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Closing Comments


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Closing Comments

Corn took off to a positive start early this morning, but turned back lower after failing to sustain support above the 200-day moving average, closing at -1 ½ (Mar).  Crude’s weakness today provided a damper over all the grains.  USDA corn inspections were strong once again, coming in above the expected 875K MT with a robust 1.113 MMT.  In Brazil, the second safrinha corn crop is ahead of planting schedule, following the quick soybean harvest due to their ideal conditions.  President Trump’s America First agenda, is continuing to cause concerns in the Ag industry, as the US is heavily dependent on exports to key players, i.e. China and Mexico.   Hopefully, there will be more clarity in the next few weeks with the confirmation of the new Ag Secretary, Sonny Perdue, and further developments with trade policies.  Keep an eye on whether corn can get through the 3.69 area for higher.


Soybeans gave us a Ross hook reversal for higher today but finished the session timidly, +9 (Mar).  Soybeans found support in a bullish USDA inspection announcement (1.635 MMT vs estimate of 1.05 MMT).  The onus continues to be on the weather story, and dryness in Brazil is needed to really spark a big change.  There is still room for this to occur, as we will not really know for sure until the end of the month and into mid-March if the yield is as good as promised.  As of last week, Informa, AgRural and Safras Mercado all raised their estimates for Brazilian soybean production.  And, this Thursday the USDA and Brazil will come out with monthly crop reports.  Soybeans continue to have a way to confound fundamentalists, as prices theoretically should be below $10 based on traditional metrics. 


March Wheat found weakness today in the stronger Dollar and the decline in crude, with Chicago -7 ¾, KC -4 ¾, and Minneapolis -2.  Additionally, rallies have been limited by ample old crop supply.  Wheat had another strong showing on the USDA inspection log, with a healthy 618,235 MT announced vs. expectations of 300K.  The export demand coupled with the lowest wheat acres planted since 1908, are providing a good story for wheat from the US side of the equation.  Will Russia see a meaningful impact from winterkill?  At this point, there is not enough evidence to have a big market impact, but it is definitely a story that will be watched closely.  Brazil recently implemented a government subsidy on wheat increasing their competitive edge in the international wheat market.  Expect wheat to look to corn’s leadership for direction.


Live Cattle traded on both sides of unchanged, on buy stops and technical buying, attempting to fill the chart gap from the last weekend of January, settling “flat” (April).  Weather is providing a component of weakness in the short-term along with a large net long position.  Looking at the trend last week, cattle were down 132 points for the week and cash cattle traded $3 lower than the week before.  Supplies are sufficient, and both packer profits and wholesale beef values are down.  Watch to see if live cattle can close the gap on the chart up to 116.75 that resulted from the end of January sessions.


April Hogs have continued to find support from strong pork belly prices and a positive cash trend, +.975 (April).  It appears to be too early to succumb to the bears, as futures posted a new high not seen since early July of last year.  The market needs to see a slowdown in export demand or drop in belly prices to reverse for lower.  Last week the market was up 195 points after a solid finish on Friday.  


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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