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Closing Comments

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Closing Comments

Argentina’s ruling party candidate has now announced he would quickly slash grain export taxes and gradually phase out other damaging farm controls. This is a sharp break from the current administration policy and would put him closer in line with the opposition candidate promises. Step one is the election on Nov 22, Step two will be follow through action on promises by the winner.
The market has general shaken off any impacts of the independent trucker strike in Brazil. Disruption to ports has been limited.
Today’s EIA report is delayed until tomorrow and tomorrow’s export sales report is delayed until Friday on Veteran’s Day holiday.

Corn

Corn bounces on technical buying and bargain hunting following the USDA report.

The significant increase in the speculative short position yesterday – an estimated 20,000 contracts sold by the funds – has provided support today. Lower prices need continued selling and farmers are slow to sell and the now large short position by funds has them reluctant to add more shorts going into South American weather uncertainty and US acreage buying.
Several grain import groups in South Korea set tenders overnight to buy corn on the global market, seeing value prices here following the USDA report. The US is inching toward better competitiveness, but Brazil currently holds a firm price advantage over both the US and Argentina.
In many commodities, including corn, trade volume on Tuesday was near record levels. Dec/March spread is now trading back at the tightest levels since last February, closing today at 7 ¾ as commercial interest in the nearby contract continues.
Technically the market gapped up last night on the open and wasn’t able to trade down to yesterday’s close. Today’s close is within a penny of where the market was trading prior to the release of the USDA report. So far, sellers seem reluctant here and yesterday’s low should prove to be good support. Trendline resistance tomorrow will be around $3.69 December.

Soybeans

Soybeans close in the upper end of their daily range today on seller reluctance.

New contract low, bearish USDA info and current cooperative Brazilian weather outlook makes it hard to expect a trend change – but slow farmer selling and South America just moving into its growing season will keep the market on edge.
Funds yesterday added to an already short position in the soybean market. Generally they prefer not to be overly short soybeans, but with current information production information there isn’t a story to scare them into getting long. But being short already coupled with slow farmer selling and continued interest in Chinese buying will likely keep the market supported – and find rallies on weather hiccups – at least until South America can prove no major weather issues.
Seasonal tendencies of soybeans include strength through the month of October, weakness during the first three weeks of November followed by strength into the end of the year.
January soybean board crush margins continue to slide lower to the bottom of the trading range it has been in since June. Closing today near 88 cents, with the upper end of the range at $1.05.
Daily January beans are in oversold territory but were able to turn stochastics higher today. 8.80 to 9.00 will provide resistance to a short term bounce.

Wheat

Wheat catches a bid after three days down on consumptive buying and reluctant sellers.

Wheat continues to struggle to compete on the world market due to the dollar exchange rate. With wheat ending stocks coming in above expectations yesterday, extended support to the market will require a significant global weather story or a change in the dollar exchange rate.
The US dollar is currently off yesterday’s highs and due for a correction out of its overbought area, but continued loosening of policy in the EU and tightening in the US will likely to keep the dollar supported, at least in the short term.
Kansas City wheat protein premiums for railcars have been steady to lower, reflecting limited demand from mills despite slow farmer sales.
World weather has continued cooperative weather for areas in Ukraine and southern Russia that have been at risk while eastern Aussie rains continue to hamper harvest.
The KC-Chi spread stagnates again, closing at -30 ½. .

Livestock

Cattle continue their normal volatility trading limit up for most of today while hogs catch a bid for the first time in ten sessions.

Yesterday’s WASDE report showed beef production lowered slightly for ’15 and ’16 compared to their October report. WASDE has 2016’s beef production with a large 4.8 percent year-over-year increase. Pork production was unchanged, up 1.7 percent from 2015.

Open interest has not been dropping in cattle or hogs on the descent, suggesting the fund selling has not been just a liquidation of longs but an addition of shorts. This could provide a bounce opportunity as shorts (sold positions) get covered.

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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