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Closing Comments

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Closing Comments

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Corn remained under the key 100 day moving average for the 4th consecutive day, – ¼ (Mar).  Futures will likely continue in range bound trade for the next 2-3 months, until we can create a future with a crop more in the 160 bu range – the carryout stockpile is smothering any bullish news that attempts to present.  Support is at the 3.35 area with resistance at 3.65.  The USDA announced a private sale this morning to “unknown” destinations of 110,800 mt of corn.  The U.S. remains in the top spot as the most competitive source of corn, but will be hotly pursued by its South American counterparts come spring.  Ukraine raised their corn export estimates by over a million mt.  Ethanol continues to produce and is still offering great profitability at 80-90 cents/bu, which is at the high end of range of the past few months.

 

Soybeans continued their long liquidation mode today, -4 ½ (Jan).   The market is down over 50 cents on the week, and the January options expired today (below the 100 day moving average of 9.92).  It is also fairly widely expected that the Jan. 12th report will increase soybean yield to 53 bu/acre.  The question after the first of the year will be – Can soybeans muster any kind of a rally with overshadowing negative technicals and improving South American yield potential?  The rains in Argentina have been just as good as advertised with more on the way for the weekend.  So far, Argentine soybean planting progress is at 75.8% complete, and their Ag Ministry is estimating an increase of around 250K acres in plantings over the previous forecast.  Yesterday, the South Korean state run fishery announced a tender for 90K mt of non GMO soybeans (tender to close on Dec 26th). 

 

Wheat was unable to muster up any motivation to break out of a range, down across the complex: Chicago -2 ½, KC -1 ½, Minneapolis –4 (Mar).  Like corn, this will likely continue to be the pattern wheat will find itself in for the near term.  The negative pressures working against building any kind of momentum include a strong Dollar, large funds holding a very large short position, the rest of the grains trending bearish, and continued expansion of global wheat inventory.  Argentina is 58% harvested and they are raising expectations to a yield of 15.7 mmt from previous predictions of 14.9 mmt.  India also raised expectations in their corner of the globe, pegging planted acres to increase from 64.1 million acres to 68.8 million acres.  However, they are expected to still import wheat through the next marketing year.  Putin also came forward with a prediction that Russia will have a bigger crop than previously expected.

 

Live Cattle remains in a positive trend, but had a modest setback today, -.500 (Feb).  Traders are wary this rally has more risk due to the overbought condition and moderate weather.  Cattle owners are not in a mood to push cattle this week, with the February contract carrying large premiums to the expiring December.  Cash cattle has continued to demand strong bids, reaching $116 on the southern plains.  These strong cash prices have supported the futures.  It was expected that there would be a loss of interest in beef for the post-holiday delivery period, but instead demand has remained strong.  A noteworthy milestone was achieved today as the CME live cattle contract reached a six-month high.  The USDA report today showed Cattle Marketings during Nov at 117% vs estimated 116% (highest in 10 years), Cattle Placements 115% compared to the expected 112%, and Cattle on Feed 99% which was in line with predictions (lowest in 20 years).

 

Hog futures reacted negatively to the report today, falling -1.500 (Feb).  The Hogs & Pigs Report was perceived bearish vs expectations as they came in at 104% of last year compared to the predicted 102%.  Kept for Breeding was at 101% vs 100.3% expected, while Kept for Market was above the expected 102.1% at 104%.  Bearish for April hogs, was the Sept-Nov Pig Crop at 105%.  The bulls will need to heed caution if exports slow with the abundant supply. 

 

The CME grain markets will be closed on Monday in observance of 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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