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Closing Comments

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Closing Comments

 

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Corn, unable to sustain 4 consecutive sessions of gains, followed soybeans down to finish the week, -3 ¼ (Mar).  The CBOT futures felt some pressure from the rising Dollar following the U.S. Jobs Report.  The USDA announced export sales well below expectations of 700-900K mt at 429,200 mt, as the holiday week had a measurable impact – 67% below the previous 4-week average.  Managed funds were estimated at 90K contracts short after picking up about 10K yesterday.  EIA showed another record week of ethanol production using about 110 million bushels of grain to accomplish the task.  Informa Economics penciled in Argentina’s production down slightly from the previous estimate of 36.5 mmt to 36.0 mmt.  The Buenos Aires Grain Exchange showed corn planting progress at 82.9% complete compared to 71.3% last week. The continuation weekly corn chart posted the highest weekly close since last June. Trade above yesterday’s high should give an opportunity for 3.75 in March, until then its continued consolidation.

 

Soybeans took a sharp downturn, – 17 ¾ (Mar), as the tug of war continues between the bulls and the bears.  Even with weather uncertainty in South America, the looming large supplies and poor export report won today’s bout in the March futures arena.  Export sales were announced this morning – a paltry 87,500 mt vs the expected 750K-1.2 mmt. Related to the weather story, it has been the tale of two countries – Brazil is almost out of the woods as many beans were planted early with good subsoil moisture, barring an extremely wet pattern moves in.  Because everything was planted early, they should experience very good harvest conditions, which will in turn bump them up a 2-3 weeks on planting safrinha corn.  Logistical issues in Brazil seem unlikely at this point, as they have more ports, railways, and better roads than in years past.  Argentina conversely, has worse news as they did not have the head start on planting, and then experience dryness and heat.  Now, they are dealing with large scale, heavy rains.  Informa Economics came out with their number for Argentina production at 55 mmt, down from the previous 56 mmt. March continues to trade either side of the 200 day moving average. March support should be just below at 9.90.

 

Wheat, is dealing with competing forces of a positive Dollar and reports of winterkill from the cold temperatures across a swathe of the growing region. Chicago and KC were down -3 and -1 respectively, while Minneapolis was +1 ½ (Mar).  The USDA announced a private sale of 100K mt of HRW wheat sold to “unknown” destination for 2016/17.  This was welcome news as the announced export sales were off the predicted 200-500K mt at 183,700 mt.  Informa Economics announced their numbers for Argentina production at 15 mmt, up from the previous estimate of 13 mmt.  Look for index fund re-balancing next week with significant shorts in Chicago remaining in the market. Minneapolis put in the highest weekly close on the continuation chart since July of 2015.

 

Cattle continued to show weakness as it did yesterday, -.250 (Feb).  The market is overbought and keep an eye out for a test of support on the horizon.  Today’s relapse re-affirms a developing peak reversal that could be large in scale.  There is potential for a long liquidation as long positions are the highest percentage since last May.  Investors are also a bit cautious after weaker cash prices this week, likely due to abundant supplies and sufficient packer inventories.

 

Hogs also trended lower under stress from bearish forces including a warmer forecast stateside as well as a declining Mexican peso, -.900  (Feb).  Today’s close helped to confirm the weekly reversal and the notion that a short-term top is in.  Investors appear to be focused on technical selling and profit taking. 

 

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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