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Closing Comments


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Closing Comments

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Corn followed soybeans’ lead again today, down -3 (Mar).  The USDA weekly inspections were under the expected 900K mt, coming in at 769,800 mt for the week ending Dec. 15th.  But Japan helped with a private sale of 128K mt of corn for the 2016/17 marketing year.  Even though the Dollar has continued to strengthen of late, the U.S. still remains the most competitive source into late winter.  Argentina has received the much anticipated rains that have been predicted over much of their critical growing acres with more expected this week.  It will be important for them to continue to receive follow up rain, but in the meantime this helped to reduce the level of crop stress.  Managed money is estimated at about 70,000 contracts short, which is in line with expectations. Corn was able to bounce of inter-day lows at technical support.   


Soybeans pulled the entire grain complex lower today, mostly due to positive news related to Argentine weather, -15 ¼ (Jan).  They have still held support above the critical line in the sand at 10.20.  However, soybean inspections continued their dominance over expectations for another week, with the USDA tabulating 1.731 mmt compared to 1.65 mmt.  Exports and Chinese buying are the dominant reasons why beans have continued to defy the fundamentalists in the face of massive yields/supply and favorable South American weather.  In that vein, it was reported by the USDA this morning of another private sale to China of 264K mt.  The declining value of the Chinese yuan is playing a major factor in Chinese importers looking to lock in the price of U.S. soybeans and booking freight.  This will translate into less of a chance of them canceling and rolling sales to South America (as has been feared), as it will be much more costly. January must keep closes above 10.18 for the bull run to remain intact.


Wheat, like corn, road lower on soybeans’ coattails, with Chicago -4 ¼, KC – ¾, and Minneapolis -3 (Mar).   Wheat also had another strong inspection showing with an announced 478,213 mt for the week of Dec. 15th, vs. 400K expected.   The extreme cold in the plains and Midwest has created some winterkill concern, but CWG doubts that much widespread damage has occurred.  The Commitment of Traders report on Friday showed spec buyers bought 25,000 contracts vs. the expected 5,000. Russia is experiencing a lower export total this month with SovEcon citing a strong Ruble and poor weather conditions at Black Sea ports as the bad actors.  But, they are still performing at a brisk clip, with exports above last year’s totals to-date.  Additionally, poor French yields are helping the Russian cause, with Morocco having to turn to them this year to supply the difference.


Live Cattle continues to surge forward toward resistance in the range of $116-118, ending up +.575 (Feb).  While traders expected lower prices for post-holiday deliveries, they have been surprised by the increase in demand.  At this time, futures are selling at a premium to cash prices.  For the week of Dec. 17th, packers processed 599K cattle, which was 2.2% more than last year and produced 2.8% more beef, according to the USDA.


Hog futures on Friday left everyone wondering whether they were at the end of the run or the beginning of the next leg to $70?  It appears the latter is the direction of choice, as the February contract pushed to a new high, +1.400.  Cash price were steady to 50 cents lower per cwt, possibly due to harsh weather over the weekend pushing deliveries into today.  Pork packer margins declined to $43.85/head, down from $44.55 on Friday.  The USDA estimated last week’s slaughter at a record 2.544 million head, 1,000 more than the previous high of a couple weeks earlier.


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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