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Closing Comments

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Closing Comments

The energy market rebounded today despite the build in inventories while the US dollar index collapsed out of its trading range on news out of China of an increase in value of the yuan. Unfortunately the macro moves of higher energy and lower dollar did not translate into supportive grain markets.

EIA report showed crude oil production continues to hold steady at level near last year this week. Crude inventories built 7.8 mln bbl, gasoline built 5.9 mln and distillates saw a small drawdown.

Super Bowl weekend coming up. Americans are projected to eat 1.3 billion chicken wings.

Corn

Corn gets some profit taking after yesterday’s six week high.

EIA ethanol information had a bearish tone, near expectations, featuring stable production and a big build in inventory. Blender demand was down, mostly from the lower activity due to the winter storm in the east. Total ethanol stocks of 939 mln gal are at four year highs. Biggest build is at the Gulf, likely for export staging.

Informa raised their production estimates for Brazil and Argentina. Brazil total production at 81.6 mln mt vs previous month at 81.3 mln. Argentina at 26 mln mt vs 22 mln last month.

Technically the corn market continues caught in a tight trading range with funds lifting shorts on breaks and farmers adding sales on rallies. For now the market is in a value range, waiting for direction to change market perceptions. Highs from yesterday and today in March encountered trendline resistance with the 3.78-3.80 area being resistance above.

Soybeans

Soybeans sell off back into the trading range on weakness in soy meal.

Beneficial rains expected this weekend and next week in dry areas of Argentina’s growing region kept prices in check following yesterday’s new high for the move. Soy oil was able to hold up with help from crude oil and support in Malaysian palm oil futures.

While cargo wait times continue to mount in Brazil, the low cost of shipping looks so far to keep China content waiting in line rather than switching back to the US.

Monsanto press release said they have received approval from the Chinese government to import its RR 2 Xtend soybeans. The company said they technology will be ready for US and Canadian farmers for the 2016 season.

Some in the trade suspect a slowdown in activity from China as they begin celebrating their lunar new year this weekend. This year will be the year of the monkey… the year of the monkey is considered by the Chinses to be an unlucky year… More likely though is that if China wants to do business, they will be in the market regardless of the celebrations.

Wheat

Wheat finds some support from the currency trade, but ample supplies cap strength until a better supply story can develop.

Wheat continues its multi-week range bound trade but was supported today against pressure in the other grains as the weaker dollar and technical buying helped wheat.

Egypt’s agriculture ministry said it will allow wheat imports with up to 0.05 percent levels of ergot, reversing a zero-tolerance policy that prompted traders to boycott the state’s wheat tender for this week.

Traders are anticipating tomorrow’s Stats Canada report to show a shrinkage of wheat stockpiles from the previous year.

US weekly export sales will be out tomorrow. .

Livestock

Cattle and hogs supported on good cash markets and winter weather.

Storm conditions across the central/northern plains shut down beef plants and will be setting back cattle performance in feedlots – but the storm has not really turned into a futures rally. However the storm and higher box prices this week should be used to leverage the packer this week. Asking prices are above $140.

Short term hog fundamentals still are holding mostly positive outlook but the higher than usual spread of the futures over cash is keeping a lid on strength.

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.

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