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Closing Comments

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Closing Comments

Corn overcame some of its ongoing weighty issues, i.e. strong Dollar, favorable South American planting conditions, Chinese crackdown on speculation trading, etc., as the market finished +4 ¼.  The Dollar continues to make life difficult for U.S. exporters, with price now north of “100”, as they are trying to compete with Black Sea and South American sellers, which both feature weak currencies.  CFTC data after the close yesterday got a few folks attention, as fund buying was larger than expected (35,000 for week of 11/9).  Funds are now only 50,000 contracts short in corn, whereas less than two months ago this number was 200,000 short.  Ethanol profitability is also showing modest improvement.

 

Soybeans gained today (Jan +5 ¼), as they remain range bound with underlying support provided by strong demand but offset with record production limiting upside gains.  NOPA announced the third heaviest crush on record of 164.64 mln bushels, well above analysts’ expectations of 160.48 mln bushels.  Additionally, NOPA reported soymeal exports rose to 562,180 tons in October from 439,605 tons in September.  Soyoil stocks were the lowest since Feb. 15th, at 1.343 bln lbs.  The USDA reported two flash sales today of 126K mt to an “unknown” destination and another second private sale of 121.5K mt to China.  Soybean harvest is reported to be 97% complete, on level with last year.  In the global oil market, demand has been down for Malaysian palm, with exports 19% reduced in November to-date compared to last month.  The 1st half of November is a mere 38% of last year, and in turn Malaysia has announced a plan to decrease the oil export tax in December from 6.5% to 6%.  Yesterday’s CFTC data shows funds are net long 124K contracts in soybeans, 119K in soybean oil, and 16K in soybean meal.

 

Wheat led the grains today, with KC sporting the biggest gain at +5 ¼.  The USDA reported Winter Wheat planting at 94% complete, compared to 93% last year, with Winter Wheat emerged pegged at 84% complete versus 85% same week last year.  CFTC data has KC wheat net long 1.5K contracts, Minneapolis 1.6K net long and CBOT net short 111K contracts.  Domestically, the market continues to monitor conditions in the Plains as the HRW approaches dormancy and the extreme dryness in the southern SRW belt. Drought regions in the Plains and Southeast continue to grow on a weekly basis.  On the global stage, Iran is now said to be looking to export wheat (after halting imports earlier in the year).  The issue for the Iranians is that their wheat is considered some of the lowest quality in the world, and the quality issue has become a focal point worldwide.

 

Live Cattle futures showed some weakness up front but stronger in back months today influenced by profit-taking and caution in advance to cash prices later this week, according to traders.  Another negative developing factor is ironically is weather, as the conditions have been ideal with little or no thoughts of winter storms to date.  This will continue to make it difficult to hold back tonnage gains in spite of days on feed remaining constant with last year.  On the cash side, the majority of slaughter-ready cattle has been around $105 per cwt, supported by futures prices, profitable packer margins and almost 11,000 fewer cattle for sale than last week. 

 

Hog futures declined sharply today, -.775.  Cash hogs in the Midwest were steady to 50 cents per cwt lower on Tuesday.  Packer demand is easing off as they are content to work with what’s available in advance of plant closures over the Thanksgiving holiday, according to dealers.  On Monday, packers processed 442K hogs, 5,000 more than last year according to USDA estimates.  Hopefully retail sales will be strong through the holiday season, as poultry and beef will be formidable competitors in this space. 

 

 

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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