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Closing Comments

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Closing Comments

Corn and wheat gained on soybeans for the second day in a row as the trade looks for more acres to shift from corn to soybeans on the improved profitability of soybeans and the delayed planting of the last 1/3 of the US corn crop.

Today was the last trade day for the May grain contracts.

Corn traded relatively quiet today, but supported on continued fund buying and slow farmer selling. A Chinese news outlet posted a story about the poor quality of Chinese corn reserves creating hog production issues because of the toxins in the corn. Funds were reportedly buyers of 7,000 contracts of corn in today’s trade. CFTC data showed Managed Money as of Tuesday (which includes the USDA report day) reduced their net long position by -28,064 contracts, leaving them net long 42,969 contracts. Interestingly the speculative position showed a loss of -43k net longs yielding a net long of only 14k – apparently Managed Money is more interested in holding on to their longs than the retail speculator.

Technically the corn market finished the week well. July was able to close both Thursday and Friday above the Tuesday report day high as well as the 200 day moving average. If July can trade above the 3.95 area convincingly next week, expect more strength to follow.  

Soybeans continued lower on additional profit taking after Tuesday’s post report surge in the soy complex to a 21 month high. Pressure continues to weigh on soybeans as weather has allowed Argentine farmers to return to harvest and the growing chatter of switching of US corn acres to soybeans – perhaps 2 to 3 million acres. The board crush profitability traded at the highest level for 2016 as meal and oil futures have held strength relative to soybeans. NOPA April crush will be out Monday with the market anticipating 147.7 mln bu vs 150.3 a year earlier. Argentine dock workers reportedly ended their strike after one day and have moved back to the bargaining table.

July gained 30 ¼ this week, off the report day highs but in the top half of the range nonetheless. The weekly moving averages and indicators continue to have a lot of momentum up – however the Stochastics are flattening out, the RSI is well overbought and the weekly has encountered the 89 week upper Bollinger resistance. The soybean market is due for a breather, but soy meal has to give up before that can happen.

Wheat fundamentals continue to be bearish as the balance sheet looks for US wheat stocks to reach a 29 year high thanks to slow exports and cooperative weather. Short covering following yesterday’s technical supportive action helped provide a generally supportive trade today. Chicago July wheat gained 11 cents for the week, KC picked up 2 ½ and September Minneapolis actually lost ½ cent. Kansas City looks to have bottomed technically for now, the question will be what kind of follow through it can find in this bearish environment.

Cattle and feeders recovered much of the early session steep losses to close the day mixed. June cattle reversed after not being able to close the gap left on the chart from Monday morning’s open. If corn continues to move higher, expect more pressure on feeders but gains in cash prices and wholesale beef should support live cattle next week.  

Hogs traded lower, led by the June contract, despite the cash market trading at a premium to futures.

 

New crop soybean/corn ratio:

Closing Market Snapshot

 

 

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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