The currency battle is certainly hot on the trading floor as the CME Group announce their FOREX for futures and options set a volume record on Thursday with 2.1517 mln contracts traded. The previous record was May of 2010.
CFTC data showed Managed Money continuing to press their short position in corn.
Corn has best week since December on improved export prospects and short covering.
While short covering helped to cap the week, according to the CFTC Commitment of Traders report it hadn’t been in the equation through Tuesday as Managed Money had added an additional -25,340 contracts for a consecutive new record short position of -229,176. This is likely an unsustainable position for the funds to maintain and should offer additional support in coming weeks. Considering the May contract gained 4 ¼ cents during the period Managed Money added to their shorts – their interest in defending their short position is likely to soon wain.
The May contract gained 6 ¾ cents this week and on the weekly chart provided nice follow through from last week’s bar. A trade past 3.74 will be critical to prove the market can begin putting in “higher highs” – which the March contract has not done since July.
Soybeans extend rally to eight sessions on technical buying and short covering.
Support for the soybean market came this week from the continued strength in the Brazilian currency relative to the dollar, providing a move toward a more competitive position for US sources.
Technical buying helped the May contract reach its highest level since December 22nd. Soy oil was supported by strength in Malaysian palm oils while soy meal held on to recent gains.
Traders noted that feed millers in the Philippines bought 90,000 mt of soybean meal with the origin most likely being the US.
CFTC Commitment of Traders report showed that as of Tuesday, Managed Money had lightened their net short position by 38,552 contracts, leaving their net position at -42,906 and they cut their net short soy meal position in half, leaving them net short -24,239.
Today in Chicago, funds were reportedly buyers of 7,000 soybean contracts.
Wheat gets led by spring wheat in the complex as planting decisions near.
CFTC data showed Managed Money lightened their short position in Chicago by 15k contracts as of the end of Tuesday, but continue to hold a net short position of more than -92k contracts in Chicago and more than -25k in Kansas City.
Dry conditions in the southern Plains and wet in the Delta this week have offered general support to the wheat complex as has the currency exchange rates with competing countries such as Canada, EU, Russia and Australia.
Extension of wheat strength will need additional spring headlines (cold threat for wheat that broke dormancy so early?), continued improvement in currency exchange and help from corn as spring nears.
May Chicago is now overbought and due for some consolidation, but continued short covering rallies should give the market opportunities to the 500 area May and 5.30 after that.
Cattle finish the week strong on good demand while strength in hogs wains.
Cash sources are reporting live cattle trade at $140 in the North while notes out of Nebraska were at $138 per cwt which is a couple dollars above last week’s trade.
This morning’s wholesale choice beef price sagged $1.12 per cwt from Thursday to $224.12 while select rose $1.40 to $212.25.
Improved packer margins and solid wholesale beef demand are providing good support for now for the market. Friday’s average packer margin was -$3.45 per head, up from -$15.55 just a day earlier.
This week’s setback in wholesale pork values weighed on lean hog futures. This morning wholesale pork price fell $1.52 per cwt from Thursday to $75.13 – mostly off weakness in pork bellies.
Fund rolling pressured the nearby contracts and helped to support deferred months.
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.