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Closing Comments

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Closing Comments

Global growth concerns pressured global equity markets, led lower by banking stocks in Europe and technology stocks on Wall Street. The 10-year Treasury yield hit their lowest in a year. Crude prices sagged after a meeting between Saudi Arabia and Venezuela failed to reassure investors.

Corn

Corn starts week lower on Argentine rains, weakness in wheat and technical selling.

Corn struggled to hang on to early support with pressure out of the wheat complex, energy and soybeans.

USDA export inspections came in well below expectations for corn at 17.27 mln bu. The pace needed to reach the USDA target is more than 39 mln. Corn inspections are currently running 20 percent behind last year’s pace.

USDA reported a private sale of 100,000 metric tons of US corn for delivery to Mexico during the 15/16 marketing year.

Funds reportedly sold 11,000 contracts of corn.

The March contract filled the gap that had been hanging below the market and should find support in the 3.56 to 3.60 area.

Soybeans

One month lows in soybeans as Argentine rains reduce dry weather anxiety.

Weakness in crude oil and equity markets compounded the impact of relief rains this weekend in dry areas of Argentina. The trade has been anxious about the dry areas in Argentina where damage has already gone beyond repair for some.

USDA export inspections had soybeans hanging in at 43.08 mln bu, better than expected by the trade, better than the previous week and above the pace needed to reach USDA target but still more than 12 percent behind last year as China continues its seasonal switch to South America.

The trade today is preparing for tomorrow’s USDA monthly supply/demand report where the market is anticipating larger US grain supplies but slightly lower world stocks.

Funds looked to have been unwinding some of their long soy oil / short meal as oil lost to meal today.

The Lunar New Year holiday in Asia has much of the volume out of that part of the world sidelined for now.

For now, without a story out of South America the market has little to hold on to for a rally.

In the March contract, selling should dry up around 8.55-8.60 or the market will threaten breaking out of its multi month consolidation range.

Wheat

Too much supply, lower European prices and uncertainty in Egypt press on wheat.

European wheat futures pressed on global prices again as sellers continue to search for prices enticing to buyers. The strong dollar coupled with ample global supplies continues to keep the US market treading water.

USDA export inspections had wheat at 14.632 mln bu, a 40 percent increase from last week but wheat’s pace continues to run 12 percent off last year and behind the 18.18 mln bu pace to reach the USDA target.

Officials in Egypt worked to reassure markets that they are stable after recent upheaval over recent rejected purchases due to ergot requirements.

Kansas City March contract put in new contract lows today at 4.45 ½ and is eyeing the September continuation lows at 4.40 ¼. 4.33 ½ is a swing low below from 2007.

Livestock

Cattle succumb early to pressure from lower cutouts and falling stock and crude oil prices.

In beef, exports are picking up and imports are down – a good sign of domestic demand, but stabilization of the dollar will continue to threaten gains in exports. Seasonally beef demand recovers in the spring as grilling picks up, but cheaper pork and chicken will continue to threaten beef’s share of the grill. Retail prices of beef are similar to prior year as retailers work to hang on to generous margins.

Hogs were unable to hold on to early strength, although Feb closed higher as convergence with the lean hog index nears. Deferred hogs look at risk here as they weren’t able to take out the recent highs and had the lowest close in three sessions.

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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