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Closing Comments

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Closing Comments

New US applications for unemployment benefits last week recorded their largest increase in eight months, but remain at levels consistent with a fairly healthy labor market. Additional data showed a surprise rise in productivity in the third quarter after a drop in self-employment led to overall hours worked falling for the first time in six years.
US House of Representatives passed the bill that will fund transportation spending for a number of years, but this version must be reconciled with the Senate version.

Corn

Corn trades back to bottom of range on strong dollar and weaker crude oil.

December corn fell to its lowest level in two weeks pressured by technical selling, stronger US dollar and the ‘risk off’ trade mindset ahead of the November USDA crop report.
USDA said US corn export sales last week totaled 20.4 million bushels, coming in at the middle of trade expectations. The port prices continue to have the US on the outside looking in on much of the export business, which the market is using as a proxy for demand. However the cash market continues to illustrate the domestic commercial demand.
The Andersons announced it may double production at its Albion MI plant after the facility was recently approved as “efficient” by the EPA. Current annual production is 55 mln gallons.
The analyst Celers updated their Brazilian 15/16 corn crop estimate to 86.41 mln mt, down -1.49 mln mt from their early October estimate.

Soybeans

Soybeans lower on disappointing export sales and a ‘risk off’ mentality prior to Tuesday’s USDA report.

Export sales in soybeans reported by the USDA for the week ending October 29 came in at 24.1 million bushels, well below the trade expectations.
The disappointing sales fed the trade anxiety that China may back off on their buying spree. With a good US crop and cooperative weather in South America, the bears secured control – taking price back to fall lows.
The market will be watching for export sales to underpin the market as it had when we previously traded at these levels.
Also of note, vessels are backing up at Brazilian ports amidst the height of their corn export season. Average wait times outside Paranagua, which ships 20 percent of Brazil’s exportable soybeans, reached 43 days last month. At most ports, the loading wait time is twice what it was for ship loading vs last year. This means more shipments to China may shift to the United States as February nears.
FC Stone estimated the 15/16 Brazil soybean crop at 100.45 mln mt, down slightly from the prior outlook at 101.1 mln mt.

Soymeal basis offers were steady to as much as $3 per ton lower at US rail and truck markets, weighted down by ample supplies and limited demand.

Brazil truckers plan to start an indefinite strike on Monday which is intended to slow deliveries of food, fuel and industrial supplies. Brazil oil workers are currently in the middle of their most disruptive strike in 20 years.

Funds reportedly sold 11,000 contracts today.

Wheat

KC loses again to Chicago on anticipation of rain relief for the US wheat.

Soft wheat mills continue to search for quality in the east, providing support to Chicago but adding more to the discrepancy with Kansas City.
Chicago was able to garner its second close above the 200 day moving average but was not able to challenge its high from yesterday, the top of the recent trading range.
The sizable short fund position has the market looking like it can follow through on short covering, but the fundamentals seem to be keeping a cap on fireworks for now.
Buenos Aires Grain Exchange said the Argentine wheat harvest progress is being delayed due to rains.

Livestock

Cattle lose ground for third day on a row while hogs extend losses after two days of consolidation.

Lack of wholesale beef demand and preliminary cash price weakness pressured cattle and feeder cattle following yesterday’s limit down futures trade.

Packers in Iowa paid mostly $131 per cwt for cash cattle while cash sources indicate cattle are trading at $130 in NE, off $7 from last week’s trade.

Thursday morning choice beef fell 66 cents per cwt while select cuts dropped 47 cents from Wednesday.

Friday will be the first of five days of the “Goldman Roll”.

Cash hog prices in the western Midwest sank $2.45 per cwt from Wednesday to $57.79. Additional government data show the morning’s wholesale pork price was down 85 cents per cwt, let by the $4.07 drop in rib costs. Abundant seasonal supplies have allowed packers to fill inventories through the weekend.

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Closing Market Snapshot

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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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