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Closing Comments

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Closing Comments

Corn is up moderately again today drafting off the explosive day in soybeans, + 4 ¼.  The USDA weekly corn inspections came in right in line for week of Nov. 17th,  at 876K mt (34.5 mln bu) vs. expected of 800K-1M mt, which was much better than last week’s 27 mln bu.  Corn exports however, need a strong finish through the end of the year to reach the USDA projection, as they have been running below expectations for several weeks leading up to now.   Traders have a net short position of around 85,000 contracts.

 

Soybeans have had a huge break-out day (+ 26 ½), bringing the rest of the soy complex along for the ride.  Soymeal’s participation is critical and will be watched closely, in order for this trend to continue in a bullish manner.  USDA soybean exports continue to amaze at 2.666M mt (98 mln bu), well above the market expectations of 1.7-2.0M mt.  In order for soybean exports to meet the yearly projection, 29.7 mln bu/week will be required for the remainder of the marketing year, which would be solid as levels tend to decline (historically), substantially after January.  And, that is a likely scenario again this year with the favorable South American planting so far.

 

Wheat  was not onboard with the soybean rally today as results were mixed: Chicago + 2 ¼, KC + ¾, and MN – 2 ¾.  Technical indicators would point to a possible target in the 4.75 range.  Export inspections were a very respectable 430K tonnes (15.8 mln bu), well over the 14.1 bu/week average over the last six weeks, and cumulatively up 29% over last year.  Wheat is coming off an impressive rally at the end of last week, in spite of the strong Dollar.  Also supportive to the complex, is the indication that the U.S. was competitive in offers to Algeria last week.  If the U.S. can begin to compete in this space and Egypt, this could be a potential game-changer.  Related to the Russian harvest, they are reporting yields up around 2.79 tonnes/hectare vs. 2.51 last year. 

 

Live Cattle continued the uptrend from last week, reaching a high not seen since late August, + .70.  Even though futures have gained $10 off of October lows, prices remain below break-evens for cattle owners.  In cash markets last week, 75,000 head were traded nationally, with prices up to $110, but the bulk of trade at $109.  Last week’s slaughter of 629K head was the largest of the year.  Unfortunately for cattle producers, the decline in retail prices does not reflect the larger decline in wholesale prices.  Many restaurants are hesitant to lower prices, but this is necessary to restoring beef demand.  The hope is restaurants will add more beef choices, driven by better margins, to help alleviate this situation.

 

Hogs had a strong performance, breaking out of the consolidation of the last three weeks, + 1.975.  This will be an opportunity to sell or we have a more substantial move coming.  Traditionally, this is one of the toughest times of the year for the cash market, with lost production over Thanksgiving resulting in a back-up of supplies of animals.  Over-abundant supplies continue to be a challenge, putting pressure on hog prices overall.  The U.S. daily slaughter of hogs was 443K.

 

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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