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Closing Comments

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Closing Comments

 

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Corn traded sideways, finding weakness today in a bearish South American weather outlook and a Brazilian monthly crop report which raised crop estimates to 84.5 MMT from 83.8 MMT last month, -1 ¾ (Mar).  Additionally, ethanol is trending in more of a negative vein, with crush margins at the very low end of the nine month range (however, plants are still profitable even at this lower level).  On the plus side, corn had a couple of USDA sales announcements this morning of 241,600 MT to “unknown” and 130K MT sold to Taiwan.  It is hard to be bearish corn (with the large yield and supply already baked in to the market) with position re-balancing, the impending acreage war with soybeans, and wheat’s emerging positive position helping to boost the complex.  Corn shipments are much stronger than last year – 17.9MMT vs. 10.1 MMT.  Sluggish demand into the summer due to Brazil’s bumper crop could put a damper on things.  Everyone’s attention is squarely on the USDA production report on Thursday. 

 

Soybeans took up where they left off yesterday, regaining the balance of Friday’s losses, +8 ½ (Mar).  Although there was bearish news from Brazil regarding their production estimates increasing, and expectations for a negative USDA report on Thursday, beans were able to push up and touch resistance before backing off modestly.  The analysts average soybean production prediction for this Thursday’s USDA report is for an increase from last report from 4.361 billion bushels to 4.374, and soy yield from 52.5 bushels/acre to 52.7.  Chinese buying interest will now start shifting to our southern neighbors.  But, until the South American soy production can be clarified with actual results, the market may trade sideways in a range.  Near-term resistance is around 10.16 ½ in the March contract.

 

Wheat futures were mixed today with Chicago and KC – ½ and – ¼ respectively, and Minneapolis posting a small gain, +1 ¾ (Mar).   Applying pressure was a more favorable outlook from forecasters who indicated that there was adequate snow cover to protect plantings from the extreme weekend temperatures.  Fund re-balancing is continuing this week as shorts look to level out their portfolios, while expectations for the Thursday crop are bearish for all three complexes.  As mentioned yesterday, wheat planted acres in the U.S. last year were at the lowest level since 1970.  Will another corrective shift occur this year?  If so, acres planted in the U.S. will be down to levels not seen since the 1890’s, and one would think this would provide impetus for better chart action in the future.  On the export front, Japan is tendering for 162,777 tonnes of milling wheat to source from the U.S. and Canada. Keep an eye on support at 4.23 ¾ and resistance at 4.30 ¾.  

 

Live Cattle gapped higher today with a big bar on the charts, finishing +3.00 (Feb).  The strong showing was led by strength from buy stops and more short-covering following yesterday’s fund-led rally, according to Reuters.  Similar to grains, the annual re-balancing of positions has been a key driver this week.  Investors will be closely monitoring the Fed Cattle Exchange tomorrow with 5,800 animals on the sale block.  A smaller beef supply early in the year is helping keep the trend positive.

 

Hog futures were supported by Monday’s higher cash and wholesale pork prices according to traders, +1.300 (Feb).  Cash prices are predicted to be $1 CWT higher.  The USDA export report on Monday documented a record high in November, at 509.9 million lbs.  Other government date showed an increase in all categories of pork wholesale values, excluding ham.  Ham demand has tailed off after Christmas with grocers featuring other pork cuts combined with chicken and beef.  As with all exports, keep a watchful eye on the Dollar for future price direction.

 

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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