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Closing Comments

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Closing Comments

Corn went higher today, pulled along by soybeans, and also wet weather in South America and in US forecasts, +2 ½ at 3.69 (May) and +2 at 3.92 ½ (Nov).  Heavy rains this year in Argentina are responsible for the loss of up to 1.7 million acres of prime corn and soybean areas.  EIA Ethanol numbers today showed production is down 3.24% vs last week and 5.12% vs last year.  Ethanol stocks are down 3.38% vs last week and up 2.63% vs. last year.  To summarize, ethanol production is down seasonally as plants do maintenance, but still above normal pace.  Margins are still positive.  Stocks are high but will hopefully follow their seasonal decline.  With the entire growing season in front of us, where do we go from here?  Keep an eye on managed money, where traders are short 150K+ contracts (as of April 4th), and susceptible to any kind of a bullish development. Support levels to monitor include 3.63 ¼ and 3.59 ½ with resistance at 3.69 ¾ and 3.72 ¾ (May).

 

Soybeans, despite bearish projections from the USDA report yesterday, continued the recovery bounce from yesterday’s session, +8 ½ at 9.47 ¾ (May) and +7 at 9.55 ½ (Nov).  Fundamentals alone would indicate beans should be on a downward trajectory, but in typical soybean fashion they continue to confound the experts.  Helping support beans is wet Argentine weather, and also the idea that the big supply numbers and South American production were already “baked in” to the formula.  It leaves one to think, what other bearish news is out there for beans before we move into the growing season?  Indicators would suggest the market is very oversold.  Look for a shift for higher if near term resistance is taken out (9.46 ¾ and 9.53 ½).  

 

Wheat found some strength today in the corn and beans rally , as well as FranceAgriMer’s revised forecast for soft wheat stocks to decline to 2.6 MMT from 3.0 MMT (below the average of the past five years).  The decline was influenced by farmers selling aggressively at the start of the season, and them using more of the crop on farm (by 20%).  Incidentally, France is Europe’s largest wheat producer.  All three exchanges ended above water, with Chicago SRW even at 4.33 ¼ (May), Kansas City HRW + ¼ at 4.30, and Minneapolis spring variety +1 at 5.28 ¾.  U.S. on farm wheat price is pegged at $3.85 vs. $3.85 last month and $4.89 last year.  As with corn, watch managed money’s large short position, as this could amplify a break-out from moving averages.

 

Live Cattle continued their ascent higher, with deferred contracts reaching new highs on the heels of yesterday’s boost in wholesale beef values, +.950 at 124.200 (April) and +.650 at 114.350 (June).  Traders also indicated that futures’ discounts to expected cash later this week provided support.  Grocers are buying beef to prepare for post-Easter grilling demand.  Keep an eye on the Fed Cattle Exchange results from today for future price direction, as 5,200 animals are up for sale.

 

Hogs fell sharply within the range they have been trading the last couple of weeks, -1.725 at 72.275 (June).  It seems to be a combination of technical and fundamental factors, with sell stops and fund liquidation on the one hand, and slumping cash prices along with seasonally growing supplies on the other.  Average wholesale pork price fell $1.53 per cwt while pork bellies were down $11.94 per cwt.

 

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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