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Closing Comments

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Closing Comments

According to the IEA, world oil production will continue to take most of 2016 to come to fruition as the slowdown in US output is taking time and OPEC us unlikely to agree to reduce production. This report weighed on the energy sector as Crude tested recent lows and unleaded found fresh new lows. 2008 RBOB lows were .78 and today’s March contract made it to just under .90.

USDA released its Feb supply/demand report today. No real surprise with a neutral to bearish tone. Price seemed to have the numbers pretty well built in already.

Corn

Corn closes down 1 ¼ for the day, off its lows, after the slightly bearish USDA report.

According to the USDA, corn imports are projected 10 mln bu higher based on recent imports of corn into the SE US feed markets. Corn exports are projected 50 mln bu lower as larger supplies of South American corn increased competition for US exports. This was partially offset by a 25 mln bu increase in projected US corn use for ethanol. Corn ending stocks for 15/16 are raised 35 mln from Jan to 1.837 bln bu.

Soybeans

Soybean ending stocks come in larger than expected, but close ¾ higher for the day.

USDA US soybean ending stocks for 15/16 are projected at 450 mln bu, up 10 mln from last month due to a lower crush pace. Production, trade and other uses remain unchanged. Increased meal competition from Argentina weighted on meal exports, but was somewhat offset by increased domestic meal use.

Global oilseed production for 15/16 is projected at 527.4 million tons, up slightly from last month as an increase in soybean production more than offset lower forecasts for peanuts and sunflowers. Soybean production in Argentina was revised up 1.5 mln tons to 58.5 mln on a higher yield projection.

Wheat

More wheat in the US than expected, more wheat in the world than expected. Chicago loses a penny and Minneapolis picks up 1 ¼.

The USDA lowered US 15/16 wheat exports 25 mln bushels this month to 775 mln on increased international competition. This export total is the lowest since 1971/72. The US wheat ending stocks are raised 25 mln bu and are the largest since 09/10 at 966 mln bushels.

Global wheat supplies for 15/16 were raised 2.1 mln tons on increased beginning stocks and slightly larger production. The largest change to beginning stocks is a 2.0 mln ton increase for China. World wheat consumption for 15/16 is lowered 4.7 mln tons led by a 4.0 mln ton decrease for China as their governments policies reduced wheat usage in favor of other grains.

Livestock

The meat sector futures were generally supported (except Feb cattle) as trade awaits cash cattle prices.

According to the USDA, the 2016 forecast of total red meat and poultry production is raised from last month as higher forecast pork and broiler production more than offsets reduced forecasts for beef and turkey.

Beef and pork import and export forecasts for 2016 are unchanged from last month. Cattle prices for 2016 are raised from last month on higher expected prices in the first quarter. First quarter hog prices are lowered from last month as supplies are expected to support higher slaughter levels – however the forecast for annual price is unchanged.

Terry Duffy, chairman of the CME Group, stated that he believes the trading hours for cattle futures are too long and pledged to look into reducing hours in an effort to condense volume and reduce trade volatility.

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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