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Closing Comments

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Closing Comments

Stocks traded slightly lower, US dollar gave up yesterday’s gains, crude oil lower but grains/oilseeds (sans soy oil) finished the week on a high note on continued fund and commercial buying.

Corn

Fund buying and dry Brazil weather helped to propel May corn to four month highs.
Good demand for US corn coupled with production stress in Brazil’s second crop corn during pollination helped May corn to add 16 ½ cents this week – posting a new high close for 2016.
Worries continue to float about the impact on temperature and moisture this summer as El Nino breaks down into La Nina.
CFTC data showed Managed Money as of the end of Tuesday’s traded had reduced their net short position by more than 25k contracts to -136,705. In looking through the numbers, the total actual short positions are still about double the number of longs held by Managed Money. Funds bought 15,000 contracts today.
USDA confirmed a private sale of 344,200 tonnes of US corn to unknown destinations for 15/16 delivery.
Price action next week will be driven by fund activity and commercial buying from weather signals out of South America and longer term moisture forecasts for summer US production. Nearby resistance for May corn will be in the 3.80-3.85 area with longer term resistance at 3.95.

Soybeans

Soybeans hold up near recent highs on continued fund buying.
Despite ample global supplies, fund traders and speculators continue to be aggressive buyers of soybeans and specifically soy meal.
On-going wet harvest weather for Argentina continues to plague harvest progress and conditions – however some estimates show a total acreage loss of around 3 percent of the Argentine soy crop due to the wet conditions.
NOPA’s report helped the sentiment showing their US processors had crushed 156.69 mln bu of soybeans last month, making it the second busiest March on record. This was just above analyst estimates of 156.248 mln.
USDA reported a private sale of 132,000 tonnes of US soybeans to China for 16/17 delivery.
Unwinding of long soy oil / short soymeal propelled meal to five month highs and soy oil to three week lows and a continued collapse in the ‘oil share’ to the lowest level since early February.
The weekly soybean continuation contract had its biggest gain – 39 ¼ – since July of 2015. Technically the soybean market is well over-bought and due for a bit of a break. However, yesterday’s opportunity for a set-back wasn’t realized and simply found too much buying support. The next upside targets if the market does find continued buying would be the daily continuation gap for May at 9.65 and a May daily swing high at 9.84.

Wheat

Wheat higher with help from corn despite the anticipation of widespread relief rains in dry Plains.
On the weekly charts, wheat generally found selling exhaustion but continue to struggle with global competitiveness and ample supplies. Expectations for moisture relief to move into the Plains the next few days gave the wheat complex a generally bearish tone.
CFTC data showed that Managed Money has been sellers across the wheat complex – adding net short of more than 38k contracts in Chicago, taking their net position to -106,163.

Livestock

Cattle up on wholesale beef demand while hogs higher on short covering despite falling cash hogs.
Live cattle gains modestly thanks to brisk wholesale beef demand and the small trade of cash cattle at a premium to futures this week. This morning’s choice beef price was up 60 cents to $225.03 per cwt which was up almost $10 over the previous week. Cash cattle in the Plains traded at $133 to $136 per cwt, nearly on par with last week’s trade. Beef packer margin has moved positive.
In South America, Brazilian chicken and pork producers continue to real from the corn export frenzy that depleted domestic feed supplies – leaving the livestock industry scrambling now to get supply needs met and having to import corn from Argentina and Paraguay.

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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