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Closing Comments



Closing Comments


Corn gains from spread trading with soybeans, while garnering support from wheat.

We turned the calendar to March this week, which is a time when the corn market tends to focus on building acreage as a safety net against potential weather problems this year. Prices dropped on Monday, but turned higher today. Overall, the market is forming a converging triangle, which frequently precedes a significant move in one direction or the other.

I continue to look for December corn to take more of a leadership role this spring in buying a few more acres, although we have not yet seen that confirmed by the charts. First significant overhead resistance is at $4.18, with support at $4.075. The new-crop soybean/corn price ratio finished the day at 2.37:1. That ratio needs to decline with corn gaining on soybeans to discourage soybean acreage expansion and encourage more corn acres this spring, but we’ll see if it actually happens.


Argentine farm strike talk provides late-day support.

Reuters reported today that rumors are flying through grower organizations about a possible farm strike in Argentine where farmers would refuse to sell grain and oilseeds. The object would be to reduce export tax revenues going to the government to support its social programs in order to force agricultural policy onto this year’s presidential election agenda.

In reality, alternative supplies are likely adequate to prevent a significant market impact at this point, but it will be something to watch longer-term. The current strike is expected to begin tomorrow, lasting just three days. There were rumors of China shopping for soybeans at Pacific Northwest ports on delivery concerns from South America as well.

November soybeans led the rally back in the final minutes of trade, with nearby contracts maintaining modest losses. May soybeans bounced off the 17-day moving average, but the charts are still vulnerable after today’s action. November bounced off that same indicator before settling near the session high. Follow-through tomorrow is needed to erase today’s early bearish move.


Hard wheat markets lead the food grain higher on bargain hunting.

Many key winter wheat production states released monthly crop ratings on Monday afternoon, with some of those states scheduled to continue issuing weekly reports until USDA starts its weekly reports in April. Monday’s state by state releases showed a mixed set of improving and deteriorating conditions, but with no state’s crop making a major move. The Oklahoma report mentioned some freeze damage in southwestern areas of the state and significant drought damage in the western half of the state.

Kansas wheat rated 44% Good to Excellent on Monday, down 2 points on the month and down 5 points over the past two months. Oklahoma wheat rated 42% G/E, up 1 point on the month, but down 12 points from two months ago. Texas wheat was rated 46% G/E, up 4 points on the month. Nebraska wheat is rated 62% G/E, while Colorado wheat is 48% G/E, up 4 points on the month, but down 14 points over the past two months. Illinois wheat is rated 47% G/E, down 2 points on the month, but up 23 points over the past two months.

Short-covering to take profits combined with bargain buying in the hard wheat markets today after both the Kansas City and Minneapolis markets found support late Monday near contract lows. Speculators turned buyers on ideas that wheat should find support at current levels as we move deeper into March when the winter crop is more vulnerable to damage. Ender users were also believed to be bargain-hunting buyers on ideas that a seasonal low may be behind us.


Live cattle futures fall on turnaround Tuesday selling after chart resistance holds amid slow product movement.

Live cattle futures rallied on Monday to partially close the gap with last week’s cash trade, which was at a substantial premium to the lead April contract. However, that contract ran into significant chart resistance at an area of congestion above $154, where buying interest dried up. As such, fund managers returned as sellers to press the down side today amid weak product movement.

Boxed beef movement fell to just 70 loads Monday, the lowest daily total since the Christmas break. Choice cuts were up another $1.09 to $248.67, while Select cuts were down $0.12 to $245.45 per cwt. This boosted estimated packer margins to $7.30 per head, up from $6.60 per head the previous day and up from losses of $69.70 per head a week ago. The Choice/Select spread rose seasonally to $3.22 per cwt, up from $2.01 the previous day and up from $1.70 per cwt the previous week.

Product movement remained slow at mid-morning today at 64 loads. Choice cuts were up another $1.03, while Select cuts were down $0.47 per cwt.

Monday’s estimated kill came in at 109,000 head of cattle, up 10,000 from the same day last week, but down 4,000 from the same day last year.

The latest CME cash index came in at $206.38, up $0.14 on the day. That breaks a streak of 6 consecutive days of lower prices, with losses over the period totaling $4.34 per cwt. The lead feeder cattle futures contract has strong resistance at $205. We’ll likely need to see greater strength in the cash market to push the futures above that level.


Lean hog futures come under pressure once again as the product market continues trend lower.

The cash hog market has been mixed in recent days, but generally stable. Cash hogs were up to $2 higher today in the Peoria market as packers seek more hogs amid hazardous winter weather. Adverse conditions have slowed the movement of hogs over the past couple of weeks, but those hogs are adding pounds while waiting for delivery.

The latest CME cash index came in at $65.60 per cwt today, up $1.11 on the day and up $5.33 over the past six trading days. Stronger cash hogs and a weaker product market left estimated packer margins tight at a positive $3.25 per head. Monday’s kill was estimated at 432,000 head, up 2,000 from the previous week and up 37,000 from the same day last year, and at heavier weights. Overall, last week’s pork production was up 6.5% from the same week last year, while calendar year pork production is up 2.9% from the previous year.

Product movement out the back door totaled 344 loads Monday, up from 319 loads the previous day and up from 329 loads the previous week. The composite pork product price was down $0.84 to $69.67 per cwt, which is down from $71.59 per cwt one week earlier. Movement at midday today was decent as well at 205 loads, but the composite price was down another $0.77 to $68.90 per cwt.

April lean hogs dropped to their lowest level since February 18 today, as product continues to flood the market. Demand for that product is good, but the supply is even larger.

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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Arlan Suderman | Senior Market Analyst
WATER STREET ADVISORY® | www.waterstreet.org
(316) 729-4599 | asuderman@waterstreet.org

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