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Closing Comments

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Closing Comments

Crude drops to lows not seen since 2009 on the heels of Friday’s OPEC announcement that they would be raising their production ceiling. The Saudi intention of pressuring the fracking industry looks to be working as frackers run out of time on hedges and struggle to find rallies to hedge again. US rig count continues to drop each week. The weakness gave the whole commodity and equity complex a sour start to the week and pulling back much of Friday’s gains in the metals.

President elect-Macri of Argentina is discussing the desire to end the two tiered currency approach of the Argentine peso – creating a free floating currency that would create a much lower valued peso and give the Argentine farmer an added advantage on the export market. This news weight on the grain sector today.

NATO ruled out sending ground troops to fight against ISIS militants in Syria.

Corn

Corn lower on profit taking and positioning ahead of the Wednesday USDA report.

Profit taking after the Thursday/Friday short covering had corn lower for the entire session today. Pressure from crude, sales and spillover from the bean market brought corn back to daily support to finish the session.

US ethanol exports increased to 265.27 mln liters in October, up 16 percent from a month ago and the second consecutive monthly jump after falling in August according to the US Census Bureau. China was the destination for undenatured fuel ethanol, taking 113.24 mln liters.

Export inspections for the week ending December 3rd were 19.4 mln bu for corn, which is 25 percent off last year. While exports are only 13 percent of the corn crop usage, it is still an indicator to the outside market the demand for corn.

The trade is anticipating a slight increase in US stocks from Wednesday’s USDA report.

Soybeans

Soybeans significantly lower on profit taking, bearish Argentina news and concern that the biodiesel subsidy may not be able to switch to producers.

After a 65 cent rally in Jan soybeans, the market faced profit taking, farmer sales and weakness out of the soybean oil market (the market that gave the soybean rally). Rumbling out of Argentina about working toward a free floating peso pressured the meal market and fear that the shift of the biodiesel subsidy would not shift from the blender to producer pressured the soy oil market.

Inspections showed shipments of 63.2 mln bu of soybeans as of December 3rd. This puts soybeans off -13.34 percent from last week and just over off -8 percent from last year,

Brazilian production regions that have been missing rains have received or will receive average rainfalls over this coming week to bring relief.

Wheat

Wheat struggles to hold early gains after Friday’s Commitment of Traders report showing significant increase in CBOT Wheat shorts.

The wheat market held up quite well to the weakness in the grain sector for most of the session as early trade responded to the startling size that was added to the short fund position in Chicago wheat. This gave the market a “gap up open” last night, but slowly succumbed to the pressure – filling the gap by session close.

Inspections came in at 8.3 mln bu for wheat which is down 15 percent from the 14/15 marketing year and 38 percent off last week’s pace.

Conditions in the US continue to be supportive going into winter for most of the wheat crop with about 15 percent too wet in the Delta and Midwest. India’s production areas are too hot/dry and plenty of Ukraine/South Russia wheat is in poor condition but has seen some relief of last – but no change to create real headlines needed for strength in wheat.

Kansas City March lost 8 ¼ to Chicago while Minneapolis was steady vs Kansas City. .

Livestock

WTO COOL ruling weighs on the meat sector.

The WTO today said Canada and Mexico can impose $1.01 billion in retaliatory tariffs on US goods for meat-labeling rules that it says discriminate against livestock from the US trading partners. This decision is after a year long battle over “COOL” requiring packaged meats to disclose where the animals were born, raised and slaughtered. Canada will be able to add about $781 million in tariffs and Mexico about $228 million.

Mexico said it has started internal procedures that would strip benefits from some US agriculture and industrial imports including apples, dairy, alcoholic drinks and personal hygiene products.

Boxed beef cutout values are steady on choice and lower on select on light to moderate demand.

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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