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Closing Comments

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Closing Comments

Numbers in the weekly EIA Petroleum report were bearish once again with builds again exceeding pre-report estimates. Crude oil inventories were little changed, but gasoline stocks were 8.4 mln higher and distillate stocks were 6.1 mln higher. The total across the three categories were a combined build of more than twice what the market anticipated. There was a 4 percent bounce in gas demand from last week but is still 4 percent below a year ago.

Corn

Corn edges higher on small short covering.

Lower grain stocks in yesterday’s USDA Dec 1 stocks helped corn garner its best close of 2016 but the ample supplies and weakness in wheat kept it from challenging the post report high.

Weekly EIA ethanol production was up 7,000 bbls to 1,003,000 bbl per day while weekly stocks were up 246,000 bbls at 21.35 mil bbls. Ethanol grind was 14.938 mln bu/day which is +2.6 percent from this week last year. This week’s report has production coming in at the third highest of all time despite the pressure in ethanol margins.

The Tuesday report showed record large US corn supplies but Dec 1 stockpiles of 11.212 bln bu, nearly identical to the Dec 1, 2014 stocks. March 2014 futures were trading 3.85 ¾ on this date a year ago.

Brazil meat industry group is predicting higher domestic meat prices as grain export market demand heats up leading to potential corn shortages in southern Brazil. The group said they don’t believe the first season corn crop will be sufficient to meet domestic and surging export demand. Higher Brazilian corn prices helped with a generally supportive tone.

Soybeans

Soybeans firmer on short covering and soy oil, but soy meal stagnates.

Yesterday’s drop in ending stocks below analyst expectations provided follow through support in the soybean market. Soy oil futures rose supported by bargain buying after hitting a seven week low yesterday while meal was weak on low demand along with unwinding of long meal/short oil spreads.

China imported 9.12 mln tonnes of soybeans in December, the second highest monthly level on record and taking total 2015 imports to a record high of 81.69 mln tonnes.

NOPA crush out on Friday. December crush expected to be 157.8 mln bu based on 5 estimates. Range of 153.7 mln bu to 161.0 mln bu (median of 159.0). Nov crush was 156.1 mln bu, this would be up 1.1% but down 7.574 mln bu from Dec 2014.

Wheat

Profit taking on yesterday’s fireworks leads wheat lower.

Yesterday’s smaller than expected US winter wheat seedings provided strong support yesterday, but ample global and domestic supplies kept follow through today at bay.

FranceAgriMer raised its forecast for French soft wheat stocks as it cut its export outlook, reminding the trade that the EU’s biggest grain producer is struggling to move out a record crop.

India’s wheat output is expected to fall for a second straight year in 2016 after a series of bumper harvests since 2007 due to an unusually warm winter in central and northern India.

Livestock

Cattle mixed while nearby hogs softer after posting new highs.

Cash cattle in KS traded lightly at $133 per cwt, steady from a week ago while Nebraska brought $134, up $2 from a week ago. Bullish traders believe insufficient inventories will support values into the end of the week while bears believe packers will avoid raising bids given Tuesday’s wholesale beef price setback.

Cash hog prices in the Midwest gained as much as $1 per cwt as supplies tighten seasonally and packers prepare for an expected big Saturday slaughter.

Smithfield food has added hogs to Saturday’s kill to make up for Monday’s downtime after technical problems halted hog processing at several of its plants.

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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