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Closing Comments


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Closing Comments

Corn continues to be range-bound, – 1 ¾The markets had moderate volume trading, after a “hard start” at 8:30 this morning, as the overnight grain markets were closed for the Thanksgiving holiday.  CBOT floor traders estimated 3,500 contracts of corn were sold.  The USDA announced very strong export sales (Nov 17th) of 1.688 mln mt against the expected 900K – 1.2 mln mt.  Weather factors to keep a close eye on include the spreading drought in the Southeast, and if this will continue to expand over the next 3-4 months.  And, what would effect will La Nina have on South America?


Soybeans surged forward again today, + 10 ½.  Another blockbuster export announcement by the USDA saw 1.898 mln mt, vs the expected 1.2-1.6 mln mt.  Soybean oil exports were 26,100 mt compared to expectations of 5K-25K mt.  Soybean meal also did not disappoint at 224,500 mt vs expected 200K-450K mt.  In Argentina, it is expected that their soybean acres will fall from 50.9 mln acres to 50 mln acres, as growers shift acres to wheat and corn to take advantage of government incentives.  The elimination of wheat and corn export barriers have encouraged farmers to rotate crops after decades of overplanting soybeans.  In Europe, due to shortages cause by poor rapeseed harvest this year, the region will need fairly large imports of cooking oils and fats.  This is the second straight season that the bloc will be a net importer of rapeseed oil.  According to Bloomberg, the European Commission plans to propose limiting the use of crop-based biofuels in transport to 3.8% by 2030, in order to ease competition with food production and to prompt the creation of clean fuels from non-food sources.  Also, adding demand to the vegetable oil complex is the U.S. biodiesel mandate, which will add 350K tons in 2017. 


Wheat was mixed as Dec options went off the board today, with Chicago trading – 7, KC – 4 ¾, but MN + 5 ½.  Wheat exports (Nov 17th) showed very strong, as the USDA announced exports of 712,400 mt over the expected 350K-500K mt.  Buyers included Japan, Peru, China, Egypt, and of course the “unknown”.  This week Taiwan bought 85,325 mt of U.S. milling wheat.  Argentina’s Ag Ministry forecast the 2016/17 wheat harvest at 14.9 mln mt, which would equate to 3.6 mln mt more than last year.


Live Cattle was up impressively, gapping higher + 1.050, as attention has turned to beef now that Thanksgiving is in the rear-view mirror.  The technical action has remained positive and February may have some short-term upside if cash trades persist higher, as buys ranged $110-112 in the plains compared to $108-110 last week.  The USDA reported 12,965 tons of U.S. beef was sold for exports (week ended Nov 17th), a significant increase from the 10,305 tons the previous week.


Hogs were propelled to new highs from gains in cash markets combined with large export sales, + 1.475, with focus shifting away from turkey to the other meats heading into the Christmas season.  Export sales were up sharply week over week from 16,347 tons to 22,100 tons, with more than half headed to Mexico (the top importer).  However, the market could be posting a short-lived peak if a slow-down in the export market were to push more pork to the U.S. consumer and force pork cut-out values lower.  China’s hog imports were down 17.8% in October from the previous month, but still up 43.3% from last year.


In Other news, Ag Commodity futures should receive notable support from outside markets through 2017 in several key areas:  reflationary environment, strong economic growth, and rising crude oil prices.  The headwind that will potentially be a drag on the ag export front is impressive strength in the U.S. Dollar.  The consensus on Wall Street is that the Fed will raise interest rates in December, as the economy is strong enough to warrant this soon.



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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