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Closing Comments

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Closing Comments

Corn found a nice batch of sales above the market, while continuing its orderly march up the charts to 374’4, + 5 (Mar).  Yesterday, corn traded 278K contracts.  The USDA report was not a game changer, as there were no big surprises.  Supply side fundamentals are keeping euphoria in check, but the technical indicators are positive, with corn back up well above the 200 day moving average and picking up momentum.  There is not a reason to believe it will not continue this trend into next week.  All the grains received strength from news that President Trump and Xi, from China, had positive dialogue this week, with Trump agreeing to recognize the “One China” policy.  Look for whether new crop corn (Dec) can reach the 4.05-4.20 range.

 

Soybeans were buoyed today by a new private sale of 140K MT to an “unknown” destination, up +8 ½ to 10.59 in the March contract.  Export sales have been fewer and farther between, with the seasonal shift of Chinese buying to Brazil.  South American weather is still the main short-term focus, as all reports continue to tend favorable.  The USDA crop report yesterday did not do much to change the fundamentals, so the markets are looking more to money flow and the charts (which are constructive).  Keep an eye on whether new crop (Nov) can climb up into the 10.40-10.70 area.

 

Wheat is being propelled by short-covering on high volumes as the entire complex trended positive – Chicago +5 ½, KC +9 ¼, MN +2 ¼.  Wheat got a great report yesterday from the USDA, both nationally and on the global stage.  US exports were positive and carryout was trimmed back here and abroad, mostly because of India and Kazakhstan.  Rally potential may still be limited by the large supplies, but it is good to get some bullish news in this sector, with Chicago seeing its highest market since late June.  Yield potential has been taken off due to weather, and Kansas needs rain in the next 30 days.  Look for focus to continue shifting to new crop, as most farmers have sold 85%+ of their old crop. 

 

Live Cattle were helped initially by short-covering and futures’ discounts to cash prices, but finished the session down sharply, -1.675 (April).  Two factors that dampened the trade were weaker wholesale beef values and increased supplies, with wholesale beef prices declining by 72 cents per cwt compared to earlier in the week.  Wintry weather in the Northeast over the next several days may also hurt demand, with limited transportation of employees and livestock to packing facilities.  Keep an eye on the bearish technical short-term posture along with the overbought condition to see if there may be more downside in cash and futures.

 

Hogs had a reversal Wednesday and continued selling Thursday, which would seem to indicate a near-top may be in place.  However, today April futures rallied modestly from yesterday’s poor performance, +.300.  Upward trending cash prices are helping to provide support.  There is a potential shortfall in packer supplies in some areas, due to the fact that most farmers are current in their shipments of hogs to market.  With a Relative Strength Indicator of 81, indications from a technical standpoint show hogs to be overbought.  Watch for a potential downtrend in the days to come.

 

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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