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Closing Comments

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Closing Comments

The week finishes with a reversal in crude prices after taking out swing highs at $41. Corn succumbs to selling, soybeans can’t hold on to gains for the second day in a row after encountering resistance and wheat recovers early losses after yesterday’s selloff.

Corn

Corn closes lower on the day from continued export competition and expectations for expanded US acreage.
Corn found support right out of the gate last Sunday night, but couldn’t sustain anything more than sideways trade this week as the tug-o-war between production uncertainty as spring nears and the plentiful supplies battle for price value.
CFTC report this afternoon showed Managed Money with options reduced their net short position by 41,010 contracts, leaving them net short still -188,167 contracts. Funds were reportedly sellers of 4,000 corn contracts today.
Analytics firm Informa Economics raised its forecast for the US ’16 corn plantings to 89.5 mln acres from their January estimate of 88.869 mln. This would be 1.5 mln more than the ’15 crop year.
Argentina continues to sell their corn stockpiles on the global market at aggressive prices after the removal of export controls and currency controls.
For the week, May corn added 2 cents but closed in the bottom of its trading range. May corn traded in a tight range this week after gapping higher on Sunday nights open. The May contract has been able to trade above the 50 day moving average for five days in a row. The consolidation trade helped the stochastics come out of the overbought situation. May corn needs to prove it can close above 3.73 ½ to signal a move to the 3.85-3.90 area.
Next week, if corn develops weakness – it needs to find support in May around 3.63 and from that support, develop strength to trade above yesterday’s high. If a frost scare develops in wheat, that will be supportive to corn.

Soybeans

Soybeans lower after hitting 3 ½ highs on profit taking.
Soybeans had their third weekly gain in a row as the drop in the US dollar index and the strengthening Brazilian real give investors hope for a more competitive US export position.
The amount of domestic supply coupled with arrival of shipments from Argentina leave the likelihood of a significant rally in soy meal prior to a US weather issue small. Continued correction in exchange rates will be needed to bring life into the meal market.
Informa Economics lowered its outlook for ’16 plantings of soybeans to 84 mln acres from their previous guess of 85.230 mln.
Two days in a row now the 200 day moving average provided resistance to the May contract, however the November contract has been able to trade above the 200 day moving average now for 6 consecutive days but found buying exhaustion at trendline resistance from August and Dec highs.
Next week, May soybeans need to keep closes above 8.95 which is the trendline resistance we broke through yesterday (resistance becomes support). If the market can support and trade up through the 200 day MA, upside targets for may will be 9.06 and 9.20.

Wheat

Wheat recovers early day declines but May Chicago still loses 12’6 cents for the week.
Wheat ran out of sellers to finish the week finishing mixed among the complex, but reduced weather concerns and plentiful global supplies reversed much of the recent run up in price.
Forecasts of dryness relief in the southern Plains and reduced risk for frost to the overly-developed hard red winter wheat crop pulled much of the weather premium out to finish the week. The question now will be what weather is actually realized over the weekend and early next week.
FranceAgriMer said 92 percent of French soft wheat crops were in good or excellent condition as of March 14, down from 93 percent from the previous week.
CFTC data showed Managed Money reduced their net short position in Chicago wheat by just under 25k contracts, leaving them net short -67,506 contracts with options.
Weather will provide direction for wheat next week. Today’s low needs to hold as support with longer term upside target in the front month contract being 5.00 and 5.25 – May closed today at 4.63.

Livestock

Cattle close weaker on anticipation of the Cattle on Feed report while hogs continue to hold on.
Boxed beef cutout values were sharply lower in Choice, losing -$2.83 and weak on Select, down -%0.64.
April cattle sagged today on anticipation of this month’s Cattle on Feed report after putting in 4 month highs earlier this week as the market anticipates increased demand from early and open grilling weather.
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The weekly cattle chart has stopped this week at the 50 bar moving average and has the stochastics now into an overbought territory. If the market can extend – $146 is as far as it looks can be extended to – the more likely scenario is we have topped out the market for now.
June hogs have been on an impressive, four month bull run and just today closed at their contract high that had been scored in January of 2015. Weights and supply concerns have continued to support the market, but at these levels it is susceptible to selling pressure as the 2016 production size comes to fruition – especially in deferred months.

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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