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Closing Comments

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Closing Comments

USDA released their April supply/demand numbers today with the numbers generally coming in close to trade estimates. From March, wheat and corn stocks were higher while soybeans moved lower.

Interesting to note is the increase in the forecast of total red meat and poultry production but the drop in feed usage in corn, sorghum and wheat…

Crude oil up strong on news that Russia and Saudi Arabia have agreed to a production freeze.

Corn

Corn closes higher but well off daily highs on the USDA’s reminder of plentiful stocks.
USDA dropped the feed demand for corn by 50 million bushel – despite larger animal numbers – and left exports unchanged – despite the pick-up in export pace. Ethanol demand increased 25 mln bushel which leads to an estimated carry-over of 1.862 bln bu for 15/16.
Sorghum use for feed was lowered 15 mln bu while industrial use was up 25 mln thanks to ethanol but exports were down 10 mln leaving the bottom line unchanged.
Down in Brazil the market continues to be concerned about the April weather stress on the Safrinha corn crop. Their Ag Ministry also announced that due to tightening corn supplies and higher domestic prices, they are asking the government to halt the 10% import tariff on corn for 6 to 8 months.

Soybeans

Soybeans mount impressive rally to the close after selling off following the USDA report.
USDA increased exports for the 15/16 crop by 15 mln bu leading to a drop of 15 mln in the carry-out, bringing it to 445 mln bu. This came in as a slightly smaller carry-out projection than the market was anticipating.
Global soy production was virtually unchanged at 320.2 mln tons as a projected boost to Argentina production offsets a decline for India.
Technically the May contract closed for the first time above the October high and now seems to be continuing to eye the gap to 9.50. Continued unwinding of short meal / long soy oil spreads could help to propel the market higher. For now, the nearby resistance will be today’s high with 9.50 beyond that.

Wheat

Wheat higher off yesterday’s drop in condition ratings and support from the short fund position.
Wheat balance sheet saw a cut to feed/residual use of 10 mln bu which bumped up the ending stocks to 976 mln bu – very close to the market expectation. Global wheat production was up 1.0 mln mt for 15/16.
KC lost again to Chicago today but is likely nearing stability in that spread.

Livestock

Cattle couldn’t hold early strength on stronger feed grain prices and unprofitable packer margins.
According to the USDA the 2016 forecast of total red meat and poultry production is raised from last month as higher expected cattle slaughter and heavier carcass weights more than offset a lower pork production forecast. The beef import forecast is raised and the export is reduced from last month based on recent trade data. Pork imports are raised on the strength of the dollar, but improving demand in several importing countries is providing support for increased exports.

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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