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Closing Comments

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Closing Comments

 Corn needs to hear a more ominous South American weather forecast in order to make a serious change in direction at this point.  March futures settled -2 ½.  The big reversal on the charts two days ago, continues to influence trade.  The recent positive action in the last week could have been due primarily to speculators covering their short positions.  Concerns in the market include the impending large South American crop and weakness in ethanol, with China’s new import tariff increase on US ethanol and the uncertainty of the new Presidential Administration’s stance on ethanol and biofuels.  On a positive note, USDA announced corn exports for the week ending Jan. 19th at 1.370 MMT compared to the expected range of 750K-1.0 MMT.  Look for March corn support around 3.60.

 

Soybeans traded lower highs and lower lows for five days in a row coming into today and kept the trend alive with March futures -5 ¾.  Traders from the bullish and bearish trains of thought have set their positions and are waiting for more confirmation on the Argentina crop, etc. The weather concerns in Argentina center around dry vs. wet, which tends bearish for now.  The USDA export report today showed exports in line with expectations at 539,400 compared to the expected 400K-700K MT.  Soybean meal exports also were above estimates.  However, there were no new sales announcements this morning.  The Chinese New Year begins Saturday, so look for a slowdown into next week as they celebrate Golden Week.  The bull flag on the charts could trend for higher if we get to 10.63.

 

Wheat found support today in predictions of possible Russian wheat winterkill and a bullish export announcement.  March futures included Chicago +2 ½, KC +2 ½, and MN +9 ¼.  There is stronger upper air cooling over Southern Russia this weekend that could, in a worst case scenario, damage up to 20% of Russian winter wheat acres.  Wheat was the lead story for the USDA report, almost doubling expectations with export sales for the week ending Jan. 19th at 853,400 MT compared to estimates ranging from 200K-400K MT.  This is the largest report since early in the 2013/14 marketing year.  Will the US be able to join the competitive mix in the global market in 2017? A case in point, Egypt tendered for 410K MT wheat after the close yesterday, and it was Russia once again with the lowest bid, with US freight cost proving to be cost prohibitive for serious consideration.  Adding to the burgeoning global supply is the probability of production increases in Argentina and Australia, according to reports.

 

Live Cattle showed weakness today pressured by bear spreading and technical selling, finishing -1.100 (April).  Look for more consolidation with correction of the overbought condition.  The daily slaughter was reported to be 113,000 head.  Tomorrow afternoon the USDA will release the Cattle on Feed Report at 2pm.

 

Hogs, after gapping higher yesterday, made a large move to the downside, -2.925 (April).  Influencing the trade today was lower cash prices and technical selling after falling through the moving averages.  There has been the expectation for some time that hogs were primed to form a top and trend lower, considering the large supplies.  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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