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Closing Comments

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Closing Comments

Chinese cancelations of soybeans pressured the markets for today’s trade while the energy market was able to extend recent gains – but traded the last half of the day well off its highs.

Corn

Corn follows soybean’s lead lower.

Funds were sellers today of an estimated 5,000 contracts of corn but remain hugely short the market. Weakness in the soy complex spilled over to finally give corn something other than unchanged. Tomorrow afternoon the CFTC will have current reportable positions as of Tuesday afternoon to see how much short covering has been done the previous week.

Export sales reporting from the USDA has been delayed until tomorrow due to the east coast snow storm. Typically the US export business picks up towards summer. Currently the US, Ukraine and Argentina are the global providers.

Over in ethanol, the recent rally in the futures should have most plants back close to break-even in the cash market compared to the 30, 40, 50 cent per bushel recent losses.

Option volatility is now back at the lows – common for this time of year prior to weather volatility bringing “fear” back into the option market.

Soybeans

Soybeans suffer under the weight of the China sales cancelation.

The morning news of the Chinese cancelation of 393 mln mt of 15/16 soybeans increasingly weighed on the soybean and soy meal market throughout the trading session today. This came at a time of already present concern over demand persistency into the spring and summer. This underscored the market concern of continued shifting to South America as their harvest nears. The market will likely maintain some doubt though of the potential Chinese behaviors as they are well known for their cancellation behavior followed by coming in and purchasing at lower prices.

Again, USDA export sales will be out tomorrow.

Technically March meal broke down from its recent trading range and with follow through would be back at the lows from the beginning of the year. Soybean indicators are pointed lower, but have historically run short of sellers as it nears the 8.60 area. Historically the soybean market carves a bottom out in January and strengthens through Feb – we’ll need to watch if seasonal tendencies play out in this market that has gone sideways since August.

Wheat

Wheat lost the most ground in Chicago today on weakness in the greater market.

Strength in the Russian ruble and Canadian dollar off the rumor of a cut in oil production by Russia and OPEC (denied by both) had their respective currencies higher triggering some farmer selling. Longer term – continued strength in the CAD and ruble coupled with weakness in the USD will favor US sources – but short term the fear of that change weighs on the market as selling gets triggered abroad. Underscoring the linkage of currency fluctuations being especially pronounced in wheat.

Some concern over too-wet of conditions is returning in northern Europe.

Technically the wheat market is continuing its consolidation with a weaker bias. Historically the seasonal tendencies have wheat higher from the end of Jan into the mid to later part of February. A breakdown of the USD would be helpful to the wheat market.

Livestock

Livestock traded generally lower to mixed.

Cash cattle bids in TX and KS were $130 to $132 per cwt vst $136 to $138 asking vs last week’s movement in the Plains at $130-135.

Bullish traders are anticipating the prospect of supply disruption from the forecasted winter storm to support prices while the bears are citing negative packer margins and seasonally weak beef demand.

Firm cash and wholesale pork values limited losses in futures today. Cash hogs in the Midwest sold as much as $1.50 per cwt higher as packers gathered supplies that have declined seasonally.

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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