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Closing Comments


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Closing Comments

Corn traded to 18 day lows on the USDA announcement of a 175.3 bpa yield, eclipsing the estimated 173.2 bpa and posting the largest Oct to Nov gain in 10 years. The increase in production bested the increase in domestic and export demand, bumping projected ending stocks 83 mln bu to 2,403. North Dakota’s yield gained an impressive 17 bpa, MN up 4 bpa and NE +3 bpa since October. The U.S. EIA  report saw an announced reduction of ethanol production of -20,000 bbl to 1.0 mln bbl/day (but still running above “needed” level and 2% ahead of last year same week).  Ethanol stocks decreased by -.51 to 19.23 mln bbl. December corn closed -13 ½ at 3.40 ¾, look for support for the balance of this week to be in the 3.37/3.38 area. Resistance now at 3.57 Dec with the 3.65-3.70 upside target still in play. Demand is strong, but for now the market has to digest bigger supply.


Soybeans gave up the previous two days of gains following the larger than expected USDA announcement of a 52.5 bpa national yield, vs. 52.0 expected. Based on history, the trade will be expecting another small increase for the final January yield. The U.S. 2017 new crop bean/corn ratio is 2.56%, while in China, farmers will be moving a portion of corn acres to beans, increasing estimated production to 1.5-2 mmt.  Despite this, Chinese soybean imports are predicted to rise 2 mmt in 2016-2017. The global soy stocks/use ratio is now at 24.8%, the highest since 99/2000. In Northern Brazil soy planting progress is so far ahead of schedule this season that harvest may be bumped up a month, with a peak in Jan/Feb. For now there isn’t much excitement to return to the soy complex in the short term unless global meal values come to life, China continues its shipping past beyond the usual seasonal decline or a South American weather story the next couple months. Spreads had January lose ground to May and old crop lose ground to new crop. January was able to close up and off its session lows at 9.91 and hold above the 200 day moving average. Closing price this week needs to hold above today’s low of 9.84 ¼ or threaten a move testing the low of the trading range toward 9.40.


Winter Wheat was lower on slightly larger ending stocks from the USDA and from the US dollar recovery following last night’s market roiling, but Minneapolis was able to close green.   The world’s largest importer, Egypt, announced the purchase of 240K mt of wheat with 180K mt from Russia and 60K mt of Romanian origin.  The U.S. has not been able to participate at a competitive level in this space up to this point and remain just outside the range of competitive wheat bids for export. On the charts, Chicago and Kansas City continue their tight, consolidation trade that has gone on for more than two months – waiting for some spark…


Cattle and feeders where higher today, but beef is also feeling the impact of Trump’s victory, creating uncertainty for export relations to customers such as Mexico. Export business to date has been good compared to last year. Investors’ eyes are shifting today to the online cattle exchange of 13,000 head, where animals last week brought as much as $106 per cwt.


Hogs traded lower today but continue in the consolidation range of the previous eight sessions.  Low hog prices forced producers’ hands, as they sent animals to market earlier than planned, which resulted in lighter weights.  Also of note, some hog and cattle processors will be closed on Friday in remembrance of Veteran’s Day.


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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