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Closing Comments

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Closing Comments

Corn

Corn futures rebound on wheat strength, weather concerns and slow farmer selling.

Wheat led corn today on short covering, giving corn the fourth higher close in five sessions.

USDA Grain Inspections have been delayed by the USDA citing technical problems.

Friday’s Commitment of Traders showed that as of May 12th, showed net fund ownership of corn, soybeans and Chicago & KC wheat was $8.1 billion, down $0.1 billion on the week and down 80% year-on-year. Hedge fund owners cut their net short corn position slightly to 784 million, down 5 million on the week.

In general global weather remains a bit bearish with good conditions continuing for Brazil and China while Argentina may experience some harvest disruptions. Gulf basis was slightly weaker on trying to compete with the South American market for exports.

With planting progress coming in today at 85% vs the five year average of 76% – there isn’t a lot for the market to be concerned about, but it does need to ensure getting those last acres secured.

China is auctioning off another 5.3 mmt of corn this week (they only sold 0.4 mmt of the 3.8 last week) and reports continue to surface of restrictions on feed grain imports (read; Sorghum) until more sales are made.

On a technical note, last Thursday the MACD and Stochastics crossed for higher in Dec as well as today closed above the 20 day MA for the first time since April 6th. July corn will likely encounter nearby resistance near $3.75 and Dec around $3.93.

Soybeans

Day four of non-direction in Soybeans as spread unwinding strengthens meal / weakens oil.

COT showed hedge funds added to their net short soybean position to get to short 170 million bushels vs. 121 million short the previous week.

Soybeans were caught between strength off Argentine strike issues and the bearishness of active planting, building new crop stocks and expanding bird flu issues.

Planting progress came in today at 45% vs the five year average of 36%. Indiana, Kansas, Missouri, and Nebraska are the only states behind average progress.

Crop progress in the coldest areas the next couple days have North Dakota as 3% emerged, Minnesota at 21% emerged, South Dakota at 4% and Nebraska 6%.

Technical aspect of new crop soybeans has the price currently stuck between a resistance line off April and May low at the 9.40 area and May support at 9.32.

Wheat

Wheat rally extends on weather concerns and short covering. Closes in top half of trade range, but off daily highs.

As of May 12th, COT listed hedge funds were net short Chicago Wheat aby 525 million bushels, down from the previous week’s record 524 million and in Kansas City they maintained their same record 201 million bushel short position. Look for a significant change this come Friday as the largest short covering day was the 14th. Floor sources had funds buying 6,000 contracts of wheat today in Chicago.

Open interest is shrinking in wheat with Chicago down 15,000 contracts in the last week.

The wheat market continues to be the feature in the market with cold weather concerns in the west and too much rain in the south and mid-south continue to feed the short covering rally.

Crop progress report showed 68% headed vs the five year average of 56%. (Kansas is 86% vs the average of 67%) Spring wheat is 94% planted vs average of 65% with 67% emerged and a five year average of 38%.

Beef

Last week’s disappointing cash market pressures futures.

June cattle closed lower on the session with talk that the cash market has peaked which has helped to fuel long liquidation. Open interest is high and the COT showed a hefty long position that has helped to feed the pressure.

Beef prices were up $1.03 at mid-day to $262.96.  Slaughter came in slightly above trade expectations at 114,000 head.

Pork

Tale of two markets as nearby contracts continue weakness and deferreds work higher.

June hogs traded lower and pushed down to the lowest level since May 5th. Weakness in cattle added to the nearby pressure.

Talk that packer demand will slow with at four day slaughter next week helped to spark some selling. Slaughter came in just above trade expectations at 423,000 head.

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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