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Closing Comments

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Closing Comments

Corn showed weakness early today but made a strong push across the finish line (following a key reversal on the charts yesterday) +3 (Mar).  Corn received support from the announcement of a private sale of 141,224 MT to an “unknown” destination (likely Mexico ahead of the meeting with President Trump).  The EIA report today showed ethanol production slightly down from last week (1.054 to 1.051 mbd), but to put it in perspective, is still 9.4% above last year’s same week production.  What this means is that the USDA’s 5.325 billion bushel ethanol usage estimate through August will need to be bumped up. On the other hand, ethanol stocks have seen a meteoric rise the last three weeks, with 128 million gallons added to stocks, pushing stocks above last year for the first time in 11 weeks.  This will provide a buffer if production continues its slowdown.  EIA reported gasoline demand is near 5 year low levels, which is causing some consternation.  It will be key for ethanol exports to show continued strength in 2017, which will be influenced by China and their recent tariff increase on imports from 5% to 30%.  Look for March corn support to be around 3.60.

 

Soybeans did not have much news today to offset its overbought condition, ending up –3 ¼ (Mar).  It is expected that soybean exports will continue to slow as South America takes center stage, with impending harvest a few weeks away.   The USDA did not offer any new sales announcements this morning.  Not much has changed on the South American weather front, as concerns still hover over Argentina and the loss of planted acres due to heavy flooding and the dry, hot ridge that is now preventing rains short term.  Soybeans are always subject to more volatility though, so keep an eye on the US acreage war with corn in addition to weather.  It is likely beans will continue to go higher, with support coming in to play in the 10.50 area, with possible upside over 11.00. 

 

Wheat has started to take on more of a bearish posture technically, failing to break through resistance in the 4.34 area yesterday.  Today was red across the complex, with Chicago -2 ¼ , KC -4 and MN -3 ¼.  There was just not a lot of bullish news today to sway trade, as exports are light and stocks are abundant.  The US Dollar has given back some of the gains realized earlier in the month, but has somewhat stabilized and is not moving the export needle. Japan is sourcing 61 TMT of US wheat as part of its weekly tender.  Ethiopia and Iraq are also in for optional origin wheat this week.  Look for trade to continue somewhat sideways, with support for Chicago March wheat around 4.20.

 

Cattle futures were able to pick up some momentum from hogs in spite of higher inventories of cattle for sale this week, +.275 (Apr).  All eyes are focused on the Fed Cattle Exchange held every Wednesday as a dependable barometer for future direction.  Additionally, carcass weights will be considered as they are an indicator for the position of cattle in the nation’s feedlots.  The last report on Jan. 7th showed steer weights were up 5#, which is considerably higher than last year.  Also, the winter weather will play a part in changes seen between now and Spring.  The USDA announced cold storage showed record high stocks of beef for December at 567 million lbs. Look for support for the April contract in the 115-116 area.

 

Hogs look to be positioned for a move to the downside, with ample supplies, but rallied today, supported by a bounce in pork values and significant decline in cold storage, +2.525 (Apr) .  Exports will be key again this year and will be influenced by the Dollar and the new Administration’s evolving trade policies, particularly with Mexico and China.  Support is around 65 for the April contract.

 

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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