Home Market Market Watch Closing Comments

Closing Comments

SHARE






[cid:image009.jpg@01CE6CE4.660D8B30]

Closing Comments

Grain and livestock generally higher amid a fifth down day in energy and a bounce in the US dollar.

Mauricio Macri took office as Argentina’s first non-Peronist president in 16 years today, ending more than a decade of leftist populism by promising to revive the country’s ailing economy. In his first speech as president he vowed to grow the economy and lift Argentines out of poverty. He did not though provide any fresh details on how he plans to unwind capital controls, deal with the double-digit inflation or manage the fiscal deficit. Watch for Peronists who have dominated politics there for 70 years to be quick to pounce on any reform caused crisis.

Corn

Corn holds on to strength into the close on good exports and technical buying.

US corn export sales through the week of December 3rd came in today at 43 mln bushels. This came in much better than expected however sales pace is still 23 percent off from last year. The US has been more competitive globally as of late, but recent competitive offers from Argentina will likely slow down the pace of new US sales.

Indonesia may import 2 mln tons of corn in ’16 amid growing demand for the grain from food industries and millers. The government, which imports most of its corn from Argentina and Brazil, stopped issuing corn import permits this summer with a push for food self-sufficiency and to channel imports through the state agency.

Soybeans

Soybeans give up much of their midday strength on return of weakness in the meal market.

USDA export sales through the week ending December 3rd were 53 mln bushels of soybean which was much better than expected. Soybean meal also impressed weekly exports coming in at 229,000 mt but it wasn’t enough news to help meal catch a bid as January lost -3.2 to close into new lows.

The strength that was seen in the complex came from soybean oil which was able to shake off overnight weakness despite weakness in palm oil and the stronger dollar. The soy oil market still seems optimistic that congress could shift the blender’s credit to producers. The move seems unlikely, but should be settled by the end of the week.

Jan soybeans are caught now between support at 8.65-8.70 area and resistance around 9.00. Managed Money with options is likely short an estimated 165 mln bu of soybeans.

Wheat

Wheat finds short covering despite disappointing export sales numbers.

USDA exports this week were reported at a disappointing 8 mln bushels as European and Black Sea sources continue to underbid the US. Year to date sales are running 15 percent behind a year ago and shipments 18 percent the USDA forecast which is a 6 percent yearly decline.

Kansas City regained its lead in the complex today – gaining 3 ½ cents over Chicago in the March to put the KC discount at -5 ¾. Minneapolis kept pace with Chicago but has struggled to take out recent highs like KC has this week.

Livestock

Cattle reverse after posting new lows early while hogs consolidate ahead of convergence Monday.

USDA forecasts released yesterday for 2016 expects beef, pork and chicken supplies to increase in 2016. Beef production is expected to register the biggest gain, increasing by 654 mln pounds (+4.3 percent). Because beef exports are expected to be down 12.9 percent, overall beef availability in the US in ’16 is forecast up just 2.3 percent. Yet cattle futures in ’16 are down 20 percent, more than fundamental suggest they may need to be.

Pork production is forecast to increase 1.6 percent but exports remain a key driver as a swing in exports will significantly shift domestic supplies. China has continually been shifting purchases to Europe and a continued strong dollar / weak euro could support this trend.

Cattle and feeder cattle are oversold and should be closing in on a short term bottom – it’s possible that was today. Follow through will be necessary and targets for Feb cattle will be gaps above around 131.500 and 139.500 – as of this printing Feb is trading 126.050.

Feb hogs continue to slowly work up but are trading in a precarious bear flag. If strength can continue, watch for resistance in the 62-63 area.

Closing Market Snapshot

[cid:image001.png@01D1335F.1ADA2A30]

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.

[cid:image010.jpg@01CE6CE4.660D8B30]

[cid:image011.jpg@01CE6CE4.660D8B30]

[cid:image012.png@01CE6CE4.660D8B30]

www.waterstreet.org
or 1-866-249-2528