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Closing Comments


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Closing Comments

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Corn, trended positive for the 4th consecutive day, +4 (Mar).  In addition to soybeans’ strong action, factors providing bullish support include better than expected ethanol demand, a large fund net short position and anticipation of strong index fund buying.  Will this provide the impetus for a further rally in the face of the huge stockpile of supplies?  Corn sales are up sharply over this time last year, as they now equal 62% of the USDA forecast compared to the five-year average of 57%.  Keep an eye on March corn support at 352 ¼ with resistance targets near 361 ½ and 367 ¼.  


Soybeans were able to make a big rebound from the lack of new buying interest yesterday (Turnaround Tuesday effect in a short week?), finding support on concerns in Argentina of flooding on up to 1.7 million unplanted growing acres, +20 ¼ (Mar).  There were no new sales announcements this morning, as the most recent was inked before Christmas on Dec. 21st.  The USDA crush report released yesterday afternoon indicated November was at 170.7 million bushels compared to 176.0 in October, in line with expectations.  Oil stocks were slightly higher than expected at 1.777 billion lbs, while meal stocks were higher by 27K to 362 TMT.  Look for support at 995 ¼ and resistance in the 10.15-10.20 area, with short-term indicators showing oversold.


Wheat, coming off an extremely poor finish yesterday, rallied today with the other grains: Chicago +12, KC +12 ½, and Minneapolis +5 ½ (Mar).  Helping the cause were the weak Dollar and the USDA conditions report yesterday afternoon, which showed winter wheat ratings lower across the board in most states, especially Oklahoma.  Keep an eye on winter wheat conditions to continue to play an important role to giving market direction in the days and weeks ahead. Ukraine wheat production is reported to be at 23.5 million tonnes according to UkrAgroConsult, compared to the USDA estimate of 27 million tonnes.  Accounting for this discrepancy is the loss of winter wheat acreage due to the lack of sprouting in planted areas.  Look for support in the 4.00 -4.02 ½ zone, as we may not see significant changes before the USDA report on the 12th


Live Cattle futures were able to regain some of yesterday’s losses aided by fund short-covering and positioning in anticipation of this week’s cash prices, +.800 (Feb).  Cattle seems to be under siege by bearish forces, both technically and fundamentally.  On the technical side, the reversal and follow-through technical selling confirmed a near-term top.  Friday’s technical reversal was confirmed by the move yesterday below Friday’s lows.  Fundamentally, weather is also on the side of the bears as the southern plains are predicted to enjoy warmer and drier conditions than normal in the coming days. Also, there are nearly 23,000 more cattle for sale this week than last week. Typically, beef demand slows after the 1st of the year, as consumers focus on paying off debts incurred from the holidays.  Look to the online cattle auction as an important barometer to price direction later in the week.


Hogs had a great run to end 2016, but showed signs of a technical top yesterday, with a large move to the downside. However, hog futures regained some of the losses today, +1.100 (Feb).  According to traders Tuesday’s better cash prices and short covering in the markets helped to boost trade.  (USDA pork cut-out values declined from $81.13 to $80.11 on Friday, with diminished post-holiday demand.)  As with the other commodities, keep an eye on the Dollar, as exports could be negatively affected if the Dollar continues to show strength.


In Other news of interest, the USDA reported that at least 1/3 of principal farm operators are 65 years or older, with the average age of the American farmer at 58.  Farmland owners are expected to  transfer 93 million acres in the next 5 years, which equates to about 10% of total U.S. farm ground. 


With the New Year’s Holiday, all regular USDA weekly reports will be delayed one day from their customary release this week.

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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