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Closing Comments

Corn seems to have run out of selling with short-covering coming into play, as bearish news seems to be behind us for the near-term, +2 at 3.71 (May) and +2 at 3.94 ½ (June).  What will planting season bring?  It appears that corn and wheat are off to a slower than normal start.  Weather forecasts have been wet, although it is a little early in the U.S. for this to be a big story.  But any perception by the market that there are potential planting delays, will tend to provide strength until proven otherwise.  The markets are also feeling some relief related to exports to Mexico, as there has not been much negative rhetoric directed south recently. Mexico has been shopping South America as alternative source to U.S. corn, which has caused concerns stateside.   On the weekly export rolls, corn was less than impressive, sporting a 730K MT tally compared to expectations of 900K-1.4 MMT. 

 

Soybeans have also reacted positively post-report, as it is thought many of the big numbers posted for stockpiles and South American production were already “priced in” to a large extent.  The May contract was +7 ¾ at 9.55 ½, while the November contract was +6 ¼ to 9.61 ¾.  Futures also received support from Chinese meal trade and a temporary slowing of South American harvest.  Additionally, the meeting between Presidents last week has allayed fears and tension around trade policies that were building between super powers.  China announced that soybean imports are 20% higher year-to-date than last year.  The demand under the market has become a worthy story.  Weekly export sales announced today were not so inspiring, as they were announced at 402,300 MT vs. estimates of 600-950K MT.  But, soybean sales are up 25% over last year and the costs are down 40% in the last eight months, which puts them on par with South American supplies.  Where do we go from here?  All eyes are now turned to weather and planting delays, as it comes down to perception more than reality sometimes. 

 

Wheat had mixed results today with winter losing and spring winning.  Chicago came in at –3 ½ (May), Kansas City at -2 ¾, while Minneapolis was +1 ¼.  The Dollar is down and may provide some help for wheat and other exports, as President Trump has made it clear that he feels the Dollar may be too strong and he is in favor of lower interest rates.  Export sales reported this morning showed a solid 421,600 MT compared to expectations of 300-750K MT.  As a counter balance to all the talk of enormous stockpiles, it is interesting to note that Europe is expecting to end the season with the smallest wheat stockpiles in 13 years, falling up to 37%.  What will cause this? According to Tallage SAS, it is a combination of a poor harvest, strong consumption and larger than expected exports. 

 

Live Cattle continued solid gains, buoyed by news of China planning to drop bans on U.S. beef imports, +1.175 at 125.375 (April) and +.350 at 114.700 (June).  However, there is no timetable on when the ban is to be lifted, so at this time perception is driving the market.  Regarding the highly watched Fed Cattle Exchange yesterday, only 120 head of cattle were sold of the 5,125 offered, as buyers and sellers could not come to terms.  Packers are making a big dent in the captive supply, as they butchered 115K head Wednesday.  Keep an eye on short-term support at 113.25 and resistance at 116.10 in the June contract.

 

Hogs were able to squeak out a small gain, +.225 at 62.450 (April) and +.225 at 72.500 (June).  It is surprising that the lean hogs cash index is still over $64, with the April expiration looming next week.  The pork cut-out was down $.44, and pork should be priced attractively for grilling season.  Look for June hogs short-term resistance at 74.50 and support around the 69.85 level.

 

In Other news, President Trump is having a significant impact on the markets with his back-and-forth rhetoric.  Not long ago, he expounded that the Russians were someone that he could work with and China was the worst currency manipulator in history.  The past few days has seen a reversal, as U.S.- Russian relations are at an “all-time” low and the Chinese are “not currency manipulators” after his recent meeting with President Xi.  And now, China is opening the doors to U.S. beef.  The markets have definitely responded to his sound bites, whether it’s the Dollar, gold, interest rates, or grains for that matter.  Stay tuned for further developments.

 

The CME will be closed tomorrow in observance of Good Friday.

 

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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