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Closing Comments

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Closing Comments

US stocks and the US dollar were lower as spending grew slower than expected and consumer sentiment sank to seven month lows.

 

Sunday May 1 is labor day in most EU countries, and various Asian and Southeast Asian nations. China, Hong Kong, Taiwan and Malaysia’s financial markets will be closed Monday in observance.

Corn

Corn closes higher on continued concerns over dryness in Brazil and export hopes for US supplies.

Analyst AGR Brasil lowered its forecast for the 15/16 Brazil corn crop to 79.6 mln tonnes, down from the previous estimate of 85.1 mln tonnes in March. Brazilian analysis Franca Junior lowered its 15/16 corn estimate to 79.5 mln tonnes, 7.6 mln below its March estimate.

Brazil’s trade ministry said it issued its first non-Mercosur import license for corn for 2,000 tonnes. This is a part of the suspension of the 10 percent tariff on corn from countries outside its trading bloc due to the shortage of supplies inside Brazil.

CFTC data showed Managed Money moved to net long for the first time since the fall of 2015 in corn. They had a net change in their position of 110,689 contracts moving them to net long 79,781 contracts. The shift in position was not only short covering (they bought back -64k contracts of shorts) but also long buying (adding 46k of new longs). This data is for the week ending Tuesday.

The monthly corn chart posted an outside month that will have technical traders sit up and take notice. July nearby resistance will be the recent swing high at 4.07 and beyond that at 4.20. The question next week will be; how much premium will come in from the Brazilian weather issues? How much will the unexpectedly large fund long position will weigh on price?

Soybeans

Soybeans firm on continued Argentine crop problems and technical buying.

Soybean futures held up on expectations that poor quality and lower output in Argentina due to the devastating rains will support US demand. The exceptional rains in Argentina have led to not only harvest delays (see below) and acreage losses but has affected quality due to sprout and fungal damage.

Unwinding of the long soy oil / short soy meal positions continue to weigh on soybean oil as funds were sellers of soy oil for the eighth straight session.

Commitment of Traders showed Managed Money added to their net long position and additional 24,714 contracts. This moves their next long position to 160,125 contracts – the longest net position since the spring of 2014.

Below is a chart of current harvest progress in Argentina vs the average range of historical pace.

Wheat

Wheat higher on end of month short covering but deliveries limited gains.

Good crop conditions in wheat and moisture relief in the west has kept a lid on wheat’s ability to garner a rally, but at the same time is struggling to find fresh sellers. European wheat futures continue to languish near their lows, but the bearishness is built in for now.

CFTC data showed funds reduced their CME wheat short position by 27k contracts, leaving them net short -60,805.

Livestock

Cattle close higher but off highs, hogs trade to highest level in a month.

Live cattle recovered some of Thursday’s steep losses on short-covering as investors squared end of month positions. This week cash cattle came in at $124 per cwt, down $3 from a week ago. Friday morning’s wholesale choice beef price dropped 45 cents per cwt from Thursday while select was up 8 cents. For now the trade remains skeptical that wholesale prices are at a bottom.

Better cash prices and tighter supplies helped support lean hog futures for the third day in a row, taking June 0.925 higher. Iowa/Minnesota average cash hog price was up 96 cents per cwt from Thursday.

Closing Market Snapshot

 

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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