Chinese stocks as well as Wall Street and European stocks continue their weak start to 2016 as the continued tumble in crude oil and copper on demand concerns gives investors reason enough to sell.
Grains continue their preparation for tomorrow’s 11:00 am CT USDA report release.
Corn trades its usual Monday lower, although respected last week’s lows.
South American weather didn’t offer any support and weakness in the Chinese economy kept corn weak right out of the gate this morning. Much of South American production is on track for now, save portions of north and west Argentina continuing dryness. The pressure from the greater commodity weakness with new lows in crude and copper added to the anxiety.
Weekly shipments have recovered from the holiday weakness at a reported 22 mln bushels. While just above expectations, this puts corn inspections more than 20 percent behind last year’s pace.
The focus on tomorrow’s report will be on US production as this is the last meaningful change for the 2015 year. Analyst expectations are flat compared to the November numbers – expecting the USDA had enough early data to be close with their Nov estimate. That being said, the large short speculative position will be at risk of any report number that shows any downtick to production.
The key number to watch will be the Dec 1 quarterly stocks which are anticipated to come in close to a year ago as this number gives an indication of both supply and demand.
The downtrend is intact, but March continues to respect the 3.50 level while selling will likely be found up in the 3.60 to 3.70 areas.
Soybeans continue choppy trade ahead of tomorrow’s USDA report.
Tomorrow’s USDA report has a history of fireworks in the bean market but the trade is not expecting much according to trade estimates holding production steady 3.981 bln bu on yield of 48.3 bpa. Weakening demand has the trade estimating carryout to increase by 3 mln bu and Dec 1 quarterly stocks estimated to increase from 2.528 bln bu last year to an estimate of 2.720 bln bu this year.
Of note going into this report is the large net short position of speculators that may require a fresh round of bearish news for the next leg lower. Managed Money with futures and options combined are reported at a net short position of -79,547 contracts. The only time they have been this short was the end of May of 2015. While a bullish rally is unlikely in the face of record US inventories, Argentine selling and the upcoming large Brazilian crop – a short covering rally if funds don’t get bearish confirmation is possible.
Weakness in soy meal continues to weigh on board crush margin – keeping the lid on soybean prices until soy meal can participate.
Mato Grosso farm institute estimated forward sale so of soybeans from the region to be at 56.6 percent, up slightly from their December estimate.
March soybeans will need to prove they can hold 8.55 area on a closing basis with resistance above at 8.76 and 9.00.
Wheat gave up Friday’s gains with KC losing a penny to Chicago.
Wheat led the weakness in the grain complex today on lack of global weather headlines, cheaper Russian wheat thanks to the falling ruble and pre-report anxiety.
The trade is anticipating an increase in ending stock for wheat from December’s estimate of 911 mln bu to an average expectation of 919 mln bushels. Global carryover as of Jan 1 in wheat is anticipated to be adjusted only incrementally lower to an ample 229.6 mln mt. Winter Wheat Seedings will be released with lower hard red acres anticipated to lower total wheat acres to 39.320 from the 2015 acreage of 39.461 mln.
Typical seasonal lows in wheat occur in the second and third week of January. A significant amount of bearish news has been rightly built into the market and the large short fund position reflects that fact. The hope for the wheat market is for either supportive USDA information or a weather headline that can trigger short covering – until then the market is still at risk.
Fats and feeders held support on quiet cash trade while hogs recovered early weakness.
Boxed beef cutout values were sharply higher on moderate to fairly good demand and light offerings. Select and Choice rib cuts steady to firm while chuck, round, and loin cuts firm to higher.
Monday negotiated cash trade has been inactive with light demand in all regions without enough sales for a trend. Last week the southern plains live sales sold at 133.
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.