Home Market Market Watch Closing Comments

Closing Comments


cid:<a href=image009.jpg@01CE6CE4.660D8B30“>

Closing Comments

Corn continued its steady gains, pushing above resistance at $3.61, + ½ (Mar).  Today was relatively quiet from a news standpoint, with no new export sales announced, etc.  Managed money is still short about 70,000 net corn contracts.  If the market gets above 3.64, fund managers will pay close attention.  The star performer yesterday was ethanol, which rose to two year highs.  Ethanol cash margins are very attractive, averaging over $1/bu in the Midwest.  The market is also keeping a pulse on South American weather, where Brazil looks terrific, but Argentina is still leaving the door open to uncertainty.  South American weather is by far the biggest potential story with market impact potential, followed by other factors, i.e. inflation expectations and increasing global demand.


Soybeans gained back most of what was lost yesterday overnight, but this was neutralized today, as beans traded both sides of unchanged – 3 (Jan).  Oil and meal were also lower, there were no new sales to China to report, and Argentina has light rains in the forecast – thus, beans did not have a positive story to draw on today.  It has been a balancing act between the strong Chinese demand story with tightening meal market versus the large yields and positive South American planting, daily weighing against each other.  It has been reported that Chinese officials have ordered six crushing plants to stop operation in efforts to clampdown on air pollution. 


Wheat led the way among the grains for most of the session, but finished mixed with Chicago + ¼, KC + ½, and Minneapolis – ½.  A notable difference this week, is the amount of business that has been announced on the global stage from a variety of locations – including Tunisia, Saudi Arabia, Algeria, Ethiopia, Jordan, Indonesia, Bangladesh, Nigeria, to name a few.  A couple of narratives to follow include, frigid temperatures in the western plains that will be lingering for most of the week and the fact that U.S. wheat is becoming more competitive around the world and may start winning some business. 


Live Cattle, after a break out day yesterday to a new high, moved bullishly forward, +1.025 (Feb).  Cattle appears to be adhering to the cardinal rule of commodity trading – “When it is obvious, it’s got to be wrong.”  There was wide agreement among forecasters that futures would be down this week, and possibly in a big way.  There is no evidence that this is the case over the last two days.  Traders have corrected the overbought condition and there is the possibility of a bounce to $115+.  Cash prices were expected to decline, but the outlook has changed due to box prices being higher instead of lower, and show lists were steady instead of higher. 


Hogs finally put on the brakes today after bumping into resistance at around 62.40, following six consecutive days of strong gains, -.425 (Feb).  Feb hogs will have to prove that they can get through resistance at 62.425.  The movement of livestock to market has slowed due to cold temps and snow and ice blanketing regions across the Midwest.  The average pork packer margins were down an estimated $.45, from $41.05/head to $40.60/head.  As packers prepare to pare back production heading into Christmas, cash hog prices are likely to top out.  The issue to watch will be significant surpluses without notable help from exports in the coming weeks.


In Other news, it is expected that the U.S. Central Bank will raise interest rates tomorrow afternoon, following positive developments in the markets and confidence in the economy.  With the rate increase being so long overdue, will the Fed need to raise the rate 2-3 times more this year to catch up?  It is thought that a U.S. GDP rate of 4% is a reasonable target by the middle of 2017.


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.


or 1-866-249-2528