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Closing Comments

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Closing Comments

Energy markets were able to shrug of much of early losses despite the news that OPEC will not be able to come to an agreement to freeze output.

US dollar traded lower for most of the session while the Brazilian real was lower too following the lower house vote to move toward impeachment.

Corn

Corn hits 5 month high on short covering and production concerns in Brazil’s second crop corn.
Weekly export inspections for corn came in above 40 mln bu for the third week in a row at 42.8 mln.
Weekly planting progress showed 13 percent planted as of Sunday night vs 4 percent a week ago and 8 percent for the 5 year average. The recent record pace was 2012 at 20 percent.
Tight domestic supplies in Brazil have them turning to importers from their neighbors and potentially even the United States as their earlier season flurry of export business now has their feed sector scrambling to secure supplies and reeling from high prices. Limited rains over the next 10 days for Brazil’s second crop corn that is already under stress during pollination added support to corn futures and concern over supply in Brazil. Estimates show 10 percent of the anticipated production could come off the Brazilian corn crop.
Bull spreads retreated a bit today on farmer selling. May/July closed at 4 cents carry vs early last week’s trade near 2 ½.
Since last Wednesday open interest and volume has been falling in corn signaling that for now this rally may be soon to stall out. May corn made it to 3.84 today at its high – 2 cents shy of the 200 day moving average. The higher close today made for the highest close in May corn since December 15th.
May corn will face resistance in the 3.85 to 3.95 area and will need price support from wheat or a larger story to move funds out of short positions more quickly.

Soybeans

Soybeans mostly lower on profit taking following new eight month highs.
May soybeans closed lower on the day, losing ground to the November contract as profit taking came in after marking new eight month highs. A softer Brazilian currency added pressure as six month highs couldn’t be sustained following the first vote toward the impeachment of President Rouseff.
Weekly export inspection for soybeans came in at expectations at 9.4 mln bu.
Excessive rains in Argentina continue to delay and add damage to their soybean harvest.

Wheat

Wheat higher on short covering after Friday surprise increase in fund short positions.
Friday’s CFTC report showed the spec position in Chicago wheat had surprisingly moved into a new record short position which led to short covering in the most traded contract. This had the whole wheat complex higher, led by Chicago, despite the relief rains in the Plains wheat over the weekend.
KC continues to lose ground to Chicago while Europe’s Matif wheat moved into fresh lows despite expectations that he European crop won’t be quite as large as earlier estimates.
Progress highlights showed winter wheat Good/Excellent up 1 percent at 57 percent, spring wheat planting at 27 percent vs 13 percent last week and 19 percent for the 5 year average.
Exports for wheat came in at a four week high of 16.8 mln bushels, above expectations but off last year by 13%.

Livestock

Cattle and feeder cattle limit down on fund liquidation.
The prospect that cash prices might weaken as more cattle come to market along with the possibility that wholesale beef prices will be peaking soon fed today’s steep losses.
Packers last week paid $133 to $136 per cwt for cash cattle in the Plains, up a dollar from the week before.
Cash and wholesale pork price gains helped to support the four nearest lean hog futures months. Average cash hog price in IA/MN was up 9 cents per cwt from Friday in light volume. Pork exports are decent and lighter weights coupled with seasonal demand should provide support to the hog market.

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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