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Closing Comments

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Closing Comments

USDA outlook forum released their acreage estimates for 2016. Compared to 2015, corn acres are expected to be up 2 mln to 90 mln, soybeans down 200k acres to 82.5 mln, and total wheat forecast to be down 3.6 mln to 51 mln acres. These numbers weren’t any surprise to the trade though and today’s weakness in corn and soy seemed to be more tied to fund selling and end of Feb farmer pricing of basis contracts.

Corn

Corn under pressure on fund selling and prospect for increased corn acres in 2016.

Corn was under pressure from the start and was never really able to lift its head as funds returned as sellers and basis contracts are priced or rolled out of the March contract.

The USDA outlook forum has anticipated corn acres up 2 mln to 90, just slightly above trade expectations.

Export sales for corn came in within trade expectations at 36.8 mln bu, but are running more than 23 percent behind year to date. Fortunately, only 13 percent of corn relies on export business and the ethanol and feed demand domestically remains strong for 2016.

The International Grains Council raised its forecast for global corn production for 15/16 to 969 mln tonnes, up from the prior month forecast of 959 mln (but down from the previous year of 1.016.) They also forecast a 1 percent increase in global corn acres.

Brazil’s corn exports are expected to reach 28 mln tonnes this year, down from a record of 30.75 in ’15 due to competition from Argentina. Recently approved export taxes in the states of Goias and Mato Grosso do Sul will likely contribute to the reduced exports.

Technically corn needs to hold the 353-355 area (or at least the Jan lows of 348) on a closing basis.

Soybeans

Slowing export sales and the advance in South American harvest weighed on soybeans.

The USDA outlook numbers for soy seedings of 82.5 mln acres actually came in less than many in the trade were expecting, with an average of 83.3 mln. However soybean export sales came in at just 12.1 mln bu which was at the bottom of trade expectations and one of the lowest of the marketing year.

Brazilian firm Agroconsult bumped its 15/16 soy yield estimates after field checks showed unfavorable weather has caused less damage than expected. Their guess is for the Brazilian crop to reach 101.6 mln tonnes vs their January number of 99.2 mln.

Wheat

Wheat closes higher for the first time this week as US acreage comes in lower than expected.

For the first time in six sessions wheat closed green as the USDA outlook forum came in with 1.4 mln acres fewer than analysts expected at 51 mln (the lowest total since 1970) and found one of the best export sales weeks in months at 14.3 mln bu. This was above the trade’s expectations.

Signs of life in global demand provided some additional support as Egypt’s GASC bought 300,000 tonnes via tender and Saudi Arabia tendered for 770,000 tonnes of hard wheat.

Livestock

Cattle futures stronger on weaker corn prices and anticipation of firm cash prices to finish the week.

Wholesale choice beef rose 98 cents per cwt to $217.72, select gained 72 cents to $214.44. The trade is anticipating $134 per cwt for cash cattle to finish the week.

The USDA expects red meat production to be 211.9 bln lbs, a 1.6 percent gain from 2015.

In hogs, Weather and maintenance reduced today’s slaughter and could pressure near term prices. Average cash hog price in IA/MN slipped 25 cents per cwt on light volume to $63.96.

The USDA projected record US pork production at 25 bln lbs in 2016. This would be the second year in a row of pork production exceeding beef.

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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