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Closing Comments

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Closing Comments

Argentine presidential election is this Sunday with the market on edge for the implication to grain export taxes and currency policy changes that could make it more profitable for farmer sales, bringing fresh supplies to the global market.
Crude oil continues to struggle under oversupply as producing countries continue to keep production high for tax revenue. Weekly data from Baker Hughes put the US crude oil rig count at 564, slightly down from last week and down from a year ago at 1,574 – but gulf oil projects and production are making up for the reduced rig count in the near term.

Corn

Corn closes lower on profit taking, but 5 cents higher on the week.

Commitment of traders report this afternoon showed for the week ending November 17th, which would be the week following the USDA November report, Managed Money increased their short position by -26,259 in futures and options for a net short position of -84,663. During that same period the futures price gained 2 ¼ cents in price. This will likely prove concerning to the funds to now have the third largest short position in the last 10 years, but not to have lower price with the move.
Gulf values continue to be soft but export reports this week did show a positive trend as the US is now in a position to compete on global business. Domestic processor bids seem to have stabilized after their recent strength. Users and farmers are now playing chicken before the end of the year as processors move closer to just in time usage and the farmer continues to hold ownership tight.
Without a rally in futures, processers will need to continue to work basis levels to encourage sales or to pay for transportation from weaker basis areas. Expect any significant futures rally to damage recent gains in the corn basis levels as bushels get priced.
The return of China to the purchase of sorghum and DDGs is a welcome sign in the market that has been concerned with a reduction in exports of those product reducing domestic corn demand.
Resistance for December corn next week will show up in the 3.70-3.72 area. .

Soybeans

Soybeans close lower on continued soymeal weakness and concern ahead of the Argentine election.

Soybean futures started the day trade at the bottom of the recent trading range but was able to gain strength on strength in soyoil and the report of the sale of 120,000 tonnes of US soybeans to unknown destinations.
This week’s export inspections and sales continue to support the expectation that soybeans moving out of the US will continue its pace well into the winter, but weaker domestic soymeal demand on plentiful supplies continues to keep a lid on strength in the market. Brazilian weather has some ongoing concern for hot and dry in the central and west but headlines to create market concern will require increased hot/dry as the calendar rolls deeper into December.
Commitment of traders showed for the week ending November 17th, Managed Money slightly reduced their short soybean position in combined futures and options, but increased their net short soybean meal position by -9,322; taking it to -14,681.
The positive feature of the complex was soybean oil with strong domestic and export demand. The concern of potential slowdown in crush has the market – oil – finding a bid on that fear. For the week, oil gained +0.86
Soymeal proves to be the most problematic in the complex, finishing the week on four year lows and losing -5.8 for the week. January soybeans continue to trade sideways above 8.50 but below 8.65. Recent interday weakness in soybeans has had a hard time finding follow through selling as farmers and speculators are reluctant to add to short positions without new, bearish news prior to the South American growing season.

Wheat

Kansas City remains weak on improved plains moisture reducing Plains concerns and stronger US dollar.

Chicago wheat lost -7 ¼, KC -8 ½ this week on improving crop conditions, forecast additional moisture in the US Plains and the prospects of improving soil moisture conditions in Ukraine and Russia. December Minneapolis wheat actually gained 5 ¼ on the week on improved demand.
The stronger US dollar added to the pressure, making US grains less attractive on the export market.
The Commitment of Traders report showed that for the week ending November 17th, Managed Money nearly doubled their short position in Chicago wheat, now to -41,409 while only modestly adding to KC short and reducing their short position in Minneapolis.
Technically Chicago is trading back at the bottom of its recent sideways trading range while Kansas City continues to lose ground from its early October highs with today’s close a new low close for the December contract.

Livestock

Cattle close neutral ahead of the COF report while hogs follow through higher after their early week price reversal.

This month’s USDA cattle on feed report:
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This month’s USDA Cattle on Feed report came in close to trade expectations with the number of head marketed being the lowest in October since tracking began in 1996. The report coming in close to trade expectations is seen as neutral, but weak demand for wholesale beef and spot fed cattle continues to weight on the oversold market.

In hogs, strong packer margins are encouraging packers to process more hogs and pay producers at steady levels. The wholesale pork price on Thursday afternoon rose $1.72 per cwt from Wednesday to $73.32. With the forecast storm, some dealers are watching for delivery disruptions.

December futures led the strength, gapping to open and not looking back, easily passing the highs from November 12th. This week’s reversal gave the chart an outside week higher off new lows, a bullish reversal – but continued strength will likely be tempered with generally bearish fundamentals and seasonals.

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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