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Closing Comments

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Closing Comments

 

Corn was weighed down by beans, wheat and markets in general, -7 ¾ (May) and –6 ¼ (Dec). USDA weekly export loadings were solid, at 1,409,281 MT compared to projections of 1,350,000 MT. Corn has made a strong surge to get back into alignment with expected export sales, as total commitments are now only 1.17% behind last year. The USDA reported a new daily sale of 115K MT of corn to “unknown” destination for 2017/18 and 206K MT of new crop to Japan. Ethanol potential looks good moving forward, as Brazil has continued to import a significant amount of U.S. ethanol in spite of a 20% tariff, due to price competitiveness. Brazil’s ethanol usage is high due to flex fuel vehicles and high gas blending mandates. It will be important how the RIN credit negotiations on Capitol Hill play out, as too low of a price cap would negatively affect ethanol demand and the resulting corn usage.

 

Soybeans need a new story with Argentina harvest beginning and premium already accounted for, -27 (May) and –18 ¼ (Nov). The COT on Friday showed managed funds have built very net long positions, with trade war talk looming over the market and many are expecting for some type of Chinese retaliation in response to President Trump’s new tariffs. While Argentina’s yield prospects continue to dwindle, the focus is shifting to Brazil’s more than adequate crop and thoughts that U.S. planted acres will increase. The March 29th Report is taking center stage, as traders balance positions and liquidate length in advance. USDA Weekly Inspections data released today (week ending March 15th) was disappointing for beans, pegged at 490,536 MT vs. expectations of 900K MT. There were no new export sales announcements today.

 

Wheat found weakness in the overall CBOT selling mood, as well as positive weather for the U.S. Plains. The weak Dollar was not able to stem the tide as KC hard red winter led the way to purgatory, with a 28 ½ cent loss in the July contract. Chicago soft red was not far behind, -17 ¼ (July). USDA weekly inspection numbers were a small bright spot, with a reported 443,269 MT for the week ending March 15th vs. estimates of 325K MT. Of note, Russian wheat has now reached a seasonal high, and likely was helpful to Australia nabbing a recent sale to Iraq. The U.S. has been left on the sidelines for many global opportunities due to high prices. Minneapolis spring wheat finished -13 ½ (July).

 

Live Cattle continue to enjoy higher prices in the cash market, but this has not been enough to support futures from losing ground, April -1.025. As of Friday afternoon, the beef cutout reached its highest level since June 29th. Futures are at their lowest levels in two months, as April bounced off the 200-day moving average. The large supply of cattle in feed yards will give packers more leverage in their bidding once these animals reach slaughter weight, which should result in sharply lower cash prices. Look for the Cattle on Feed report later this week.

 

Hogs are technically oversold and searching for a bottom, but still managed to rack up more losses across the months, with April -2.300. Looking at seasonal charts, one would expect a turnaround over the next three months, but a counter seasonal move is not out of the question considering the supply fundamentals. The upcoming Hogs & Pigs Report on the 29th will help provide market direction.

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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