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Closing Comments



Closing Comments

Crude has given up much of yesterday’s gains as concern on potential supply disruption from French bombings in Mideast give way to the continued supply glut concerns and the ongoing strength in the dollar.
US dollar is trading at new recent highs on supportive domestic economic information and the market anticipation of an interest rate rise in December. The dollar is technically overbought, but seems to be gunning at least for the April high on the continuation chart of 100.38 – December is currently trading 99.70.
Brazil crop fertilizer group released data showing fertilizer deliveries to end users in October were -8.7 percent compared to the previous year’s month while accumulated deliveries off -6.4 percent. Contributing factors likely include the low Brazilian currency causing inflated costs of imported products along with the slower start to the planting season.


Corn catches a short covering bid, but gains are limited by weakness in wheat.

Yesterday’s release of the Commitment of Traders showed noncommercial traders as of November 10th had expended their net short position from the previous week by more than 75,000 contracts. Hope for an uptick in export business as US corn finds global price competitiveness coupled with the large increase in trader’s short position had some nervousness among speculative shorts today.
Prices were able to close near session highs for the day and near the top side of the trading range since last Tuesday’s report. Technically the daily MACD has flattened its decent and the Stochastics have turned up, crossing the signal line for higher. December-March spread lost another ¾ cents, closing at 6 cents carry.
Below is a chart of the Managed Money net position since 2006. While the Managed Money has been “shorter” historically, the short position is the exception and creates a situation for short covering rallies.


Soybeans work to bounce out of their oversold condition.

Analysts with Safras Mercado notes Mato Grasso soybean planting progress was 83 percent complete, up 23 points over last week but behind the long term average of 88 percent. The Brazilian crop is estimated to be 56 percent planted.
Gulf bids have softened a bit as China has been reasonably quiet the past few days. Board crush margins have weakened to levels closer to last spring with January margin near 76 cents. Strength will need to develop in the meal market and the meal and oil bids for strength in soybean futures to be sustained.
Soybeans too are at risk of a short covering rally as speculators added significantly to their net short position. While Managed Money added new shorts, they seem to be content holding their current long positions. South American weather doesn’t look to be developing a story yet, but developing cooling in the equatorial waters may put the market on edge of a feared switch to La Nina – a potentially problematic development for both North and South American 2016 weather.
Beans posted their best close since the USDA report, turning the MACD for higher and keeping the Stochs for higher. January closed at 8.64 with nearby resistance at 8.75.


Wheat falls on improved conditions, rains and technical selling.

Rains in US plains and more cooperative weather upcoming in the Black Sea area brought pressure into the wheat complex today. Weakness in energy, the uptick in US crop conditions and large Euro supplies are keeping a lid wheat, even in an oversold condition ripe for a short covering bounce.
Commitment of Traders showed the combined speculative short position at a new record level of 33,071 contracts, an increase of 8,351 for the week.
Kansas City gained again on Chicago today, dropping Chicago’s premium to 24 ¼ cents.


Livestock higher today on short covering and fear the recent break may be overdone for now.

Exceptional volatility is the new normal in livestock with today as no exception. Live cattle and lean hogs traded today on expanded limits after yesterday’s limit close. Today Feb live cattle traded a $4.65 range while December Hogs reversed yesterday’s limit down – taking out the previous day high and closing near the upper end of the range.

Much of the bearishness is likely now priced into the cattle market as weights work down and weather concerns develop going into winter.

Today’s wholesale choice beef price rose 19 cents per cwt from Monday to $209.23. While unlikely that processors will be eager to raise bids for cash cattle, retailers are scrambling to book product following downtime at packing plants this week and the risk of wintery weather disrupting packing operations.

Today’s AM pork cut-out values were down sharply, adding pressure to the volatile hog market. Carcass values were down -2.10 to $72.59.

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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