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Closing Comments

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Closing Comments

Corn

Corn under pressure from weakness in wheat and buy soy/sell grain spreading.
Export inspections came in over 40 mln bu for the second week in a row but it wasn’t enough to overcome the bearish tone of better upcoming planting weather and the weakness in wheat on expected rain relief in the Plains.
The first national crop progress for corn showed us corn planting 4% complete, this was slightly behind average but more than many in the trade were expecting.
Ethanol margins continue to increase on the weakness in corn, continuing to provide support to the cash markets. (CFTC data showed aggressive commercial buying thanks to exports and ethanol).
Tomorrow’s WASDE is usually uneventful as the first new crop S&D won’t come until the May report. Expectation of slightly higher carryover domestically and around the world.
Market keeping an eye on the continuing build of dryness in Brazil’s second crop corn.
Funds were reportedly net sellers of 10,000 corn contracts today.

Soybeans

Soybeans and meal continue their race to the top on fund buying and currency rates.
Covering of short positions in soy meal has spilled into additional strength in the soybean market which has provided continuation of the technical buying and bean-corn spreading. In addition, the continued weakness in the US dollar and strength in the Brazilian real aided the strength.
The large South American crop continues to have them as destination of choice with Chinese interest in cargoes continuing. US beans are now a $6-8/mt premium to Brazil FOB.
The new crop bean/corn soy ratio continues to strengthen in an effort to garner more soybean acres from corn before planting goes into full effect. Today the ratio closed at 2.55, while the high in that spread came the summer of 2014 at 2.58.
USDA will be out tomorrow with its WASDE report. The market is expecting a slight tightening of the carry out.
Technically the May contract took out its October swing high today by ¼ of a cent. If this doesn’t stop the rally, next target is the continuation gap above at 9.50. The market is starting to run short on fundamentals to support the price – but in the short term, fundamentals don’t always matter.
Funds bought 11,000 contracts.

Wheat

Wheat was the boat anchor in the market, falling to five week lows on improved weather outlook.
Pressure on wheat started right out of the gate, led lower by the Kansas City contract as showers on Plains wheat and more importantly the anticipation of future wide-spread rains pressed on the “weather premium” that had been built into the market. (the term premium is used loosely there)
The market was reminded of its poor export demand as weekly inspections came in well below the expected seasonal pace at 12.464 mln bu as aggressive offers from abroad continue to garner business – despite the continued weakness in the US dollar.
Trade expectations for tomorrow’s WASDE report are for small a small build in the wheat carry-out.
Crop conditions from the USDA showed a drop in “good/excellent” for winter wheat to 56% from last week’s 59%. This is below the trade expectation, but still 14% better than a year ago. Winter wheat progress was seen at 4% headed while spring wheat was estimated at 13% planted vs 10% for the five year average.

Livestock

Cattle lower on profit taking while technical selling and live cattle losses weighed on hogs.
Cattle traded lower as technical resistance reversed much of Friday’s gains in the futures market, finishing just above trendline resistance. Boxed beef cutout values were higher on moderate to good demand and moderate to heavy offerings. Choice was $1.65 higher while Select was up $1.80.
Cash price uncertainty coupled with technical selling and weakness in the live cattle had lean hogs give up Friday’s gains.

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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