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Closing Comments

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Closing Comments

“Turnaround Thursday” doesn’t have the same ring to it as it does on Tuesdays – but that’s what today was after the grains extended yesterday’s losses to open, only to reverse mid-day to finish with strength.

Argentine peso devaluation of around 30 percent was the feature pressure out of the gate this morning until soymeal posted a morning low just before 10:00 am CT which was followed by strength in soybeans, then corn and finally wheat.

While grains had a good close, the US dollar is up strong today with gold, crude oil and the Dow Jones lower.

Concern continues over whether the long only index funds will hold their positions into the end of the year as they have experienced significant losses since 2013.

Corn

Corn pokes out new March contract lows before reversing to close 4 ½ higher on selling exhaustion.

Often action like today is found in a weather market or a report day – today seemed to simply be a situation of too many shorts having chasing bearish news and the tone changed mid-morning, spending the rest of it chasing the shorts out.

USDA export sales for corn came in below expectations for the week at 22.9 mln bu. The US will now struggle to compete with Argentine offers. US corn sales are now running 23 percent behind last year to date.

Informa Economics released their revised 2016 corn acreage estimate at 88.93 mln acres planted. A surprising reduction from their last release estimating 90.1 mln.

Buenos Aires Grain Exchange increased corn acreage estimate up to 2.850 mln ha, up from the previous outlook of 2.72 – pegging the planting progress at 59.3 percent.

First quarter export expectations for corn are expected to be one of the slowest in years, which longer term could have the WASDE projection still too high and subject to a revision down.

Soybeans

The force was strong in soybeans after trading more than 8 lower, they reversed late morning on strength in meal to close near their highs.

Today’s action erased losses going all the way back to December 8th.

Weekly exports for soybeans came in at 32.6 mln bu, just above the lower end of trade expectations.

Today’s Informa Economics estimate for 2016 soybean planted acres came in at 84.54 mln acres, down from the previous guess of 85.3 mln.

Buenos Aires Grain Exchange increased the Argentina soy crop acreage by 300,000 ha over their previous outlook – pegging planting progress at 72.2 percent planted.

USDA reported private sale of 15.5 mln bu to China for the 15/16 marketing year. The market needs to continue to see China as a buyer on breaks for more confidence.

Dry concerns in NE Brazil continue to be watched. Expectation is still for relief to come in over the next 10 days. The worst production years in Brazil have dryness concerns in the north and the south – so far this year the concerns are contained to the North/Northeastern region.

Turning to the charts – both soybeans and soy meal posted a “key reversal” on the daily chart after opening lower, putting in a new low on the run and finally closing above yesterday’s high. This is a good sign – but we need to see follow through, especially in the meal market.

Wheat

Wheat also recovered early losses but was only able to close the complex mixed as cooperative weather, strong dollar and questionable demand weights on the market.

USDA reported export sales of 11.7 mln bushels. For the near future the wheat market will continue to struggle for export business as Argentine, EU and Black Sea offers continue to undercut the US.

The KC-Chi spread lost a penny and sits at -3 ¼ in the March contract. The best hope for support in wheat in the short term is the large short position held by funds.

Livestock

Cattle and feeders into new contract lows today…again with hogs lower too.

Cash sources say fed cattle traded in Nebraska around $117 per cwt, near to a little off last week.

Confidence is starting to grow that prices are low enough to clear the short-term supply glut and allow the cash to push higher.

Cattle on Feed report out tomorrow. This next report will provide an on-feed count as of December 1st and for the month of November head placed and marketed, using surveys of all US feedlots with a capacity of 1,000 head or more. The surveys are voluntary.

The market will be watching the number of head placed compared to a year ago and number of head marketed compared to a year ago. Industry expectations are for on-feed of 100.9%, placed 95.7% and marketed 103%.

If marketings come in rather high and placements low, the report could be deemed bullish. It’s been a long time since that term has been used in the cattle market.

In hogs, concern that the USDA may have underestimated the size of the hog herd is balanced against improving fundamentals into next year. The drop in weights might suggest that producers moved hogs ahead of schedule. Weekly average weights for Iowa/MN for the week ending December 12th came in at 284.1 lb from 284.4 lb last week and 285.4 lb 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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