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Closing Comments

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Closing Comments

Federal Reserve Chair Janet Yellen testified before members of Congress that she sees several risks to the U.S. economic growth, sighting borrowing costs moving higher, stock prices declining and the dollar strengthening against the other global currencies would weigh on economic activity and the labor market. Note futures have continued to see strength since the last time the Fed raised the interest rates because there is no concern they would be raising them soon.

Corn

Corn closes down ¾ for the day, very tight range and awaiting new fundamentals.
The weekly EIA ethanol data this week showed a bounce in production and inventory. Ethanol production increased to 969,000 bbl/day rate, and would consume 101-102 mln bushels of grain for the week. Inventories rose to 966 million gallons, which was a four year high. There were no imports reported.
Japan was reportedly a buyer of 243,000 mt of US corn for the 16/17 marketing year.
The latest USDA attache report for China says to for them to continue artificial suppression of grain imports due largely to their surplus in grain stocks affecting trade policies. The post expects large production in 2016 corn, rice and wheat crops.

Soybeans

Soybean oil rebounded off of technical support and provided the lone bright spot in the bean complex.
Beans traded in a very tight range today before closing near its lows for the session. The dominant theme of the market remains excessive global supplies and benign South American weather to finish off what seems to be another record crop in Brazil. Lack of demand moving forward remains a concern as the US will need to see a similar level of disappearance on soybean stocks to allow for any sizable rally in the upcoming crop year. Low volatility and lack of a defined direction also have traders frustrated, creating some of the lowest trading volume since 2007.

Domestic crush broke back today as soybean oil continues to advance on meal values despite a lack of positivity out of the palm oil and crude markets. Meal continues to try to pierce out a low, with this move extending back to support set back in 2010. Though demand has held up relatively well for the bean market thus far, it is disturbing for meal, the desirable and exportable soy component, to be the weakest part of the complex. Meal’s weakness could be a leading indicator of poor future demand, while its ability to carve out a bottom could signal a short or long-term turn around for the oilseed complex. For now we remain stuck in our long term trading range of 8.44 – 9.12 with the next test seeming to be a test of support rather than resistance.

Wheat

Chicago Wheat closes up 3 ¾ while the other classes were slightly lower.
Little to no coverage for the spring wheat crop and well below freezing temperatures raised some concerns about winter kill in some of the southern growing areas. The Plains areas have had plenty of coverage from last storm.
Managed money was seen as a net buyer of 4,000 wheat contracts, selling of 1,000 corn and net even on soybeans.

Livestock

Cash cattle traded higher than the offers earlier in the week, helping to put in a rebound.
Cash sources were reporting that packers had moved their bids up to $134 in Texas this morning and in the afternoon reported fat cattle in Kansas traded at that level.
CME Group released a statement that futures and livestock option trading hours will be reduced to align with the period of greatest liquidity in these markets. Effective Monday, Feb 29th, and pending CFTC approval, CME Globex futures and options will trade 8:30 am to 1:05 pm CT Monday to Friday. The CME Group also said it will form a working group with the National Cattleman’s Beef Association to discuss other possible adjustments to its cattle markets to improve market quality.
Hogs have started to put a break in from the rally that started back in mid-December prompting hedges to be put in place.

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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