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Closing Comments

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Closing Comments

Corn closed on its session highs, just below 3.71 resistance +2 ¼ (Mar). The EIA released a report reflecting that ethanol production for the week ending 2/3/17 declined slightly (from 1.061 million bpd to 1.055 million bpd) but continues to run stronger than the USDA’s 2016/17 corn for ethanol demand estimate implies. Corn for ethanol usage for just the first 5 months of the marketing year already fully accounts for the USDA’s current estimate of increased usage for the entire year. Due to an anti-dumping move on distiller’s grain, China’s corn consumption forecast rose by 500,000 tonnes from January’s estimate, and there are reports that the funds bought 2,400 contracts of corn. USDA report estimation for 2016/17 800,000 – 1,100,000 for tomorrow’s exports. USDA supply/demand report out tomorrow has the trade expecting a down-tick in ending stocks from 2.355 bln in Jan to 2.342 this month. Still plentiful supplies, but an indication that demand is strong. Technically the March contract is bumping against the 3.71 resistance level again – but was able to close for the second time above the 200 day moving average – the first closes above that moving average in the March contract since June 29. If March can find follow through strength, look for upside targets of 3.74, 3.78 and 3.89.

 

Soybeans traded at a 12-day high throughout the session closing +16 (Mar). Support of the positive gains is the expectation of continued demand for U.S. supplies before South America’s new crop arrives on the global markets. In purchasing news, the funds have bought 7,000 contracts of soybeans, 4,000 contracts of soy oil and 2,700 contracts of soymeal. USDA report estimation for 2016/17 500,000 – 800,000 for tomorrow’s export sales. Trade expects another drop in ending stocks for soybeans in tomorrow’s USDA report from January’s 420 mln to an average estimate of 409 mln.

 

Wheat, like other grains had a positive day with Chicago closing +1 ¾ (Mar). This morning, the funds bought 1,200 contracts of wheat and Tunisia purchased around 10,000 tonnes of durum wheat that can be sourced from optional origins. In other world news, India has bought more than 5 million tonnes of wheat since mid-2016, which is their largest in over a decade. Buying is expected to continue; however, it will not be more than 200,000 to 300,000 tonnes. USDA report estimation for 2016/17 300,000 – 500,000 for tomorrow’s export sales. Estimates are for a small drop in the large wheat ending stocks tomorrow. From 1.186 bln in Jan to 1.178 this month.

 

Live Cattle futures sagged a bit today closing -1.750 (Apr). The cash price expectations for this week lent downside market support to the February contract. The March feeder cattle contract closed down -1.925 (Mar). Profit taking and CME live cattle selling are the expected causes of the loss.

 

Hogs continued to climb higher for a third consecutive day in the Feb contract but lost ground in April closing -0.450 (Apr). Feb marked a new contract high for the month at 73.450. The continued positive gains are supported by Tuesday’s firmer cash price and whole pork prices.

 

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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