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Closing Comments

 

Corn finished strong today with May up .06 ¼ cents. A little bit more than friendly supply/demand report for corn today. The 2017/18 carryout was dropped 225 million bu. This is a substantial drop but still leaves the carryout over 2 billion for now.  South American crop expectations were probably the most featured news today and didn’t disappoint. The USDA was not willing to lower the Brazilian crop as much as the trade expected.  It was lowered to 94.5 mmt compared to the trade guess of 91.4. Brazil is still just trying to plant this crop so it is not surprising the USDA didn’t want to make any bold predictions here. Argentina though is much further along and the USDA evidently is a believer in how poor that crop is, dropping it below the trade guess by .3 mmt to 36 mmt.  This could mean that they believe the crop is even worse than this if they were willing to drop it that much in one report. World corn numbers have the most shock value. They came in today almost 30 mmt less than where we were last year. 

 

Soybeans rallied today to close slightly up. We were given some clarity today but there is still a lot to figure out with soybeans as we move forward. Trade got what they wanted from the USDA with a drop in both Brazil and Argentina production numbers. Argentina came in almost 1.1 mmt below the estimate and Brazil 1 mmt below the estimate. The USDA dropped Argentina 7 mmt in this report. This would also lead you to believe that the USDA thinks it may actually be even worse than that as we start getting more information. The part of this report that makes it difficult to expect a ton more upside is they expect us to have a 2017/18 carryout of 555 million bu.  This is 255 million more bu. than last year.  It is hard to imagine this carryout will hold up. They slashed exports today which doesn’t make a whole lot of sense if they are expecting such a small crop for Argentina but either way if we grow our expected crop next year we will have a lot of soybeans.

 

Wheat rallied to close down only .01 cent vs. March. Numbers for wheat today were bearish but not substantially. World Wheat stocks went up 2.8 mmt from the last report and carryout increased 25 million. Weather in the plains has not improved and doesn’t have a ton of hope in the forecast, but like corn, carryout is still a problem. Temperatures will start to warm up soon and give everyone a better indication of what is really out there.

 

Live Cattle closed lower on the day with April down .925 cents. Cash has been steady with last week.  We continue the large supply vs. good demand battle. Weather does not look good for grilling on the East Coast this week as they get slammed by their second nor’easter. Supply will not go away soon so we need demand to continue to be strong as it has done all year. The wildcard, that is tough to predict is what impact the trade tariffs may have on traders mentality and if that will leak into cattle. Cattle usually seem to tie themselves pretty closely with cattle so that could force livestock lower than they would go otherwise.

 

Hogs up marginally today on the close. Tough to want to hold long positions when 25% of your exports go to the Mexico and Canada. Two countries we are currently battling on the trade front. Pork product prices are down, weights are up and the weather on the East Coast is going to hurt up front demand. Exports overall are still good with January down from the record in Dec but up almost 30 million pounds from last January.

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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