Pressure across the ag and energy sector today as selling came in on fear of devaluation announcement from Argentina, Federal Reserve increase in interest rates and plentiful energy supplies.
Federal Reserve announced a fed funds rate rise of 0.25 to 0.50 percent based on their judgement of the considerable improvement in the labor market condition. They stated reasonable confidence that inflation will rise over the medium term to its 2 percent objective. Their forecast is for a rate of 1.375 percent by the end of 2016.
Weekly petroleum inventory report was more negative than expected with crude inventories jumping 4.8 mln bbls this week, gasoline stocks 1.7 mln larger and a growth in distillate stocks of 2.6 mln bbl. Compared to this week a year ago; crude inventories are 11 percent higher, gasoline stocks 1 percent lower and distillates are 25 percent greater.
Congress decided against a Producer Tax subsidy change for biodiesel producers and will maintain the current blender credit system.
Argentina bank officials announced today they are easing currency controls.
Corn stumbles out of recent trade range on selling pressure and weakness spillover from wheat.
Corn faced challenges from all sides today as Brazilian weather is favorable for corn production, the Argentine devaluation threat could bring even lower offers in export competition, the build in energy supplies weighs on ethanol, growing expectations of more US corn acres next year and the dollar finding support today.
Today’s trade action won’t be reported in Friday’s Commitment of Traders report, but funds were sellers again of corn as we move into end of the year, light holiday trade.
March corn needs to find support on today’s low or the next support will be at recent November lows of 3.64.
Soybeans suffered from Argentine devaluation fears and demand concerns but close well off the daily low.
Decent South American weather coupled with fear of Argentine peso devaluation had the soybean market under pressure until late morning but was able to claw back losses into the close.
Weak soy meal demand had January meal into new contract lows…again. Coupled with the weakness in the soy oil market following the removal of the chance to see the switch of the blender credit over to producers – the board crush margin closed at 65.35, the poorest margin since last spring which continues to weigh on soybean price.
The Philippines Supreme Court ruled against GMOs – this could have impact on unshipped soy meal.
Soybean stochastics are moving into oversold area. Today’s low of 8.56 in Jan and 8.50 below that is nearby support with nearby resistance around 8.80.
Wheat couldn’t sustain its recent rally as funds returned to selling and the marker open interest continues to dwindle.
The already short fund position by the funds have been providing support, especially in Chicago and Kansas City but the recent support collapsed today as funds turned sellers once again.
The low offers from Argentine and EU sources coupled with cooperative weather has kept the recent rally in wheat from extending from the lack of supportive headlines.
Today the March contracts were lower with Chicago losing 10 ¾, KC down 11 ¼ and Minneapolis off 7. Support in Chicago is today’s low at 4.83 ¼ and 4.60 below.
Cattle have an inside day looking for more direction from the cash market while nearby hogs break down from their recent consolidation.
The Fed comments today regarding the strengthening economy could have longer term implications on beef demand as the economy strengthens. The Dow responded well to the Fed announcement trading up 184 points at this time. For now, the excess beef supply needs to be cleaned up to give hope to the futures market.
Cutout values show Choice off -.31 from yesterday at 196.90 and Select down 1.90 at 184.91. Auction reports from Kansas are light on volume but indicated feeder steers steady to firm while slaughter cows steady after last week’s decline.
Closing Market Snapshot
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.