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Closing Comments

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Closing Comments

 

Corn traded both sides of unchanged before deciding on a negative finish, – ¼ (Mar). It seems most everyone is assuming a bearish outcome for corn and soybeans in the January 12th WASDE report. A bullish surprise would include either a neutral or positive result. Crude oil prices provided a measure of support, as they climbed above $61/barrel for the first time since June of 2015. The EIA Ethanol weekly report was pushed back until tomorrow due to the holiday. Spot ethanol prices have been improving the last couple of weeks, getting some producers back into a profitable margin.

 

Soybeans continued their post New Year’s ascent, +4 (Mar). Demand is seeing an uptick from China, as the PRC has started to ramp up their FOB soybean offers for February and March. Some of that will be sourced from the U.S., as the Brazilians will be slow to offer new crop soybeans because of late seeding dates and an empty pipeline of old crop, according to AgResource. Analysts are looking for a possible bull run for soyoil, as yesterday’s NASS crush numbers revealed a soyoil yield well below prior years and market expectations. This against a backdrop of increasing domestic demand due to biodiesel tariffs on Argentina and Indonesia. Whispers are getting a bit louder with regard to concerns for South American weather over the next 10-12 days, with heat building and little moisture forecasted.

 

Wheat saw all varieties gain, as concerns of winterkill across the Plains is getting a bit of traction. Kansas City HRW and Minneapolis HRS finished +6 ¼ and +1 ¾ respectively, while Chicago SRW came in +2 ½ (Mar). Early crop conditions released by several states yesterday showed less than ideal conditions. All of the states showing declines had dry patterns, which impede development, coupled with artic cold in some cases. Longer term, it would be expected that Chicago will see the largest amount of short-covering, due to the massive net short position held by fund managers. Adding to the mix is the fact that wheat has the least amount of planted acres in over 100 years, so any loss will be magnified.

 

Live Cattle fell in the front month (-.400), while the deferreds were mostly positive. Yesterday’s trade featured a large bar, building in weather premium. Today was an inside day and correction. Look for possible strength in the days ahead as demand is great with a solid economy and consumer mindset. Lower expected production in the first quarter compounded by frigid temps across the Plains also are providing support.

 

Hogs featured indecision today before ending a positive, +.325 (Feb). The February contract is trading at well over a $9 premium to cash, which is much higher than the five-year average premium to cash of around $4. As in cattle, the cold weather across the country is bringing support, as producer marketings will be at a limited pace. There is chatter though of big supplies needing to be absorbed for January, with hogs backing up in the country.

 

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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