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Closing Comments

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Closing Comments

Light news to start the week as the trade moves into the mode of position squaring for the end of the year. In light of the short corn and wheat fund positions, this could mean short covering support.

DuPont and Dow Chemical have agreed to combine in an all-stock merger valued at $130 billion. First step will be a 2016 merger followed by the breakup of the conglomerate into three businesses, one being agriculture.

The fed will make their interest rate change announcement on Wednesday. Expectation is for a slight increase in interest rates, the first in almost a decade.

Corn

Corn finds technical buying, short covering and supportive export inspections.

Inspection showed exporters shipped 22.3 mln bu of corn this week. An increase of 13 percent from last week, but keeping the year-to-date pace 23 percent behind last year.

Concern of competitive offers from Argentina continue to concern the export business but a higher energy sector and short covering offered a generally supportive trade in corn today. December corn – last trade day today – traded as high as 8 3/4 higher today.

Indicators are relatively neutral as corn continues its choppy, somewhat higher trending trade pattern.

Soybeans

Soybeans find support from the meal market to start the week.

Weekly shipments show soybeans at 49.371 mln bu, almost 22 percent behind last week. This leaves the year-to-date pace at 9.55 percent behind last year’s pace.

The market will now be closely monitoring Brazilian weather as January approaches. For now the weather is cooperative but if the north/east misses anticipated rains over the next two weeks – about 15 percent of the production area will be at risk of hot/dry conditions. In the south, excessive rains continue to promote Asian rust concerns and flooding in some areas.

In the veg oil sector – the longer term outlook looks favorable, but for now palm oil supplies and domestic soy oil will limit significant gains.

NOPA crush for November will be released tomorrow.

The January beans kept from closing in new lows – staying out of executing the bear flag – thanks to help from higher soy meal. While soy oil was lower, meal has much more impact on the crush margin as was able to close 2.2 higher.

Wheat

Wheat can’t hold early gains but closes higher on short covering and supportive exports.

Inspections in wheat came in at almost double last week at almost 16 mln bu, but still trailing year-to-date progress vs last year by 14.5 percent. This came in well above the trade expectation which provided early support to the wheat complex.

Longer term the wheat market will continue to face strong price competition from the plentiful supplies and advantageous exchange rates for EU and Black Sea destinations.

The warmer than usual weather in the EU has left their winter crops vulnerable to cold snaps as they have yet to fully see the hardening of their crops for winter. They are hopeful for gradually colder weather over the next few weeks for better winter preparation.

Weaker Russian ruble has Black Sea origin wheat prices lower while EU milling wheat futures closed lower today as well.

Rabobank in Australia is blaming El Nino for leading to a lowering of their crop estimate by 2 mln mt, down to 23.3 mln mt.

Livestock

Cattle continue to try clean up supplies with lower prices while hogs consolidate following Friday’s exciting trade.

Cattle market continues to probe for low enough prices to clear the market. While cash and beef prices are at the lowest levels in two years, retail prices are down just slightly – contributing to the slow retail demand.

If cattle can hold today’s lows, there will be a three-day fade buy set-up that means taking out today’s high would be a signal for higher – at least in the short term.

USDA estimated hog slaughter came in at 436,000 head Friday and 236,000 head for Saturday. This brought the total for last week up to 2.426 mln head, up 7.3 percent from last year. Pork production was 517.7 mln pounds, up 6.5 percent from last year.

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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