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Closing Comments


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Closing Comments


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Corn made a nice recover after a poor start to finish positive, +2 (Mar).  Things got off to a good start with a sale reported by the USDA to an “unknown” destination of 112,500 mt.  This was followed by a stellar USDA weekly inspection count of 875,562 mt for the week ending Jan. 5th, compared to expectations of 700K.  Corn is following wheat now ironically, and if wheat has legs, corn will not likely be lagging lower. We are probably in consolidation mode until 2017 fundamentals take over.  It will be interesting to see the battle of the acreage war, because if 3-4 million acres go to beans this year, it will be hard to be bearish corn.  Look for corn to continue positive with fund position re-balancing before the report on Thursday. 


Soybeans touched Friday’s low before making a nice correction today, +10 ½ (Mar).  This in spite of an overall positive South American weather outlook.  Bolstering the soybean cause today was the USDA weekly inspections, announced at 1.457 MMT for the week ending Jan. 5th, vs. the expected 1.25 MMT.  All eyes are focused on the Thursday production report, with expectations for soybean yield to be up over the last report and stockpiles significantly higher than last year at this time.  If the acres swing toward beans in 2017, the odds go up that we come back to earth in the markets.  Soybeans did not have a new sale announcement this morning, as it has been a very dry spell going back until before Christmas.  Look for the next short-term resistance level at 10.07 with support around the 9.84 level. 


Wheat has taken the pole position, with the other grains looking for direction from its positive chart posture.  Much of the strength seems to originate from short-covering and index fund re-balancing this week, with Chicago +4, KC +5 and MN +6.  The USDA reported a private sale of 120K mt of HRW wheat sold to an “unknown” destination.  Last year’s wheat acres planted were the lowest since 1970.  If a couple more million acres are shaved off again this year, we will be looking at the lowest planted acres since the 1890’s.  This combined with a short fund position could give us some fireworks.  There is also a potential demand story developing in India to watch.  On the weather front, a band of heavy rains developing for later this week and early next week could eliminate much of the moisture deficits across the driest areas of the Midwest.  Keep an eye on KC if it can climb up above 4.75.


Live Cattle showed weakness early but finished strong, +1.700 (Feb).  Most would agree that factors are trending bearish.  Wholesale beef values fell on Friday, and are expected to influence cash cattle prices later in the week.  Retailer buying has slowed after the holidays and demand may have been hurt in the Southeast and East where they got a dose of winter precipitation.  The market is overbought and keep an eye out for a test of support on the horizon.  In Argentina, it was reported beef production declined 2.67 million tonnes, but will show positive growth in 2017 due to more favorable policies put forth by President Macri after taking office in December of 2015.  The policies have encouraged growers to cut back on slaughter to increase herd size so they can capitalize on the elimination of export taxes and other restrictions.


Hogs are showing a bull flag on the charts with a current modest setback, -.225 (Feb).  Some traders believe that the recent cash rally supporting futures, may run out of steam soon.  However, packer margins in the Midwest as well as more limited supplies are providing support.  The pork cut-out price has been affected by the decline in ham buying by supermarkets after the holidays.  Investors seem to be focused on technical selling and profit taking. 


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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