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Closing Comments

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Closing Comments

Crude oil traded higher today on anticipation of better economic news, the possibility of real production freezes and the continued drop in the rig count.

US Coast Guard announced the partial reopening of barge traffic on the Mississippi after a barge accident closed traffic earlier this week.

Next Tuesday will be the USDA’s release of their monthly supply/demand report. Traders expect higher corn and wheat stocks and lower soybean stocks.

The Baltic Dry Index traded at its highest level since the second week of December after putting in all-time lows in February. The index covers prices of ocean transport costs of coal, grain and other dry goods.

Corn

Corn higher six straight sessions on technical buying and stronger export interest.
May corn added 8 ¼ cents for the week, returning to the level of trade prior to the release of last week’s USDA report.
The May/July spread traded as narrow as 2 ¼ before finishing the week at 2 ¾ – the narrowest since last July as bull spreads have been leading this six day rally.
Global buyers have noted the corn price, coupled with the lower US dollar, and have stepped up purchases. Today the USDA announced the sale of US corn to ‘unknown’ destinations of 120k tonnes – the second sale of at least 100k in two days.
CFTC information showed that as of the week ending Tuesday, Managed Money sold more than 53k contracts of corn – putting them net short -161,865 contracts.
Argentina announced it will move its energy policy toward a maximum ethanol blend of 26 percent – more than double the current 12 percent policy. This gets them in step with neighbor Brazil with whom they manufacture autos for each other – simplifying manufacture and trade as well as increase domestic demand for biofuels.
Often basis and spreads are leading indicators of what’s to come in the futures market. With that in mind, the bull spreads have been leading the way while basis has firmed in various processor markets as commercial buyers continue to encounter reluctant sellers. Does this mean the futures is ready to take off? Not necessarily but it at least a source of optimism in a market that continues its multi-month consolidation trade.

Soybeans

Soybeans higher as traders exit long soy oil/short meal positions as well as strength in the crude oil market.
The weekly soybean chart posted its first lower close in five weeks, but not without almost closing higher off May’s Friday rally of 12 ¼ cents on the unwinding of long soy oil / short soy meal bets had may meal 6.9 higher.
Soy oil’s share of the value of soy output topped 39 percent this week, the highest since 2012 – leaving the long soy oil / short soymeal spreads vulnerable to a correction. A Malaysian Palm Oil conference over the weekend will have new supply data for the market to digest Monday.
Brazil’s CONAB lowered its estimate for the Brazilian soybean crop to 98.98 mln mt from their previous estimate of 101.2.
Funds were buyers of 9,000 soybean contracts.
For now, if stronger meal next week can propel soybeans past their recent highs – upside target for May will be first around 9.30 with a stretch target up at 9.50.

Wheat

Wheat stems recent losses on dry weather uncertainty in the Plains.
Continued dryness in Kansas and Oklahoma are expected to be addressed by incoming moisture – but the market reversed its recent bearish posture going into the weekend on concerns that the full relief may not get realized.
Export activity at the end of the week helped to recover the early week’s bearishness.
FranceAgriMer left its wheat ratings of 92 percent of good or excellent ratings unchanged from the previous week. This is the highest of the last five years and one point above a year ago at this time.

Livestock

Technical buying drives cattle futures higher.
Live cattle rose for a third day in a row fueled by short-covering and fund buying. Futures discount to this week’s $132 to $136 per cwt cash cattle prices brought more buyers to the futures market.
This morning’s wholesale choice beef price was up 56 cents at $215.18 while Select slipped 17 cents to $205.62.
The USDA attaché in China adjusted 2015 pork imports to China up to 1 mln tons and further increased the 2016 forecast to 1.3 mln tons. Citing processors utilizing lower cost imports for domestic demand.

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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