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Closing Comments

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Closing Comments

Corn observed “Turnaround Tuesday” with a modest reversal, following soybeans’ lead, +2 (Mar).  There is not much news today to move the needle in a meaningful way.  Positive factors include a weaker Dollar, a positive weekly inspection report and the acreage discussion vs. soybeans, which will become clearer into the Spring.  South American weather forecasts continue to be favorable.  Farmers have lost interest in selling, as many took advantage of the rally to button up old crop.  On the world stage, US corn is overall the most affordable on a FOB basis, but some low-price alternatives, i.e. Black Sea feed wheat, are providing competition.  Look for continued pressure on corn for now until a new story develops.

 

Soybeans experienced a serious decline yesterday, with longs exiting their positions.  Today proved relatively uneventful with March futures +1 ¾.  Once again, there were no new export sales announcements on the books this morning.  The USDA Crush Report tomorrow for December is expected to show a slight decline from November, with estimates of 170 mb compared to 170.7 mb.  Giving some support to the market is the weak Dollar, which has dipped below the vaunted “100” mark.  But, serving as a counter balance is continued uncertainty regarding trade policies with China and others.  Speaking of China, their markets are closed through Thursday for the Lunar New Year holiday.  In South American news, Cordonniere upped his Argentine crop estimate to 52 MMT, compared to 56 last year; he has Brazil pegged at 103 MMT, compared to 95.5 last year.  Even though soybeans experienced a free fall yesterday, March futures are still positive by double digits.

 

Wheat also gave an uninspiring performance today with a lack of impactful news, as Chicago and KC March futures trended positive at +6 ¾ and +3 ½ respectively, while MN was down -2 ¼.  Wheat crop conditions have been improving recently, but are still below average for this time of year.  In global news, Algeria is looking to buy 50K tonnes of soft wheat and 50K tonnes of barley for April shipment.  In Europe, the extreme cold weather predictions for last weekend did not manifest in many areas, which did not help provide market support.  Wheat is still positive for the month but has lost much of the recent gains.  Technical indicators are showing weakness and it is likely wheat will test lower levels.  However, managed funds are still almost 90K contracts short, so balancing could come into play.  Look for support in the 4.10 neighborhood and initial resistance at 4.17 ¼.

 

April Live Cattle futures gapped to a new three week low on follow-through liquidation and short selling, -.650.  Applying pressure to the market is a growing US herd and ample cattle supplies.  Cash cattle started the week with futures narrowly avoiding a limit down close after a bearish Cattle on Feed report. April Cattle Feeders were also down today, -1.125.  The USDA will release its bi-yearly Cattle Inventory report this afternoon.

 

April Hogs had nice bounce back today after the large reversal last week, reaching up over 70 before settling back modestly, +1.025. The market has demonstrated volatility over the last few sessions as it seeks direction.  Demand for pork has remained strong in the midst of near record large hog/pork production, and cash prices have continued to trend positive. However, in an overbought market with an increasing focus on trade war with Mexico, there is potential for a significant amount of pork to return to the US market.  Keep an eye out this week for a possible test of support at 65.00 (Apr).

 

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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