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Closing Comments

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Closing Comments

 

Corn The Astros were not the only ones over the moon today, as traders were also upbeat with the performance of the grains at the CBOT today, with corn on an upward trajectory, +2 ¼ (Dec). The USDA announced a whopping sale of 1,346,360 MT of corn to Mexico, with 845,820 MT penciled in for 2017/18 and 510,540 MT for 2018/19. Is this sale partly based on concerns from Mexico that NAFTA modifications could be around the corner? USDA weekly export sales were not too shabby either, within estimates of 750K-1.25 MMT at 811,400 MT for 2017/18 and 90K MT for 2018/19. Private analyst, Informa, released their latest corn yield estimate at 173.4 bpa compared to 170.5 bpa previously. This did not seem to dissuade traders, as the market has been expecting a yield bump. Corn still needs a story in order to sustain rally.

 

Soybeans got a technical bounce from positive export numbers, +8 (Jan). Informa provided their latest national soybean yield estimate of 49.7 bpa compared to 50.0 previously. This in comparison to the USDA’s latest stab of 49.5 bpa. Weekly export sales once again exceeded expectations of 1.4-1.9 MMT, as the USDA pegged soybean sales at 1.97 MMT for 2017/18 and 15,200 MT for 2018/19. PRC meal trade is driving a lot of the action this week due to attractive Chinese crush margins. As has been the case of the late, the market is watching two main fundamental factors – USDA report on next Thursday and South American weather. But, today’s rally was based in large part on technicals and managed fund positioning ahead of the report, as they were taken by surprise in October with the post report rally.

 

Wheat was able to draft off soybeans’ lead, and build on gains from the overnight. Most of the focus has been on corn and beans, with wheat taking a backseat. However, today featured short-covering and overall optimism. Export sales on the weekly log showed improvement, falling solidly within expectations of 250K-500K MT at 347,800 MT. On the world scene, big Russian wheat exports have also affected the EU, as their export sales are down from 8.8 MMT last year to 6.6 MMT this year. Chicago SRW +8, Kansas City HRW +10 and Minneapolis HRS +8 ¾.

 

Live Cattle were down sharply today, as the market corrected some of its 10% gain in October due in part to speculators holding large net long positions. It may be advisable for producers to size up current price levels and lock in profits. Demand both domestically and in exports are helping to absorb the large numbers of cattle on feed. Exports to Asia and South America are up significantly. Feed grain prices at the low end of the price spectrum are also providing support. It is essential for the U.S. to remain part of trade agreements in order to compete with Australia and others who are taking advantage of lower import duties and gaining a competitive advantage. Dec Live Cattle -2.275

 

Hogs are facing record supplies, growing animal weights and a degree of weakness in cash – will this turn the tide on speculative buying and trigger a trend of long liquidation? The overbought condition of the hog market is providing pressure and if pork values turn down the market may be vulnerable to a significant break, according to Hightower. Dec Hogs -.800

 

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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