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Closing Comments

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Closing Comments

Corn, without a good story of its own, was pulled lower by the volatile day in soybeans, -4 ½ (Mar).  However, the weekly USDA export report was positive, with an announced 1.495 mmt (vs. expectations of 750K-1 mmt) in new business to destinations including Peru, Japan, Mexico, South Korea and Saudi Arabia.  Brazil planting is almost 93% complete while Argentina is still lagging, at 48% complete.  The Brazilian CONAB is estimating summer corn crop potential of 2016/17 at 27.06 mmt, down from the November forecast of 28.55 mmt, but still a 7% increase over last year. On the chart there was some selling exhaustion to finish today’s trade. Look for today’s low of 3.50 ¼ to be nearby support.

 

Soybeans look to be liquidating some length ahead of tomorrow’s USDA report, down 22 cents.  The USDA export numbers pegged soybean sales at 1.461 mmt, on the high end of the expected 1-1.5 mmt.  Soybean oil was 13,400 mt compared to the expected 0-40K mt and meal came in at 222,500 mt, at the high end of estimates.  The USDA reported the sale of 136K tonnes of soybeans to “unknown” and 20K tonnes of soybean oil to South Korea this morning.  Related to South America, the USDA ag attaché in Brazil estimates this year’s soybean crop lower than the last USDA, 101 mmt vs 102 mmt, and below most other opinions of around 103 mmt.  Exports are viewed to be 57 mmt vs USDA 58.7 mmt – last year was 52 mmt.  Soybean oil and meal were also both down today, -.69 (Jan) and -6.4 (Jan) respectively.  On the Jan chart, today’s weakness did hold up above the Dec 1 swing low, but this week’s inability to trade above the Nov high has bulls on alert.

 

Wheat prices reacted positively overnight and this carried over into today’s trading in the March contract, led by Chicago +7 ¼, and followed by KC +4 ¾ and MN +1 ½.  This was due in part to news from India that they will cut the 10% import duty on wheat effective immediately.  Some analysts see the potential for India to import up to 5 mmt this year which would be their largest imports since 2006/07.  Most of this wheat will come from Australia or the Ukraine, but it will help to relieve the burdensome global supply.  Weather is also a market influencing factor, as over the next 7-10 days, temperatures will plummet to at or below zero for much of the middle of the U.S., with little snow cover protection except for portions of the western plains.  The USDA reported wheat exports at a solid 503K mt, on the high end of the expected range of 300-600K mt. 

 

Live Cattle contracts on the CME were influenced by technical selling and Wednesday’s wholesale beef prices which dropped $1.57 per cwt, finishing -.125 (Feb).  Earlier this week, packers in the Plains paid $112 per cwt compared to $114-115 a week ago, according to feedlot sources.  The Fed Cattle Auction, which is viewed as a barometer to watch, only commanded $109-112 per cwt vs. as high as $113.25 last week.  Cash prices are being weighed down by tight packer margins, ample supplies, and the seasonal slowdown in demand.  It is expected that processors will reduce their slaughter rate to boost margins and drive up beef wholesale values.

 

Hogs trended bullishly today for the fourth consecutive session, +1.075 (Feb). Bird flu concerns in Europe and Asia have added to the price support the past three days.  Cash prices in the Midwest were reported up as much as $1.50 per cwt, following a decline in supplies and the addition of cold weather.  Freezing temperatures result in less hog weight gain, which delays delivery to packers.  Yesterday, packer margins were cut back to $41.25 per head from Wednesday’s $43.95.  According to USDA estimates, from Monday to Wednesday this week, packers processed 11,000 fewer hogs than last week and 5,000 less than last year.  Exports reported by the USDA were up significantly over last week, with 11,400 tonnes (mainly to Mexico) vs. 8,900.

 

In Other news, PEOTUS, Donald Trump, appointed Iowa Governor, Terry Branstad, as the U.S. Ambassador to China.  This is viewed as a positive development, as Branstad has a long and favorable history with China (especially President Xi Jinping), which hopefully will help Ag trade moving forward.

 

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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