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Closing Comments

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Closing Comments

 

Corn was able to follow wheat’s lead today, +2 ½ (March). All of the grains and resulting action are intertwined together to some extent. With regard to wheat, corn is competing for feed usage. And, with regard to beans, the 2.5:1 price ratio that is viewed as equilibrium, plays a corrective role. To start the new year, corn seems to be fighting for more value and acres. Additionally, managed funds are sitting on a record net short position in the grains to start the new year, and do not have much reason to continue selling, leading to some short-covering. Brazil’s Trade Ministry revealed Dec corn exports of 3.99 MMT vs. 3.519 MMT in Nov and 1.01 MMT in Dec of 2016. This brings more clarity to the 38% decline in U.S. corn exports year-to-date.

 

Soybeans pushed higher to 9.70 (Mar), before fading to 9.64 ¾ and a small gain +3. South American weather is at the forefront, as they received the precipitation forecasters expected over the weekend. However, the next 10-12 days look drier, and with temps over 100 degrees in some areas, it bears monitoring. USDA weekly soybeans loadings were a bit disappointing, as they came in under the expected 1,200,000 MT at 1,139,436 MT. Soybeans can ill afford more poor showings, as exports are running behind last year and now is a critical catch-up period. Numbers released by Brazil’s Trade Ministry showed Dec soybean exports at 2.36 MMT compared to Nov at 2.14 MMT and Dec 2016 at 0.65 MMT.

 

Wheat received a jump-start from frigid cold temps across the Plains, +6 ½ (Chicago), +7 ½ (KC) and +3 ¼ (MN). With brutal cold across the Plains on dry soils (in some cases), the threat of winterkill is perceived as real. Fund managers showed eagerness to reduce their risk exposure, considering their record large net short position in wheat. However, with the world’s storehouses busting at the seams with grain, it is hard for anyone to be too bearish or bullish. Weekly export inspections were well below expectations, pegged at 274,506 MT vs. estimates of 450K MT.

 

Live Cattle received support from frigid temps across the Plains along with stronger cash markets, +1.800 (Feb). According to AgResource, sales were generally $3 higher compared to last week. With temps ranging 15-30 degrees below normal, the resulting impacts will likely include lower cattle weights and a slowed down marketing pace.

 

Hogs fell under the weight of a somewhat bearish supply picture, -1.050 (Feb). As with cattle, some support was found in cold weather. The CME Lean Hog Index as of Dec 27th was down to 61.58 from 62.37 last week.

 

In Other News, trade deals and NAFTA will be major stories in 2018. January 23-28 is the next round of NAFTA negotiations in Montreal, Canada. Stay tuned

 

Closing Market Snapshot  

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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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