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Closing Comments

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Closing Comments

Grains able to close higher after yesterday’s USDA surprise. Stocks higher on solid US jobs data while crude trades lower.

Corn

Corn closes on its highs on bargain hunting following yesterday’s declines.
Corn found some bargain buying following yesterday’s steep losses coming off the USDA prospective plantings acreage estimate coming out with 2.5 mln more acres than the high trade guess.
Thursday’s trade volume in corn set a new all-time daily volume in corn in Chicago with more than 930,000 trades as computer traders and fund selling pounced on the bearish USDA report. This afternoon’s CFTC data shows that in the week ending Tuesday, Managed Money had continued their recent short covering – dropping another 46k off their short position, leaving them net short -108,433 contracts before their return to selling began on Wednesday.
Yesterday’s report will give the market its largest corn acreage number for the year as delayed planting in the South and Delta has already seen the shift of corn acres to soybeans and areas of the Midwest are still slow on fieldwork, allowing for switch to soybeans and spring wheat where the economics work better. The new crop bean/corn ratio is now at 2.52, only briefly surpassed during the summer of 2014.
USDA today said 420.8 mln bushels of corn were used in February for fuel ethanol, up from the 394.1 mln used in February of 2015.
South Korea bought 272,000 tonnes of corn today and nearby CIF barge values firmed as exporters are stepping in for supplies for renewed demand.
Technically a case could be made that with the record volume of trade and the fact acres came in more than 2 ½ million more than the highest trade guess, the second surprise yesterday was that corn didn’t trade limit down. In fact it close off its lows yesterday and higher today. Looks like end users getting coverage on and profit taking as we enter the weather season. This piece of information yesterday certainly doesn’t make the bulls feel good, but the fact that we have now supported again on an area (3.46-3.48) that we have run out of sellers before gives hope that the market is unable to find follow through selling until weather is more certain.

Soybeans

Soybeans trade to their highest level since August on rising soy oil prices and anticipation of lower planted acres.
Soybeans extended gains following yesterday’s USDA report showing a drop in soybean acres expected in production and were supported by continues gains in the soy oil complex from strong veg oil prices.
Today’s CFTC report showed as of Tuesday, Managed Money had added an additional 21,768 contracts to their long position in soybeans – taking them to net long of 75,450. They took their soy oil position to a record long of 105,655 contracts.
USDA today said US processors crushed 4.64 mln tons of soybeans during February, down from 4.81 mln in January and close to the trade estimate of 4.65 mln.
Funds reportedly bought 8,000 soybean contracts today.
Technically soybeans on the continuation chart were able to take out the October high today of 9.19 ¾. This leaves the market one step closer to the bottom of the August continuation gap at 9.33.

Wheat

Wheat recovers early session losses to close mostly higher on short covering.
Wheat traded marginally higher to finish the week on the prospect of the lowest production acres since 1972 and specter of dryness concerns in the Plains not being alleviated by the extended forecast rains.
Minneapolis put in new 4 ½ month highs as it works to recover lost acres before the planting window shuts, but it was unable to hold onto gains, leaving May down ½ for the day and September even.
CFTC data showed Managed Money reduced its net short position in Chicago by 12k contracts, leaving them net short -69,832. However they added to their short positions in both Kansas City and Minneapolis.

Livestock

Cattle and feeders mostly lower while hogs drop to 10 week lows on weaker pork prices.
Lean hogs dropped to the lowest level in 10 weeks as declines in pork prices triggered selling and fund liquidation. Wholesale pork prices retreated from a nearly two month high suggesting flattening demand while thoughts of cheaper feed supplies added to concerns of continued herd expansion.
Live and feeder cattle were mostly lower as cash cattle brought lower prices this week in the southern Plains, moving mostly at $133 per cwt, down about $3 from last week. The technically oversold situation of the cattle market after recent losses though are providing some price support.
Cattle may be able to now find a short term bottom and get an April rally if grilling demand can develop.

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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