Grains succumb to profit taking ahead of USDA reports after the recent rally.
Crude gave up early session gains on the increase in inventories of 2.3 mln bbls over the last week according to the EIA. This was a gain, but less than the 3.3 mln expectations.
Corn has one of the worst finishes in weeks on anticipation of the USDA reports.
Technical selling and positioning ahead of the USDA reports sent corn to its session lows. This was the worst front month performance for corn since the first trading session of the 2016.
Trade participants are anticipating an increase of planted corn acres over 2015 by an additional 2 mln acres to 90 mln acres. The trade also expects a reminder of the ample supplies as of March 1 with 7.798 bln bu, vs 2015 at 7.750 bln.
Ethanol futures edged higher despite information from the EIA showing a decline in production and increase in inventories.
Funds reportedly sold 15,000 contracts of CBOT corn.
The May contract took out the high from late February of 373 ½ but was able to hold strength, finishing 6 lower on the day and back to the bottom of the recent trading range. Look for nearby support in the 3.63-3.65 area vs May barring unexpectedly bearish news out of tomorrow’s USDA report.
Soybeans lower on profit taking.
Soybean contracts reversed much of yesterday’s rally after most contracts matched or bested yesterday’s high.
Cash markets continued to soften at the Gulf and interior locations on the pickup in farmers selling on this week’s rally ahead of the USDA report.
In preparation for tomorrow’s USDA report, analysts are expecting a March 1 stocks of 1.557 mln bu which would be the largest stocks since 2007. The trade is also actually expecting an increase in soybean planted acres of 400,000 acres based on the USDA farmer surveys as of March 1.
Soymeal and soy oil were lower. Malaysian palm oil futures were off after three days higher on the stronger ringgit currency.
May soybeans have now had their sixth consecutive close above the 200 day moving average, but the stochastics are well overbought and showing bearish divergence and due for either a correction in time (sideways) or price (lower). A pullback to the 8.90-8.92 area would be a test of the upper side of the wedge the market broke out of on the 17th. Funds will need fresh news soon to continue their buying spree – markets don’t stop going up because people sell it, they stop going up because it runs out of buyers.
Outlook for rains on the Plains sent wheat tumbling with weakness led by Kansas City.
While dryness in the west continues to concern the market, updated forecasts are indicating a better chance for rain in the central and southeast plains over the next two weeks. This sent funds back to their defensive, selling posture in the wheat market following the recent price rally.
USDA’s March 1 stocks in wheat are expected to come in at 1.354 bln bu, up from the 2015 stocks of 1.140 bln while all wheat acres are expected to drop to 51.665 mln from last year’s 54.644 mln which would be the lowest in the US since 1970.
Cattle suffer fund liquidation as the end of first quarter nears and wholesale beef demand stagnates.
Technical weakness off wholesale beef concerns triggered sell stops in cattle and feeders today, sending April cattle 2.500 lower and May feeders off 4.025.
Boxed beef values were sharply lower on moderate demand and heavy offerings. Choice was $3.19 lower to $221.87 and Select lost $4.16 to $212.68.
Packers have yet to bid for cash cattle which are price at $138 per cwt in TX and KS. Last week cash cattle in the Plains moved at $136.
Weakness in cattle spilled into the hog market sending June 1.375 lower to 81.550.
Average cash hog price in IA/MN was 66 cents lower to $62.66 per cwt.
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.