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Closing Comments

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Closing Comments

Corn seems to be caught between the bullishness of beans and the bearishness of wheat, as futures traded –  ¾.  Funds are significantly short, with Friday adding to the total by 5,000 contracts.  Open interest is at its lowest level since October 11th.  The USDA announced weekly exports of 31.5 mln bu, lower than the expected 33.5-41.3 mln bu.  Brazilian weather conditions remain near perfect, which does not help the waffling market.  Also, related to Brazil, the Energy Minister said that the  government is working on a program to spur ethanol production with the goal of reducing the country’s gasoline imports.  Other overseas news includes Indonesia’s Ag Minister declaring that 2018 will be the absolute latest time frame that corn imports will be accepted, as the government is driving towards self-sufficiency.

 

Soybeans executed into trend mode overnight, pushed higher by the Asian markets, as the Dalian soybeans and Malaysian palm oil were up sharply.  Soybeans closed today, + 10.  Oil led rallies tend to be bit more muted than meal led rallies, but regardless the trend appears to point higher for the near future.  The USDA announced weekly exports of 76.8 mln bu, at the top end of the expected 66.1-77.2 mln bu, for the week ending November 24th.  There were no new USDA sales announcements this morning.  Chinese officials are trying to slow speculative buying by raising margins and fees.  There is a general feeling that a possible trade war with the U.S. may lie ahead in 2017.  Weather continues to be favorable for South America.  Brazilian soybean plantings are at 83% complete compared to 73% last week.

 

Wheat continued to show weak technical action, in spite of its oversold condition, –  6 ¼ (Chicago).  However, this did not apply across the complex today as MN Wheat surged up + 6.  Wheat overall has been in a choppy, consolidation mode as the global supply from the prominent exporters continues to grow.  In order for the supply burden to experience relief, there will need to be a major weather issue from one or more of the key producers.  The USDA announced disappointing weekly exports of 8.2 mln bu versus the expected 11.9-19.3 mln bu, for the week ending November 24th.  Additionally, they were down from last week’s 15.9 mln bu and last year’s same week of 13.4 mln bu.  Overseas, the India Food Minister signaled that the government will not import wheat as they have sufficient stocks.  On the other hand, Indonesia expects the need for imports to grow 5-6% next year. 

 

Cattle are extremely overbought as futures have been following the cash market higher.  Today however, cattle futures showed some decline – 1.450 (live cattle), as investors consolidated positions following the highs last Friday (highest since August 22nd).  Cash trades were as high as $113 last week, which brought a feeling of relief to many, as the majority of producers’ break-evens are in the range of $113-117.  Carcass weights are a closely watched barometer indicating the position of cattle feeders in the nation’s feed lots, and will be released on Thursday.  Last week’s report was a surprise considering the large sales of the last two weeks, with steer carcass weights 5# higher at 918#.

 

Hogs have shown some impressive technical action recently, but will the market stall at the current level, with indicators pointing to a possible market roll-over?  Hog futures finished lower, – .625.  The market is pre-occupied with attempting to absorb an enormous short-term supply of all meats, and there is the potential that exports could stumble.  Today, Midwest cash hogs traded mostly 50 cents per cwt higher, which was the result of strong packer demand for this week’s slaughter, according to dealers. With the holidays approaching later this month, the first week of December is typically one of the largest hog slaughter times of the year, with packers ramping up to meet retailers’ orders.  Packer profit margins were down slightly from a week ago.

 

In Other news of interest, there is speculation as to how PEOTUS Trump will balance Big Oil and Big Farm interests, two of his biggest supporters throughout the campaign, with regard to the Renewable Fuel Standard program that was enacted by President Bush (which requires energy firms to blend ethanol and biodiesel into gasoline and diesel).  The program was designed to cut greenhouse emissions, reduce U.S. dependence on foreign oil and boost the rural economy that provides the crops.  Oil groups are up in arms over Wednesday’s announcement in which the EPA set record mandates for renewable fuels, which they feel are not in touch with reality, while the farming sector has lobbied hard for the maximum biofuel volumes laid out under the law to be blended into gasoline and fuels.

 

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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