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Closing Comments

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Closing Comments

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Corn trading was light overnight and sessions are thinning as we are approaching the holiday, -3 (Mar).  March corn is back down now to support in the 3.45-3.50 area.  Corn recently tested and held the 100 day moving average, but momentum indicators have flipped and indicate possible bearish moves ahead.  With corn not having a compelling story of its own beyond good demand, beans have become the dominant market influencer, and they did not provide positive support today.  A Brazilian ag consulting firm, Agrural, has pegged corn crop production up 33% over last year’s crop, but with much more ideal conditions this year.  Weekly export inspections were slightly below expectations yesterday, but overall corn shipments are up substantially over last year, 15.3 mmt vs. 8.5 mmt. Look for corn to continue its broad range trade this winter of 3.40 to 3.75.  

 

Soybeans broke sharply below support at 10.18-10.20 today, down -16 ¼ (Jan).  The question now is if sellers extend losses tomorrow confirming bearish shift.  The key threat heading into the end of the year is speculative long liquidation selling.  Adding to the uncertainty, there were no new USDA sales announced this morning and favorable South American weather continues to point to record stocks ahead.  News from Vietnam that they will halt DDG imports for 60 days, also added to the bearish mindset.  Thinning trade is adding to volatility this final week before the holidays. Daily charts have entered “over-sold” territory on the indicators which may help to stabilize price but for now Jan needs to get back above 10.20 to threaten the bears.

 

Wheat traded in a range today, unable to take the lead on its own with the other grains down: Chicago -1 ¾, KC -1 ¼, and Minneapolis -2 (Mar).  It was reported that Egypt put in a tender for a January shipment for an unspecified amount of wheat.  It was a battle between Argentine and Russian offers, with Argentina winning the lowest honors this time around.  U.S. wheat was not offered as part of the tender.  Argentina appears to be getting aggressive with wheat offers, having a good crop under their belt.  The strengthening Dollar and record world ending stocks are not helping bullish sentiment in the complex.  The frigid weather across the middle of the U.S. this past week (without much snow cover) has continued to cause concern about potential winterkill, which could show up in the Spring. While sustained selling in the winter wheats isn’t being found, neither is ongoing buying. Look for continued consolidation for now.

 

Live Cattle has continued to impress with solid demand, but sustained a small setback today, -.425 (Feb).  USDA boxed beef cut-out values have continued to support, closing 76 cents higher yesterday.  Cash prices are back in the asking range of $115 with smaller show lists this week, and most cattle owners are not in a hurry to move cattle with February contract carrying large premiums to the expiring December.  There are 12,000 fewer head of cattle for sale this week than last week.  The Fed Cattle Exchange will once again serve as a barometer for cash price direction, with 5,000 cattle for sale tomorrow morning.  The USDA will release its cattle on feed report on Friday with average estimates of 98.5% on feed, 112.3% placements and marketings of 116%.

 

Hogs have left us wondering whether they are ready to put in a top, and today they are showing the first signs of weakness, with profit taking and soft cash prices weighing down the CME contracts, -2.100 (Feb).  Potential negative forces working against the current optimism are the record weekly slaughter last week, talk that ham prices may be maxing out, and a break in the cold weather.  USDA pork cut-out values have remained strong, up 88 cents from the end of last week.  This Friday, the government will release its quarterly hog report.

 

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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