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Closing Comments


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Closing Comments

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Corn is sticking to the same narrative today, still trading in the low end of a broad range of 3.40 to 3.75, finishing flat (Mar).  Corn does not have a compelling enough story of its own to overcome bearish soybean forces and the glut of supply coupled with favorable South American growing conditions – in spite of the positive ethanol story and the U.S.’s pole position as the most competitive exporter for global corn sourcing.  On that note, corn did find support today from a USDA reported private sale of 100,400 mt to Mexico and USDA announced export sales over expectations (1.251 mmt vs 800-1.1 mmt).  It was also reported that China’s November imports of ethanol were down 48% from last year, but overall for the year are up 51% (essentially all from the U.S.).


Soybeans were in long liquidation mode today, down sharply -12 ¼ (Jan).  Traditionally, the week before Christmas experiences a measure of volatility as trade thins.  A last level of support to monitor for those of a bullish mindset, is the 100 day moving average at 992.  Export sales announced today were larger than expected at 1.813 mmt vs 1.1-1.4 mmt, but were not enough to bolster trade.  In addition to South American weather, other negative forces weighing in are the potential of another yield increase by the USDA on the January 12th report and farmer interest in expanding soybean acreage in 2017.  China’s November imports of soybeans were up 6% over last year, with U.S. imports increasing 32%, Brazilian imports decreasing 66%, and Argentina increasing 44%. 


Wheat once again played follow the leader (soybeans), down across the entire complex: Chicago -2 ½, KC -1 ¼, Minneapolis -4 ½ (Mar).  Managed fund traders, who are short 92K+ contracts, are in position to round out a very profitable year.  Exports announced today showed that wheat is at the bottom of the expected range (298K tonnes vs 300-500K tonnes).  USDA exports for the year are estimated to be up 26%.  Russia lowered its export estimate for 2016/17 wheat exports by .5 mmt as a result of increased competition with Australia and Argentina.  The Ukraine raised their projection of this year’s total grain crop by .2 mmt.


Live Cattle remains in a positive trend, but traders are wary this rally has more risk due to the overbought condition and moderate weather.  February futures were up a solid +.575.  Traders had been expecting lower beef prices for post-holiday deliveries this week, but instead were greeted with solid demand.  The closely watched online exchange sold fed cattle from $112-114, up $2-4 over the previous week.  Cattle owners are not in a mood to push cattle this week, with the February contract carrying large premiums to the expiring December.  Tomorrow, the USDA will release its cattle on feed report at 11am CT. 


Hogs were in sideways mode heading into the home stretch before Christmas, -.175 (Feb).  Cash prices were basically unchanged with most processors having adequate supplies heading into the weekend.  Packer margins have been amazingly strong, reaching an estimated $48.90/head, compared to $37.40 a week ago.  Factors providing uncertainty include concerns of higher revisions for the report tomorrow, plus a warmer weather outlook.  The USDA will release the quarterly hogs and pigs report on Friday at 11am CT.


The CME grain markets will close early tomorrow at 12:05pm CT and will be closed on Monday as well for the Christmas holiday.


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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