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Closing Comments

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Closing Comments

USDA announced it will begin offering farm ownership microloans, creating a new financing avenue for farmers to buy and improve property. They anticipate microloans to be helpful to beginning or underserved farmers, U.S. veterans looking for a career in farming, and those who have small or mid-sized farming operations. Microloans have helped farmers and ranchers in the past with operating costs, such as feed, fertilizer, tools, fencing, equipment, and living expenses, but will now expand to help with farm land and building purchases, and solid and water conservation improvements.
Estimates out that funds were net buyers of 10,000 corn futures, 4,000 soybean futures and 3,500 soyoil contracts.
Australian Bureau of Meteorology saying that they see El Nino likely ending in 2q with a potential La Nina to follow. Also saying that ocean temperatures have dropped by 3 degrees C since late November and so have sea surface temperatures.

Corn

Corn edges higher on small short covering.
Corn rally today linked to short covering by fund managers as well as reports of producers not willing to part with bushels at these levels. Corn has made it through a resistance area from last week’s high and the high of the crop report to put thoughts of 3.80 as next resistance area off March futures.
Export shipments have continued to hold steady over the last few weeks, but a larger pace is still needed. South Africa’s Ag Minister said that the country would likely need to import 5-6MMT (200-240 mln bushels) of corn, with supplies likely to run out by September due to drought. There also was a private sale of 110,500 mt of corn delivery announced to unknown destination earlier in the day.
Informa Economics estimates US corn planting acreage at 88.869 mln acres vs. previous estimate of 88.93 mln.

Soybeans

Soybeans firmer on short covering and soy oil, but soy meal stagnates.
Soybean inspections were a little stronger than last week and overall demand has remained at a steady level. Some of the private analysts in Brazil have continued to slowly trim expectations of the crop size sighting that Mato Grosso could also cause further losses, also saying the crop is much worse than it was last year in the state. Overall Brazil is still expecting a bigger crop than last year with other growing areas doing better than last year.
On the technical side, soybeans were also able to close above a major trend line today and may have fund managers looking for more short covering in the week. Seasonals tend to perk things up in February and March and they might be looking to stay ahead of that given their record short position.
Informa Economics forecasting US soybean planting acreage at 85.23 mln acres vs. previous estimate at 84.54 mln.

Wheat

Still caught at resistance on the charts keeping the rally from Friday in check.
Informa Economics forecasting 2016 US Wheat plantings acreage at 51.1 mln acres.
Russian Ag Minister is recommending either reducing or ending export tax on grains, with the hope of getting approval by Jan 31.

Livestock

Cattle stronger while nearby hogs mixed after posting new highs.
Cattle seeking new direction following limit down last week. Gaps on the charts from Friday’s action have been filled by today and we have also retraced around 50% of the recent rally from December. Tomorrow’s action will be key for short term direction of either a possible new low or rally back to first of the year high.
Reports that Iowa farmers have ramped up construction of swine farm buildings as they look to capitalize on cheaper feed and stronger demand for pork from China and Mexico. Last year, 280 hog barns totaling 1,250 head each, up 60% from 2014, were built in the state. Some concerns that the additional buildings would add to further drop in hog prices, but the domestic demand increase for feed would be welcome.

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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Aaron Hodge | Market Associate
WATER STREET ADVISORY(r) | www.waterstreet.org
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