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Closing Comments


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Closing Comments

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Corn, decided it would be nice to end the year on a positive note, +2 ¼ (Mar).  Corn has been chopping sideways (with big demand balancing big supplies), resisting the pull lower from soybeans.  USDA corn export sales announced this morning were right in line with expectations, weighing in at 958,600 mt vs. the estimated 750K-1.2 mmt.  There are several demand factors that are rising to prominence including higher than expected livestock supply, strong exports, and great ethanol margins.  In the calendar spreads, March continues to lead price vs. deferred months, a positive sign for the market.  Key support areas to watch for March corn are at 3.48 and 3.46.


In Soybeans, the bears won today’s final round in a wild finish, with South American weather uncertainty and a declining dollar unable to wield influence, -8 ¾ (Mar).  In export sales, the USDA reported 974,100 mt compared to the expected 1.0-1.5 mmt.  This is the first time in recent memory of underperforming soybean exports, but the holidays have contributed a certain amount of volatility to the week.  On that note, no new export sales were reported this morning by the USDA.  March soybean direction will be decided between a break-out above 10.28 or a drop below 9.97.


Wheat, finished 2016 on a positive note, buoyed by strong export numbers and re-balancing of short positions with Chicago +3 ¼, KC +3 ¼, Minneapolis +2 ½ (Mar).   Wheat funds have been extremely short and demand from traders is picking up.  The USDA reported 568,100 mt in export sales vs. the expected 200K-500K mt.  Is wheat ready to make a recovery, based on its cheap and oversold condition? Keep an eye on support levels around 4.02 ¾ and 4.00 ½ in Chicago.  A weekly close next week above 4.26 will signal higher to come.


Live Cattle, which are in an over-bought condition, succumbed to weakness today (after a great start) with a large move and close to the downside, -1.900 (Feb).  Will this be the beginning of a new trend to new lows?  The action early next week will help to determine its fate, as strong demand and tight supplies have helped provide support in December and through the holidays.  Cash sales remained stellar, as offers were more in the $118-121 range compared to $114-116 last week.  And, export numbers have continued to be solid in spite of the strengthening Dollar (index is at a 15-year high).  Trade below today’s low will signal the possible beginning of a break in the cattle futures.


Hogs, while having a stellar December, could find that large supplies will weigh down the market in 2017.  But, unlike its cattle counterpart, hog futures crossed the finish line with a flourish, +1.500 (Feb).  It will be critical for exports to continue to show growth, and short-term the trend is positive. Positive action is also 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 animals that are expected to come to market between Dec and May.  Traders may be advised to proceed with caution as there will likely be volatility ahead.  Next week’s February target will be a weekly gap at 67.150.


The CBOT will be closed Saturday through the New Year’s holiday, and reopening on Monday at 7pm CT.  


Happy New Year’s and Safe Travels to All!

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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