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Closing Comments

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Closing Comments

Large speculators increased their net short position in corn futures in the week of February 16 according to the regulatory data released on today. Also, the CFTC weekly commitment of traders report showed noncommercial traders, including hedge fund managers, trimmed their net short positions in wheat and soybeans.

Corn

Corn picks up 6 ¾ this week on short covering and ends Friday’s trade where it started.
Export sales came in at the top of the range of expectations, giving the corn market some hope as it can now compete with Argentine offers. However, extended rallies will continue to encounter competition from global feed wheat and ample supplies to be priced.
Cash markets are holding up in most markets as processors continue to work to secure ownership for front month delivery.
For the week ending Tuesday, CFTC data showed Managed Money was sellers again of the corn market – selling an additional -35k contracts to put their net short position at -137,937.
In the spreads, March has gained on May by a penny this past week. First notice day for the March contract is Monday the 29th. The March contract will encounter resistance again in the 3.70 area – breaking through the Feb highs should give May a target zone of 3.90 to 4.00.

Soybeans

Soybeans close slightly lower on good South American crop but manage to pick up 5 ½ for the week.
Soybeans closed lower on the day and funds were said to be net sellers of 3,000 futures. The trade for the week continued the overall sideway action, still needing a story. New news of flooding in Argentina by its government and 160+ cargo ships waiting to load at the ports may help down the road. Shipping rates have started to rise off of record low levels and U.S. dollar will be worth watching next week.
South American weather showing lots of rainfall in Argentina and Southern Brazil over the next couple of weeks and will be interesting to see how many more states are affected by flooding in Argentina.
AgRural put the Brazil 15/16 soybean crop at 23 percent harvested, up from last week’s 16 percent and just slightly ahead of the long term average of 21 percent.
CFTC data showed managed money covered some of their short position, reducing it by nearly 25k contracts – leaving them net short -43,391 contracts.
March soybeans closed just below the strike target of 8.80 on today’s March option expiration.

Wheat

Chicago wheat adds 4 ¼ this week, begrudgingly.
The wheat complex continues to struggle to find sustained strength as plentiful supplies around the world search for buyers.
France’s wheat crop conditions, the first of the year, were released today and have soft wheat conditions at a record 94 percent good/very good compared to 91 percent this time last year.
Egypt’s GASC announced they had bought 240,000 mt of wheat, however none were of the U.S. origins. Russia was the main buyer at 180,000 mt and 60,000 mt were from France.
CFTC data had funds sellers again of Chicago wheat but covered some of their KC short position. Managed Money in the Chicago contract are net short -84,367 contracts.

Livestock

Cattle on Feed in at expectations, hogs lower to finish the week on good coverage by packer and retailer.
The cattle on feed report showed supply at 100.0% of last year. Placements came in at 99.4% of last year and Marketing were 97.8%. Everything came in very close to expectations so the reaction should be very neutral. The cash market early next week should set the tone for how cattle trade now that this report is out of the way. Beef prices have traded at the lowest level since December 31 and are keeping packer margins in the red which could also limit the cash markets potential in the short term.
Hogs finished the week on a low note after making a new high earlier midweek. April hogs are holding a $6 premium to cash which seems to be a little more than normal this time of year. Slaughter numbers should be running 1-2% above last year with plenty of pork to meet short term demand. Actual US Pork production for the week ending February 6 came in down -4.7% compared to last year.

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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