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Closing Comments

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Closing Comments

EIA energy inventory report came in close to trade expectations. Crude inventories increased 1.3 mln bbl, less than expected while gas stocks dropped by less than 1 mln and distillates dropped by just over 1 mln. This is the second week in a row of flat to lower stocks which helped to support energy prices.

The ethanol report featured an increase in production of 2 percent and inventory fell 2 percent.

The Fed announcement following the FOMC meeting this week kept the Fed Fund rate unchanged and they forecast a lower growth path for ’16 through ’18 and will be monitoring the expected 2% inflation rate closely. They anticipate making two quarter-point rate increases by year end – half what they anticipated earlier. Their announcement send bonds rallying and the US dollar falling. The lower dollar helped corn and soybeans recover early session losses.

The US Senate blocked a bill that would nullify state and local efforts to require food makers to label products made with genetically modified organisms.

Corn

Corn closed slightly lower on the day but the top of today’s trading range.
Corn started the session weak but made gains throughout the session on continued support from the huge short fund position and the weakness in the US dollar index.
As mentioned above, EIA showed higher production and lower stocks of ethanol in this week’s report.
Open interest has declined in corn this week, suggesting short covering of the fund positions. Friday’s COT report will include fund activities through yesterday.
May corn held above the 50 day moving average for the third day in a row. May, July and Sept gained on Dec today.

Soybeans

Soybeans close higher on the falling US dollar and recovery in the Brazilian currency.
US soybean futures firmed despite the ample South American and US supplies on the retreat of the US dollar index and the strength returning to the Brazilian real.
Soyoil rallied on continued strength in the world veg oil market while meal closed lower but well off its daily low.
Brazil’s AgroConsult estimates Brazil’s 15/16 soy crop at 101.7 mln tonnes vs 101.6 mln tonnes in February. They are expecting an increase of soy production acres by 600,000 hectares for the 16/17 crop.
November soybeans have now closed five days above the 200 day moving average – the first time accomplishing that since June of 2014.

Wheat

Wheat struggled to regain losses as technical selling presses and concerns over cold for the Plains wanes.
Temperatures are forecast to drop below freezing late this week in much of the southern Plains but not low enough to create market concern over damage. The dry concerns continue though.
Wheat scheduled to arrive the end of this month in North Carolina from Argentina added to the bearish tone. This would be the third vessel of Argentine wheat this year to unload in the US – underscoring the aggressive offers from Argentina, the (un)favorable exchange rate, and low ocean shipping rates.
Egypt’s GASC bought 240,000 tonnes from French, Romanian and Ukrainian sources at an average estimate price of $188.86 a tonne.
Funds were reportedly sellers of 4,000 contracts in Chicago.

Livestock

The meat sector was higher across the board on strong retail demand and the expectation of early grilling.
Boxed beef cutout values were sharply higher on moderate to fairly good demand and light offerings. Choice was up $2.91 to $233.92 and Select $2.10 higher to $223.68. Beef packer margins have now rebounded into positive territory helping cash price outlook.
Pork has been helped by the strength in beef. Wholesale pork this morning surged $2.11 per cwt to $77.85, helped primarily from rib values.

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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