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Closing Comments

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Closing Comments

The downing of the Russian jet as well as sabotage by suspected separatists in Crimea among other headlines continues to have the outside markets on edge. The market, be it energy or grains, is trying to figure out what the Russian response will be to the situation. Turkey is a large buyer of Russian energy and wheat.

In addition to Mideast unrest supporting energies, pressure seems to be mounting on Saudi Arabia to back down from their strategy of gaining market share on low crude prices as OPEC country budgets are stretched during the prolonged downturn in the energy market.

Look for volume to drop this week as traders head out to extend their Thanksgiving weekend. Lower volumes and sometime add to more volatile holiday trade. Friday’s trade will close early at Noon CT.
EPA is expected to release their updated Renewable Fuels Standard this week (not later than Monday) with the trade expecting an uptick of 2 to 3 percent in ethanol and around 5 percent in biodiesel.
Regulators in China lifted their temporary rule requiring proprietary trading offices to be net long each day of trading, a move many believe is a signal of stability returning to the stock markets there. The regulation was put in place to prevent ‘short selling’ of stocks during the recent turmoil in Chinese equities.
First notice day on December grain futures is Monday.

Corn

Corn couldn’t find follow through interest from fund buying after Monday’s short-covering rally.

Monday’s action was driven in part by the large fund position and short-covering as many of the short positions have been added at lower price levels. Today the follow through wasn’t there as pressure from wheat kept a lid on the recent 10 cent rally in corn.
Cash market is stable to weaker after its recent strength as processors continue to secure ownership into the end of the year. Some ethanol sites in the west have softened their bids after the recent “strength” in the futures market.
Brazil’s crop watcher Cordonnier left his Brazil and Argentine corn productions estimates unchanged at 81.2 mmt and 21.6 mmt respectively. Ukrainian analysts are anticipating a jump in corn acreage next year because of the poor planting conditions this autumn for fall crops.
March corn will have resistance above the market in the 3.74-3.77 area and is at risk of short term pressure here after not being able to follow through on yesterday’s strength.

Soybeans

Soybeans close slightly lower, unable to follow through higher after trading higher most of the day.

Soybeans found most of its support from the soy oil market, which has been nervous that a slowdown in crush will tighten soy oil supplies in light of good global demand and the prospect of increased biodiesel demand from an upcoming change in the RFS.
Holiday trade this week with full trading day Wednesday and Noon CT close on Friday. Interestingly, over the last 40 years soybeans have closed higher on the day before and after Thanksgiving nearly 65 percent of the time.
In Brazil, the southern areas continue to struggle with soaking rains while the central region is still dealing with hot/dry conditions although some rains are in the extended forecast.
Today price in January traded at the highest levels in 11 sessions. Board crush margin continues to struggle which will likely cap soybean rallies until soy meal can begin to participate.

Wheat

Wheat struggles under improving crop conditions and ho-hum global demand.

Wheat continues to be plagued on the global export market as Black Sea and European offers lower offers to garner business from their destinations. The US dollar was lower today, but still remains too strong of a headwind for export competitiveness.
India’s wheat planting has been delayed by at least a week due to high temperatures, threatening its output of the grain again after storms during harvest earlier this year dragged down annual production levels for the first time since 2007.
Without new headlines, expect the fundamentals of wheat to keep it a subdued market for now.
Chicago and Kansas City wheat returned to the bottom of the recent trading ranges, while Minneapolis – which has been stronger – reversed much of yesterday’s gains. The wheats seem at risk of another drive lower, but value buyers and reluctant seller have kept the lows of the last several months as solid support so far.

Livestock

Cold storage weights on beef while the lean hog index has capped strength in hog futures.

With yesterday’s cold storage report showing frozen beef levels 34 percent above 2014 and boneless beef accounting for a majority of the increase, the belief is much of the inventory has come from Australian imports. With Australia and NZ reaching their export quotas, this is likely to moderate but for now the inventory weighed on the traded today.

AM boxed beef cutout values were higher this morning, with choice up +1.16 at 203.95 and select up +2.07 at 193.12.

Pork in cold storage saw a significant decrease from September to October, which follow’s last year’s seasonal pattern. This is significant as October’s commercial port production was 2 percent higher than 2014’s.

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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