Home Market Market Watch Closing Comments

Closing Comments

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Closing Comments

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Corn was able to carry momentum throughout the day along with the other grains, +9 ¼ (Mar).  Most of Argentina received the advertised rains over the weekend, with rain totals of 2-4” common.  However, southeastern Argentina was missed, which accounts for 10-15% of the growing area.  Although this seems to not be a game-changer, it did provide support today in the light-trading holiday environment, which can often lead to exaggerated moves.  The USDA announced weekly inspections at 970,506 mt for week ending Dec. 22nd vs. 875K estimated.  Expect short-term support for March corn at 346 ½ and resistance at 352 ¾ and 355.  

 

Soybeans had a technical bounce-back today (getting back up over the 100-day moving average) after last week’s free-fall, +26 ¾ (Mar).  In this 4-day, holiday-shortened week, there are several factors to be watching: end of year and new year money flows, January futures First Notice Day on Friday, USDA January crop report looming in a couple of weeks, and the always discussed South American weather conditions.  USDA weekly inspections were once again in line with 1.709 mmt announced compared to the expected 1.60 mmt.  The supply outlook is bearish and there were no new export sales this morning.  Look for March support at 998 ¼ and 990 with key resistance at 1026 ¼.  

 

Wheat carried strength from the overnight into today, as it benefited from a bounce related to technical correction of its oversold condition, rocketing +16 (Chicago March).  KC and Minneapolis came along for the ride with KC +12 ½ and MN +6 ¾.  USDA weekly wheat inspections announced today were also positive, with 520,975 mt coming in against the expected 400K mt.  However, most news last week was not friendly, with Putin proclaiming his expectations for an even larger Russian crop, the EU and Argentina raised estimates, and India plans to back away from wheat imports.  Keep an eye on support for March at 346 ½ and resistance at 352 ¾ and 355.

 

Live Cattle had their second straight day of losses following long liquidation and last week’s bearish USDA Cattle on Feed data, -.300 (Feb).  As the Obama Administration winds down, it is taking up the fight on behalf of U.S. beef producers on a decades old ban (1989) by the European Union regarding hormone use in American beef.  Our “beef” with Europe is that the embargo is not science based and violates international trade obligations.  The U.S. intends to relaunch the fight including possible tariffs on European goods, as the belief is that it is more about politics and market access. Fully 90% of the fed cattle in the U.S. receive a growth hormone, and hormones are also widely applied to cattle in 20 other countries.

 

Hogs were able to fend off early weakness and finish positive, +1.550 (Feb).  The Hogs and Pigs Report  added to the narrative of abundant supplies, as it showed inventory of 71.5 million (up 4%), market hogs of 65.4 million (up 4%), and breeding up 1% at 6 million.  To keep the rally going, the bulls will need to be fed some friendly news.  Catalysts driving the bullish action have included declining open interest with short covering combined with multi-year price lows in October.  Also adding favorable news is USDA data showing less than expected stockpiles of pork cold storage.  The Feb-June spread has blown out so traders may be advised to proceed with caution.  Supply is ample and packer margins are high ($52.65/head).  There will likely be volatility and the market may be headed for a turndown.

 

In Other news, bird flu is starting to get more global attention as multiple countries are confirming outbreaks.  The Chinese Ag Ministry reported that more than 55,000 birds have been culled in Xinjiang province, Germany’s Lower Saxony government said they have also started culling 55,000 birds, and India with 2,500 in the eastern part of their country.  South Korea is employing armed forces to aid in destroying another 1.6 million birds within 24 hours.  Seventy-eight percent of South Korea’s culled birds are egg-laying hens, which is definitely tightening supplies.

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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