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Closing Comments


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Closing Comments

March Corn, poked its head up through the 200-day moving average after a turnaround yesterday, but was unable to sustain momentum, finishing – ¾.  Additionally, corn has found difficulty pushing through the $4 level for new crop. This is due in large part to farmers still owning the lion’s share of the crop.  What will cause corn to move from the farmer to market?  There are a couple of factors to consider.  The first is dictated by cash needs.  But, more importantly, is basis – if basis gets hot for a period of time, corn will start to move.  Warmer weather will also help the cause, as hauling will be less demanding.  There were two significant sales announced this morning, 140k MT to unknown and 110k MT to Japan. This is the third week in a row that U.S. export sales have exceeded 1 MMT, as the USDA announced weekly export sales at the upper end of expectations. From a global perspective, Brazil exported just 1.5 MMT of corn in January, down sharply from 4.4 MMT this time last year.  Look for front month corn to fight resistance in the 3.70-3.75 area, as the stochastics are preparing to cross over.


Soybeans, similar to corn, traded both positive and negative before settling + ½ (Mar).  Soybeans are in need of a steady diet of positive news to offset the positive weather premium for South America.  Most of the 2016 soybean crop has changed ownership from the farmer to the end-user/consumer, while a good portion of corn is still in the bin.  The former being a driving reason behind why soybeans have been able to maintain prices over $10.  The USDA Crush report showed December lower than expected and below November levels, while oil and meal stocks increased.  In export sales, the USDA announced 624K tonnes, right in line with market estimates of 500-800K tonnes.  Worldwide, Brazil’s 2017 soybean exports of 912k MT are up considerably from last year’s 394k MT.  Look for front month support around 10.17 and upside resistance in the 10.40-10.50 area. 


Wheat lead the grains today with March futures + ¾ Chicago, +3 KC, and +5 ½  Minneapolis. Minneapolis was coming off a seven cent gain overnight, as the higher quality wheat has been the leader of late.  The USDA announced export sales were just above expectations at 451K tonnes compared to the expected 250-450K tonnes, and noticeably higher than last year’s same week.  The funds hold a considerable large short position in Chicago; the big question is if they will continue to add to it as they have over the last two trading sessions. If trade can sustain the gains over the balance of this week, Chicago wheat could attain its highest weekly close since May 2016.


April Live Cattle futures were able to reverse direction, seeking to fill the gap on the chart created over the weekend, +1.775.  April Feeders also expressed optimism, +1.875.  The 2017 Cattle Industry Convention is taking place in Nashville, TN, this week, with trade and Washington policies taking center stage.  Much of the talk will also center around prices, according to industry analysts.  The good news is that prices are much better this year than last, with the late October rebound in calf prices and the fed cattle market.  Economists are predicting a better year in 2017.  It is estimated feed yards are making $250/head this week.  The Fed Cattle Report showed an increase of 2-3% in current herd size, so supplies are ample to support demand at this time.  The USDA reported exports to be down slightly from last week, with about half of the sales headed to Japan.


Hog futures were up in the front month boosted by favorable prices in the Midwest cash markets, as well as up modestly in the deferred, with April +.475.  The deferred months have been feeling pressure from expectations of lower prices later in the year.  Bacon lovers are somewhat concerned as Cold Storage showed the lowest levels of frozen pork bellies since 1957, and bacon prices have increased about $.50/lb in the last couple of months.  Hog inventory overall is growing, and weekly export sales were down significantly from last week – the main destinations being Mexico, Japan and South Korea.


In Other news, President Trump’s cabinet pick for Agriculture Secretary, Sonny Perdue, is scheduled for Senate confirmation hearings in mid to late February.  He has secured the support of his predecessor from the Obama Administration, Former Secretary Vilsack, who feels he is well-equipped to do the job.

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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