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Closing Comments

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Closing Comments

Corn and the rest of the grains are continuing to trade South American weather (which has continued to offer favorable outlooks) with March futures finishing, -1 ¼ (374’2) .  Managed money is long corn contracts, as open interest has surged over the past week, and the overbought condition is playing a factor in addition to weather. The acreage battle between corn and soybeans is the next big market mover, and the question begs – Will this play out as a big swing to beans as some are predicting?  Doane’s Ag Report came out with their acreage estimates for the coming season with corn plantings pegged at 90.6 million acres (94.0M last year) and soybean plantings at 86.7 million acres (83.4M last year).  If this proved true and corn experiences any yield challenges, we could be looking at a different market in 2017.  In exports, the USDA reported a private sale of 229K MT of corn to Japan for delivery in 2017/18.  NAFTA negotiations will also be worth following, as Mexico has been a major importer of US corn.  Keep a watch on March corn to see if it can move into the 3.75-3.90 range, with an eye on 3.87.

 

March Soybeans continued their slide following a day in the red yesterday, -9 ¼ (1045’0).  Time is running out for the bulls, as South American weather is boding well for harvest and the accompanying exports, as China is ramping up sales from Brazil.  Fund buying alone is probably not going to be enough to push the boulder up the hill, as the rally this month has not had the same urgency as January’s.  One factor working in bean’s favor is the strength of the Brazilian Real and the recent weakness of the Dollar, which appears to be helping support the solid US export reports.  The USDA reported a private sale of 142,500 MT of soybeans to Mexico for delivery in 2016/17.  Look for results from the NOPA crush report tomorrow as a direction indicator. 

 

March Wheat experienced a modest setback today following yesterday’s positive action, -2 ¾ Chicago, -1 ½ KC, -2 ½ Minneapolis.  There are a variety of factors playing into wheat’s behavior, as it looks to model its grain siblings’ actions.  Australia is only adding to the burgeoning world stocks, with reports yesterday confirming record level production and exports.  The weather in the US looks to be above normal temps and precipitation over the next several days, which should help development but at the same time could threaten to break dormancy too early in some areas.  India’s drought and Russian winterkill are two influential factors that have yet to be quantified.  And, of course, the US winter wheat acreage plantings dipping to a low level not seen since 1908, has raised a few eyebrows.  The chart action has been constructive – look for 4.66 (Chicago) as a next target area. 

 

Live Cattle bounced back today, as the April contract was up, + 1.475.  Feeder Cattle also received a nice bump, +2.175 (April).  Wednesday’s Fed Cattle Exchange of 4,800 head will help give price direction for the week.  Cash prices are receiving pressure from more animals on the sale block compared to last week, which could be limiting market advances.  The market is susceptible to more selling pressure, as speculators hold a large net long position.  Look for more technical selling and bearish pressure from weather in the days ahead.

 

While Hogs look to be forming a top, with some key supportive factors going negative, it was not yet reflected today, with April futures +1.600.  Tighter pork supplies, particularly pork bellies levels reaching record lows, are helping to support packer margins. 

 

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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