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Closing Comments

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Closing Comments

Equities off their daily lows, but extend losses on growing global demand and debt concerns. Weakness in stock markets and energy market weighed on the soybean complex today.

Crude oil new lows, Heating oil new lows, Unleaded holds yesterday’s low, Ethanol futures higher for the fifth day in a row.

Corn

Corn hasn’t had a lower close in seven sessions as fund short covering continues to support the market.

Corn closed at its highest level in nearly a month on continued short covering and technical buying supported by increased export demand and ethanol futures.

Corn’s strength has come despite weakness in crude oil and has gained on wheat and soybeans as speculators unwind their recent record large ‘short bets’.

USDA reported a flash sale of 243,100 mt to Mexico for 15/16 while overnight South Korea purchased more US corn. The sale announcement was the third in a week.

Higher prices has been met with farmer selling, softening basis offers in some markets.

Open interest has been flat to slightly lower suggesting the rally is more short covering than new longs coming into the market. Stochastics are now into overbought area which should limit the length of this current run without a consolidation period or set back.

Soybeans

Ample supplies brought profit taking into the soybean market following recent strength.

Weakness in the crude oil market and continued expectation of the large Brazilian soybean harvest pressured soybeans as the board crush margin is holding as some of the lowest levels for this season over the last 10 years.

Analysts at Agroconsult cut their forecast for Brazil’s crop to 99.2 mln tonnes from their 100.6 October estimate. However this is still a record crop that well surpasses last year’s 96 mln tonnes.

In China though, they are expected to import record volumes of oilseeds as crushers take advantage of cheap overseas supplies – making up for the drop of imports of DDGs. Soymeal output there increased 10.3 percent in 2015 – driving soybean demand up 14.4 percent last year.

Technically, March soybeans were able to hold 8.71 support for now but are at risk of further weakness on good Brazilian weather. Above the market is still a gap to 8.91 from the expiration of the January contract which could yet be attractive to the market.

Wheat

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

Some talk of severe cold across China’s wheat growing areas where there is poor snow cover but overall winter wheat conditions look ok.

Paris’ Matif wheat into new lows again on brimming EU wheat supplies and Russian ruble into new lows.

Colder weather in Europe is helping wintering for the French, German and British crops – but cold temperatures in Poland have caused an unknown amount of damage.

FranceAgriMer rated 98 percent of the soft wheat in good or excellent condition as of the end of November and will resume ratings in February.

Livestock

Meat complex recovers early losses after struggling against equity and energy markets.

Equity markets and falling energy prices pressured the cattle market out of the gate following lower wholesale beef values. Negotiated cash trade of cattle has been at a standstill in all regions with the most recent established market at $134 last week in the Southern Plains.

Cash hogs around the Midwest sold 50 cents to $1 per cwt higher as a seasonal decline in supplies and wintery weather slowed delivery in some parts. Weekly drop in hog weights implied producers are on time in moving pigs to market, helping to underpin 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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