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Closing Comments

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Closing Comments

Corn finished the week on a high note with July up 4 ½ today and +18 ¼ for the week. This is the highest front month close since July 17th. Strong export sales demand, illustrated by 383,000 tonnes sold in just the last two days, coupled with the technical buying ahead of the long holiday weekend. The strong demand structure coupled with uncertainty over summer weather prospects during the transition from El Nino to La Nina is providing additional ‘risk on’ attitude for the trade.

This week’s Commitment of Traders report showed Managed Money added 15,718 contracts to their corn positions, leaving them net long +74,560 contracts.  

Traders went into the long weekend in ‘buy mode’ – now the question will be how they come out of the weekend. The 4.15-4.25 area will be a critical zone for both the July and December contracts to prove if they can get through or stall out. December is now only trading at a ¾ cent carry to July as bull spreads have propelled the front month.

Soybeans closed higher despite lower trade in the soy meal market after meal put in its 20 month high yesterday. Concern in the soybean market was underscored by the Buenos Aires Grain Exchange noting that while farmers in Argentina have harvested 72% of the crop, the flood damage has been severe not only in crop loss and lower quality – but in delays of getting the harvest to the market. USDA noted that China bought 110,000 tonnes of soybeans for 16/17 while another 100,000 tonnes were bought for unknown destination for 16/17.

Commitment of Traders showed an incremental drop of -2,980 in the net long position held by Managed Money leaving them net long 202,173 contracts.

Today’s lower meal and lower board crush margin could be a warning shot to the bulls – but despite this the July contract was able to post another new high close for this run. Next week’s meal action will drive soybeans – which for now look reluctant to give up price easily.  

Wheat futures were lower to mixed today as July Chicago closed ¼ cent higher but KC lost to Chicago for the second day in a row down 2 ½ in July while Minneapolis saw the largest decline of -6 ¾ in September. The hard red winter harvest is underway in the southern Plains with some loads being reported in central Texas and southwest Oklahoma – but wet weather has been delaying rapid progress. The Chicago contract has been supported the last couple days on short covering of fund positions and the increased likelihood of use as a feed source as corn strengthens.

Commitment of Traders report showed that as of Tuesday, funds had added another -17,062 contracts to their net short position in Chicago, leaving them net short -89,636 contracts.

Technically the Chicago July contract has been in consolidation mode for more five months. Typically the winter wheat markets don’t finally bottom until they get past the first part of June, but the market for now look reluctant for new lows. The weight for the market will not only be a potentially higher dollar but the ongoing ample domestic and foreign supplies.

Cattle gained ground for the second session on technical buying and hopes that meat demand would increase from summer grilling. Prices for wholesale beef and pork declined going into the holiday weekend as retailers had already bought what they needed for the weekend.

Hogs were mixed with cash hogs mostly $1 lower in Illinois ahead of the shortened slaughter schedule.

 

A note of thanks to all veterans and families of veterans as we remember their sacrifices that support the freedoms we enjoy. Thank you.

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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