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Closing Comments


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Closing Comments

Corn continued to regain some of the ground it lost last week, +1 ¾ (May).  Corn received mixed news in exports, as South Korea put in an order for 55K MT (likely US) while the USDA also reported a cancellation of 136K MT of optional origin corn sales to South Korea.  What will the USDA Ag Forum offer up for acreage estimates for corn?  Last week’s USDA baseline estimate pegged acreage at 90.0 million acres, while analysts average estimates are around 90.8 million acres.  If true, ending stocks would be in the neighborhood of 2.003 billion bushels compared to 2.32 billion bushels this season. May close in resistance is at 3.80’4 and 3.82 with close in support at 3.69’6 and 3.65’4.


May Soybeans were down again for the fourth consecutive session, -3 ¾.  The markets are hungry for news.  The USDA should offer up something to chew on this week, as they will release a new 2017 planted acreage estimate.  This should be a better indicator of producer intentions than recent 10-year history, although definitive numbers will not be known until near March 31st.  A Bloomberg survey of industry experts showed an average estimate of 88.3 million acres, ranging from 86.5-92.5.  There are some areas of South America that are too wet, but that does not seem to be enough to stem the tidal wave of predicted crop yield bearing down.  Brazil corn crop is estimated by the weekly roundup at 87-88 MMT vs USDA estimate of 86.5 MMT, while Argentina is spot on pace with expectations at 36.5 MMT.  Long liquidation selling is the trend, with close in resistance at 10.45, 10.12’6 and 10.08’6 next downside support (May).


Wheat led the grains today, as they were up across the board with Chicago +6 ¼ , Kansas City +5 ¾ , and Minneapolis +3 ¼ (May).  Wheat is under a bigger influence by weather than normal, with a backdrop of lower acres.  Last week’s USDA baseline projection had wheat acres at 48.5 million.  However, a Bloomberg survey showed analysts with a different opinion, as they pegged acres on average at 46.45 million, with a range of 41.3-52 million acres.  Either way should result in lower ending stocks than this season.  India is considering bringing back its import duty on wheat, to help alleviate the burden of their expected record crop of 96.6 MMT.  And, Egypt is back in the hunt for various grades of wheat, tendering for 120K MT.  Look for 4.41’4 as close in support and  4.60’4 as close in resistance (May).


Live Cattle got a boost from cash markets, finishing +.775 (April).   Cash cattle traded at $124 in TX and NE.  Also providing support were tighter supplies in the Plains and improvement in packer demand as a result of a boost in beef prices.  Is the market still somewhat under-valued? Increasing beef prices and a large discount of futures to cash are indicating “yes”.   The Cattle on Feed report will be out on Friday with estimates of on-feed at 100.7%, placements at 111.1%, and marketings at 109.8%.


April Hogs were sharply lower,  on weakness in cash bellies (down over $10) and hefty supplies, -2.600.  Bearish technical developments also played a role, as hogs gapped lower at the open and continued to a new low not seen since Jan 26th.  Pork cut-out values were down $1.48.  Warm weather is boosting weights and colder weather coming may provide some support.  In exports, China and Mexico will continue to play a prominent role.  Two topics to watch include: China buying more pork due to their bird flu issues, and the possibility of slowing trade with Mexico (who has been a big buyer of US pork in recent months).  Watch tomorrow’s action for follow through on recent break.


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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