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Closing Comments

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Closing Comments

The number applications for unemployment benefits unexpectedly increased this week, a sign the labor market momentum may be starting to cool.

Data showed that $380 billion in capital spending projects have been cut since 2014. This has provided some support today to crude as Barclays expect oil and gas companies to cut spending on exploration and production by 15 to 20 percent this year. The average breakeven on delayed projects ins $62/bbl with the high priced deep water drilling, shale and oil sands projects being the first to be shelved.

Corn

Flat fund action in corn leaves March unchanged.

USDA export sales for corn showed 26 mln bu for the week ending Jan 7. Close to trade expectations and the USDA pace, but it didn’t help gain ground on the pace running 25 percent behind a year ago.

The Rosario Grain Exchange raised their Argentine corn estimate to 23.8 mln mt, up from their last estimate of 20.2 mln mt. Growth in planted acres is credited with the increase. USDA projection is for 25.6 mln mt.

March gained on deferred contracts matching yesterday’s close. Nearby selling resistance to be found 3.65-3.70 above the market.

Soybeans

Soybeans found small additional short covering on weaker meal and stronger soy oil. New lows in March board crush margin.

USDA weekly sales reported soybeans at 41 mln bu – coming in at market expectation but has commitments off 11 percent of last year’s pace.

NOPA crush report out tomorrow anticipates 157.5 mln bu, off from last year’s same month of 165.4 mln but up from November of 156.1 mln bu.

Safras says Brazilian farmers have forward sold 49 percent of their new crop soybeans compared to 39 percent at the same time last year.

Continued short covering in March should have upside target area of 8.85-.9.00. January futures go off today, leaving March now the front month in soybeans.

Wheat

Wheat weakest grain on lower EU prices and technical selling.

New contract lows in Paris, technical selling, ample global supplies and ho-hum demand for US wheat kept the wheat market under pressure throughout today’s session. Inability to take out Tuesday’s high brought in technical selling as the wheat exchanges ran into trendline resistance.

USDA weekly sales for the week ending Jan 7 showed 10 mln bu of wheat – at expectation but keeps the pace 11 percent behind last year.

Strength earlier this week came from the USDA surprise to traders with its forecast for the second lowest US winter wheat plantings since 1913. However, USDA noted that Russia will overtake the US as the world’s top wheat exporter for the first time since the agency started the records in 1960. Thank the weak ruble / strong dollar.

Argentina’s Rosario grain exchange left its estimate of the country’s 15/16 wheat crop unchanged at 9.6 mln tonnes.

Livestock

Cattle lower on investor uncertainty while hogs support on firm cash values.

Early afternoon trade in Texas had fed cattle trading around $135/cwt compared to last week’s $133/cwt.

Box prices held their ground and closed the day mixed with choice holding steady and select posting gains of a dollar. Packers are enjoying good margins and will watch slaughter rates in order to manage inventory to protect gains.

Cash hogs in the Midwest on Thursday sold mostly steady to up 50 cents/cwt with packers struggling to fill inventories as colder seasonal temps temper available supplies. Cash hogs have climbed faster than wholesale pork values, cutting into profitable packer margins.

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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