuesday’s USDA report lifted March futures 4 today and December corn 4 ¼.

CFTC data showed as Tuesday, Managed Money added another significant round of short positions – increasing by nearly -26k contracts to put their net short position with options at -161,988. Their largest previous position was the fall of 2013 at -180,627.

Technically the corn market was able to find support this week in the 3.50 area – a place that had previously run out of sellers. Tuesday’s report is the last real fundamental report the market will absorb this winter before preparing for spring acres and weather.

Soybeans

March soybeans add one cent for the week as the market contemplates the coming USDA report and pending South American supplies.

March soybeans continue to find support, or lack of willing sellers, below the 8.50 area for now as uncertainty over the upcoming USDA report, question over the amount of farmer selling out of Argentina and waiting on confirmation over the final outlook for Brazil’s crop.

AgRural estimates 1 percent of the Brazil soybean crop is now harvested. Early reports from the early harvest areas are disappointing because of the weather impact they experienced, but broader trends are unlikely to develop as weather patterns have proven favorable and the country is on pace for a 100+ mln mt crop.

Nearby resistance for March soybeans is 8.78 with longer term resistance around 9.00. Soybean meal must stabilize and rally for any sustained strength in soybeans to occur.

Wheat

Chicago wheat adds 8 ½ cents for the week, KC 4 cents and Minneapolis 7 3/4.

Short covering was the word in wheat today, leading the price action in grains in preparation for next Tuesday’s USDA report and wheat plantings.

USDA will release 16/17 winter wheat plantings next Tuesday. Their estimate is at 39.334 mln acres which would be slightly below last year’s 39.461 mln acres. HRW at 28.81 mln vs last year at 28.98 mln. SRW at 7.144 mln vs last year at 7.087.

CFTC data showed that as of Tuesday, Managed Money added another -16,836 to their short wheat position yielding a net short position of -119,842. -96,143 of that in Chicago wheat.

Chicago wheat will encounter nearby resistance Monday at 4.83, but the more significant resistance will be in the 5.00-5.15 area.

Livestock

Choppy session left Cattle and feeders to extend losses – hogs stable.

Expectation that up-trend wholesale beef values might soon top out and uncertainty for unsold cash cattle kept investors on the defensive today. Fund rolling, firm corn prices and the anxiety in the stock markets added to the weakness – especially in the feeders.

Traders noted fed cattle in Kansas have traded around $133/cwt – off a couple dollars from last week.

Boxed beef cutout values higher on Choice and sharply higher on Select on moderate to fairly good demand.

Hogs were somewhat lower as traders sold deferred contracts on the view that wintery weather may slow animal movement to market. Packers in Iowa/MN paid $50.79 for hogs, now 50 cents from Thursday. Wholesalers bought pork at $70.77, 99 cents higher than on Thursday, driven by increased costs for all categories. With good margins, packers may raise cash bids next week if weather becomes an issue.

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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