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Closing Comments

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Closing Comments

Crude oil lower resisting at the 200 day moving average for the June contract (the first time ever for that particular month’s contract) while equities traded off their recent highs.

Grains generally ran out of buyers except in the old crop soybean market today with corn leading the weakness in the feed-grains into today’s close.

Corn

Corn succumbs to profit taking on only the second lower close for the month of April.
Profit taking after the overnight trade for the front month contract took out the front month high from October of 3.99 ¾.
USDA export sales were within the trade expectations at 47.4 mln bushels and 4.8 for the next marketing year.
Short covering has had funds buyers of corn for seven consecutive sessions returned sellers on technical signals. Reportedly selling 25,000 contracts today.
Tight supplies in Brazil and more competitive US corn for global export has given a supportive narrative to corn in addition to the threat of losing acres to soybean, but the market was due for a setback. Now the question will be if trading back to the top of the consolidation range will continue to contain the market or if a breakout is in the making.
Technically today’s action doesn’t bode well for the daily chart, at least in the short term, after trading to the top of the range and proceeding to fail. However the market has been on a flurry run and a setback would be natural. See how funds want to go into the weekend. A setback in May to the 3.74-3.78 area wouldn’t be unexpected. From a chart pattern standpoint, May corn has been able to blow out three previous swing highs – an impressive feat and a signal of a different acting market. Now it has to prove it can hold onto a “higher low” and regain buyers. A pull back followed buy strength that can take out last night’s high would have the market gunning for the October May highs around 4.15.

Soybeans

Soybeans close well off the overnight high but May posted another new high close on continued Argentine harvest concerns.
New old crop highs in soybeans extended the recent spectacular run – however open interest fell for the first time in eight sessions but volume continues to be large following yesterday’s record number of traded contracts.
Buenos Aires Grains Exchange slashed its Argentine soybean production estimate for 15/16 to 56 mln tonnes from its previous forecast of 60 mln due to damage from the recent excessive rains. In addition harvest is running 30 percent behind the normal pace.
USDA export sales for soybeans came in at the upper end of the range.
The uncertainty in Argentina reduces the margin for error on production from the Northern hemisphere as we enter the US growing season.
Technically the November contract has placed a perfect “shooting start” at the top of this recent rally – this is a sign of buying exhaustion and that the market is ripe for a pullback. Today’s high may have been a wave three high which would set up a pullback in price for a wave five before a re-test of last night’s high or a final “make the shorts miserable” fifth wave run to the 10.55-11.00 area.

Wheat

Wheat lower on profit taking.
Open interest in wheat continues to fall in the wheat complex as the funds have been covering shorts. Large volume today had bulls and bears battling for position as the bears continue to see the bearish fundamentals in the global wheat complex while bulls are anticipating future uncertainty to bring price premium into the market.
USDA export sales for 15/16 were at the high end of expectations while 16/17 sales came in above expectations.
Stats Canada said Canadian farmers intend to plant 23.8 mln total acres of compared to last year at 24.1 mln.

Livestock

Cattle found generally indecision trade while hogs recovered early losses to finish close to unchanged.
Cattle traded generally weak as a small volume of cash cattle in Nebraska brought $125 to $128 per cwt, down from mostly $134 last week. Lackluster wholesale demand had choice off -$1.06 per cwt but select was able to rise .91 cents.
Cattle on Feed report will be out tomorrow afternoon.
Hogs were generally under pressure in the front months but was able to recover the early weakness into the close as cash hogs in the Midwest were mostly .50 to $1 higher per cwt.

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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