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Closing Comments

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Closing Comments

 

Corn felt the burden of a less than stellar ethanol report, -2 (March). EIA Ethanol weekly results showed production down to 1.032 million barrels/day, 5.32% lower than last week and 1.05% less than last year. Conversely, ethanol stocks were up 2.67% over last week and 21.10% over last year. Corn used for ethanol was still well over the weekly average needed to hit the USDA yearly projection, but can the pace continue? Heading into the report next week, the grain market is considering competing factors of lower U.S. exports against the prospect of less South American yield compared to last year. With strong demand under the market, any change could stimulate short covering by funds.

 

Soybeans fought back with a “hammer” formation on the chart, regaining over 8 cents off the session low, -1 (March). The market is pondering South American weather forecasts, as well as WASDE estimates for Jan 12th. While U.S. exports are down from last year, the South American crop is also seen by many to be 5-6 MMT less than last year’s record. With such strong demand from the PRC supporting the market, and with managed funds flipped to a net short position, traders are wary to stick their necks out too far. The USDA report on Jan 12th, is considered the “biggest” of the year, with final production/acreage and supply/demand numbers. Beans have significant downside risk if the report comes out bearish.

 

Winter wheat saw correction today, as the story of frigid weather across the U.S. Plains seems to have run its course. Chicago -2, Kansas City -1 ¼. Minneapolis spring variety was able to keep positive momentum. +8 (Mar). As U.S. futures prices rise, wheat from the states becomes less competitive against Russia and others. However, providing some support today was a fledgling Dollar, as other currencies have strengthened against the greenback recently.  

 

Live Cattle traded both sides before settling on a bearish note, -.700 (Feb). This would seem somewhat counterintuitive considering the uptrend in cash and beef prices and poor animal weight gain. With a sharp production decline from the 4th to 1st quarter predicted, expect cattle to find support in a positive seasonal trend.

 

Hogs were up across contract months, +.325 (Feb). The cold weather supported higher trade in pork products and a firm tone to the cash market, according to Hightower. Look for a possible boost in marketings and pork production with warmer weekend weather extending into early next week.

 

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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