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Closing Comments


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Closing Comments

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Corn rallied nicely yesterday along with the rest of the grains, likely the result of end of the year short covering and possibly mixed weather reports from South America.  Managed funds bought around 6,000 contracts on Tuesday, leaving them at approximately 95,000 net short when trading started today.  However, today was a return to corrective action, with March corn futures -6 ¾.  The ethanol story has continued to be a bright spot, and in that vein it was reported that Elite Octane will be moving forward with plans to construct a second ethanol plant in Atlantic, IA, that will produce 120 million gal/yr and add 49 new jobs to the local economy.  The EIA report was delayed until Thursday this week, and the export sales report will be announced at 7:30am CT Friday. Expect short-term support for March corn at 346 ½ and resistance at 352 ¾ and 355.  


Soybeans gave back some of the big gains from yesterday’s trade which was driven by technical and fund buying, -7 ¾ (Mar).  Tempering optimism is the Dollar, as once again it resumed its sharp ascent up the charts.  The strengthening Dollar is adding weakness to all the grains, as it makes it more difficult for exports to compete in an already competitive arena.   And, South American weather, although not perfect, is still favorable and is not giving any real cause for concern at the present.  Argentina’s biofuels industry group said that 2016 biodiesel production will hit new records, with a 50%+ increase over last year’s levels.  This is due mostly to government policy changes to encourage the use of biodiesel and electric generation in public transportation systems.  Look for March support at 998 ¼ and 990 with key resistance at 1026 ¼.  


In Wheat, was yesterday a one day apparition? The markets were energized yesterday with fund buying, but today returned more to the listless, bearish trade mode we have become accustomed to, with Chicago -8, KC -9 ¼, and Minneapolis -7 ¾.  It is noteworthy that Chicago in particular has a very large short position.  This week has been quiet on the export front with several countries in for smaller quantities of wheat including Jordan, Colombia, Indonesia, Bangladesh, and even the UN (30K mt) for a donation to several African nations. India’s wheat output for this year may improve to 88-89 million tonnes from 86-87 million tonnes due to an increase in planted acreage, according to the director of the National Collateral Management Services.  Keep an eye on a support level at 404 with key resistance at 413 and 419 ¼.


Live Cattle returned to a bullish demeanor, vaulting upward to a new high, +1.375 (Feb), with an assist from short-covering following the recent rise in wholesale beef values.  Prices are expected to be higher in the cash markets this week, and all eyes will be watching the online cattle auction for price direction.  Prices last week were around $115-116, but this week most asking prices are expected to be closer to $120.  There are 24,000 more cattle for sale this week than last week.  A key gauge to monitor will be the size of this week and next week’s slaughter, and also carcass weights, which will give an indication of the position of cattle feeders in the feedlots across the country.  Export numbers have continued to be solid in spite of the strengthening Dollar (index is at a 15-year high). 


Hogs keep churning out positive vibes in the face of a bearish environment, climbing steadily +.350 (Feb).  The action is supported by continued strong packer profits and solid pork demand.  This in spite of the Hogs and Pigs report that was released the end of last week, which showed a significant increase in the number of hogs that are expected to come to market between Dec and May.  Cash prices will likely remain steady the rest of the week.  The average packer margin is $55.45/head, which is up from $47.80 a week ago, according to HedgersEdge.com.  Traders may be advised to proceed with caution as there will likely be volatility ahead.


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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