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Closing Comments


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Closing Comments

Corn could not find impetus from soybeans or a positive EIA report today, chopping sideways, -2 ½ (Mar).  The EIA U.S. ethanol production report showed production increasing to 1.023 million barrels/day from 1.012 last week.  This is the highest production level in 14 weeks.  Traditionally, production slows in the winter months, but the margins have remained favorable, which has allowed the production to remain strong and 3.5% above last year.  This could mean that the USDA will increase their corn for ethanol usage estimate in Friday’s report.  As far as ethanol stocks, they moved slightly higher to 778 million gallons from 775 million gallons, but they are still well below last year’s levels.  This would appear to be very supportive for corn, but it must be mentioned that gasoline demand has seen significant declines.  Keep an eye on gasoline going forward, as ethanol demand concerns could emerge if the trend continues.


Soybeans once again found some strength in exports (after trading lower overnight), +1 ¼ (Jan).  The USDA reported two new sales today, a private sale to China of 330K mt and another sale to an unknown destination of 136K mt.  The battle continues between the competing factors of strong demand and large yields/favorable South American planting.  On the flip side, dryness and heat in Southern Brazil and Argentina is starting to attract notice, but has note demonstrated major threat potential yet (Argentina is still in a growing period equivalent to May in the U.S.).  Soybean oil was +.11 (Jan) and Soybean meal declined, -1.4 (Jan).


Wheat has tended to be a follower of the other grains, without having a good story of its own and with most fundamental news negative to price action.  Today saw a decline spread evenly across the complex in the March contract, led by Chicago (-5 ¾), followed by KC (-5) and MN (-4 ½).  Price has been fighting to find upside momentum, in spite of recent strength in other grains.  It is expected that the upcoming USDA report on Friday will show ending wheat stocks to be down slightly, and the same for global stocks, according to analysts’ projections.  This may help relieve some of the bearish pressure on the market. 


Live Cattle on the Chicago Mercantile Exchange was down, -.275 (Feb) amongst volatile trading, prompted by technical selling and yesterday’s soft wholesale beef values, according to traders.  The failure of early week bids of $112 helped spark a rally yesterday in futures prices, rising almost $2 cwt, as the majority of sellers are holding firm for $115.  The online auction today will offer 8,000 head and will further direct the cash market for the remainder of the week.  The Livestock Marketing Information Center is showing, based on their estimated breakeven sale prices, U.S. cattle feeders have not covered their costs in 22 of the last 24 months.  Thankfully that picture is improving as a result of lower costs for both feeder cattle and feedstuffs. 


Hog futures gapped higher today in the February contract, +2.275 (Feb), due to yesterday’s cash price hike and healthy packer profits, in the midst of tightening suppliesThe combined slaughter of Monday and Tuesday added up to 875K head, which was 10K less than last week and 5K lower than last year at this time.  Look for cash prices to weaken after packers build up their inventories for Saturday’s slaughter, which analysts expect to be around 250K head. 


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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