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Closing Comments

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Closing Comments

Corn has been trading bullish based on fund buying, more so than changes in fundamentals, as open interest is up 53K contracts after yesterday’s rally.  However, this did not continue today as weakness in the market from beans and wheat were the trend of the day, as March corn finished -5 ¼.  The USDA released its weekly export sales report, and corn came in under expectations, at 784 MT compared to the expected 900K-1.1 MMT.  Japan sales made up the lion’s share, while Mexico disappointed with only 69 tonnes.  Of greater concern in the bigger picture, is Mexico looking to Argentina as a possible source for corn, due to concerns over NAFTA re-negotiations and the ongoing trade war with the Trump Administration.  China is also getting in on Japanese corn demand, as they had their first sale in ten years of 25-50K MT.  Delayed corn shipments from the US have pushed Japan to consider their emergency stockpiles, as corn inventories are at very low levels. 

 

Soybeans have little fundamental reason to extend gains, succumbing to bearish forces today,  –17 ½,   (Mar).  Open interest leading into the session was at a respectable level at 9K, but not anywhere near corn (53K).  Soybeans appeared to have a breakout export report, with 890 MT announced, well above market expectations of 500-750 MT.  However, that number does not take into account any readjustment from the USDA’s revised sales last week from 537 MT initially to 384 MT.  If the revision is figured in, sales this week were still the highest in the last four weeks.  Sales to China are experiencing seasonal decline, as they only accounted for 99K MT, which included the cancellation of 81K MT previously reported.  Helping the export cause is the strong Brazilian real, which has been trading at new highs.  However, this was not enough to overcome favorable South American weather and yield reports.  Will beans be able to test resistance at 10.80 before the end of the month?

 

Wheat was down significantly across the complex today, led by a deep break by MN, with Chicago -7, Kansas City -11 ¼, and Minneapolis -18.  The Chicago contract failed to hold support above the high of its 20-day Bollinger range and also fell below the 200 day moving average, as traders focused on profit-taking.  Wheat exports provided some positive news today, as the USDA announced weekly export sales above expectations at 569K MT compared to estimates of 300-500K MT, the 2nd highest in seven weeks. 

 

Live Cattle experienced sideways action finding support in short-covering and futures’ discounts to expected cash prices this week, before finishing -.250 (April).  The Fed Cattle Exchange yesterday produced prices in the $118.50-119.25 ranged, which was up from last week’s $117.50.  Putting a damper on the FCE sales was the lack of sales from Nebraska, where prices were lower last week due to animals carrying mud.  It was reported that some processors cut their production due to poor margins and uninspiring beef demand.  The USDA Slaughter data today will help provide some clarity.

 

April Hog futures peaked mid-morning before heading lower, -.950 (April).  Cash and wholesale pork prices have been trending up.  Packers have been motivated to raise cash bids due to short supplies and solid overall pork demand.    It does not appear that the protests for “Day Without Immigrants” has resulted in plants reducing hours or shifts.  Will futures finally roll over to the downside as has been expected from the near term top?

 

In Other news, China is reporting that their government will shell out almost $250B to boost land quality.  They expect to add 66 million acres of farmland by 2020.  In US news, President Trump announced the appointment of former NLRB member, R. Alexander Acosta, as his new Labor Secretary nominee.

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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