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Closing Comments


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Closing Comments

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Corn traded both sides of positive today, but failed at the finish, – ½ (Mar).  Yesterday’s breakout to the highest level since Oct. 28th was driven in part by the waves of rain that have flooded both soybean and corn areas of Argentina.  It was estimated by a major crop advisor in South America that corn could be down as much as 2.5 million tonnes.  Additionally, managed funds bought 19,805 contracts and they are still short 76,564.  Once their positions are re-balanced, who will be willing to buy corn?  Will the market run out of gas, considering the huge ending stocks pegged at 2.355 billion bushels by the USDA?  If exports have their say, the answer will be a negative, as U.S. corn shipments year-to-date are at a lofty 18.83 MMT compared to last year at this time of 10.64 MMT.  And, ethanol is in good shape with production strong and estimates of profitability at $.05-.10/gallon net of costs.  Any reductions in corn planted acreage, crop issues, etc., could tighten things up later in the year.


Soybeans built on yesterday’s large gains, reaching a new high before settling down to +5 ¾ (Mar).  The Argentina weather situation is gaining traction, even though it does not seem as severe as years past.  But, headlines and pictures rule the day in this social media news environment.  Soymeal has also played a central role in leading the rally, up over $35 in the last three days.  For all the talk about Argentina, it is easy to forget that the rest of South America is doing well enough to still push production to an estimated 2-3 MMT above last year, as Brazil has seen near ideal conditions and Uruguay and Paraguay are right with them.  What direction will we go from here?


Wheat was mixed today, as Minneapolis regained a good chunk of what was lost yesterday, +6 ¼ (Mar).  Chicago was down -2 ½ while KC had a small gain, + ¼ (Mar).  Wheat is facing a similar scenario to corn, as managed money has been buying to balance their large short position.  When will it be at a manageable level and buying will hit a speed bump?  As was demonstrated by Minneapolis March wheat recently, futures shed 25 cents after getting as high as 5.90.  On the world stage, Russia’s large crop will have an effect on the world market.  And, they continue to dominate the conversation in northern Africa, with Egypt purchasing 235K tonnes of wheat, three cargos from Russia and one from Romania.  Egypt is the world’s largest wheat importer, and it will be important this year for the U.S. to be included in the discussion for some of these tenders.  Egypt has imported 3.41 million tonnes for the year, which is up 7.1% over last year.  The market is still digesting the news of the significant reduction of U.S. planted acres, and the impact in 2017.


April Live Cattle is coming off its highest close since March 18th, and futures gained again today in the front month, +.700 (Feb).  Traders are expecting favorable cash prices this week, as indicated by the follow through buying.  Analysts are looking for 20K less cattle for sale and tighter supplies ahead.  The Wednesday Fed Cattle Exchange continues to be the barometer, with last week prices at $119 per cwt.  The market appears to be continuing its steady, although volatile uptrend for now.


April Hogs had their highest close since July yesterday, as the market has remained in a positive trend, despite plenteous supplies.  Today, the Dollar was back to its winning ways, which provided some weakness to futures, -.600 (Feb).  A large slaughter is predicted for Saturday of 280K head, helping to make up for the holiday shortened 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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