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Closing Comments

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Closing Comments

Corn felt the effects of the favorable South American weather outlook along with trade uncertainty with Mexico and Asia, declining slightly – 1 ¼.  Corn traded over 7 cents lower for the week after experiencing a key reversal on Tuesday.  Open interest is way up, suggesting producer selling.  Today did not feature any new export announcements for corn.  In South America, Brazil is ahead of schedule for soy harvest, which will help get the Safrinha corn (2nd crop) off to a solid start.  Mexico accounts for about 25% of US corn exports, and the recent spat between Presidents is not helping ease concerns.  Look for March corn support around 3.60.

 

Soybeans are sporting a classic bull flag on the charts, finishing basically unchanged after the big rally a couple of weeks ago, – ¼ (Mar).  Meal is also exhibiting a similar chart pattern, and it will be critical for there to be substantial damage to the Argentine crop in order to maintain the high cost of meal, as distiller grains prices are near the lowest levels since July of 2010 and inexpensive feed grain substitutes are abundant.  To further expand on Argentina, the Buenos Aires Grains Exchange put forth their first estimate of the soybean crop at 53.5 MMT, down from 56 last year but not as low as some of the hype insinuated.  Also, about 1.9 million acres were impacted by the flooding, with an estimated 1.1 million acres suffering total losses out of a total 19.5-20 million planted acres.  Which way will beans go? If we can get to 10.63, look for breakout to the topside, otherwise a purge may be coming with managed money overbought.

 

Wheat, coming off a big export report yesterday, could not keep up the momentum today, with Chicago -6 ½ (Mar), KC -6 (Mar), and MN -7 ¼ (Mar).  Analysts will be keeping an eye on Russian weather this weekend, as the stronger upper air cooling system could be damaging to a large area that does not have adequate snow cover (up to 2 million acres).  Russia, and the Black Sea Region, is the world’s largest wheat exporter.  The EU was knocked off last year’s perch at the top due to a decline in French production.  It is important that the US is able to stay competitive and not lose key business in the Gulf area and South Africa, in addition to bidding for opportunities in North Africa and the Middle East.  Keep a watch on support at 422 ¾ and resistance hovering above at 431 ¼.

 

Live Cattle continued its show of weakness today with more consolidation of its overbought condition, as the fear of trade wars looming in the background are continuing to cause uncertainty, -.250 (Apr).  The market is showing signs of vulnerability with high open interest and an overbought condition, in addition to the trade tenor with Canada and Mexico.  The Cattle of Feed Report will be released this afternoon and is sure to set the tone for next week.

 

Hogs saw a correction after a key reversal to the downside yesterday, driven by short covering and technical buying, +1.075 (April).  The pork cut-out value is at its highest since July 26th of last year.  Packers are still experiencing good margins resulting in steady hog flow, according to merchants.  The daily slaughter was estimated at 433,000 hogs and Saturday’s slaughter is estimated at 200,000.  Support is around 65 for the April contract.

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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