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Closing Comments


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Closing Comments

Corn closed lower ahead of first notice day in the March contract but off the session lows. May -2 ½ at 3.68 ¼ .  Brazil may have gotten more rain than needed, with 2nd crop plantings getting behind schedule, but nothing that is influencing the market in a meaningful way.  Weekly inspections were announced by the USDA this morning, and they showed corn well above expectations at 1.461 MMT compared to estimates of 1.050 MMT.  Of some concern, Mexico is sending a trade delegation to Brazil next week to discuss sourcing them as an alternative to the US for corn (and other commodities). Mexico has traditionally been the largest buyer of US corn, but is troubled by the US indicating they want to “unilaterally change the established rules of the game”.  Chinese imports of DDG and ethanol were exceptionally small in January, due to the sharp rise in import taxes.  The Commitment of Traders report released Friday showed managed money long 92,216 contracts, up 6,856 and index funds long 280,745, up 11,359.  Look corn to find a footing the next three cents. Keep an eye on 3.75 ¾ May as a trigger for corn to move into higher ranges. 


Soybeans traded mostly lower but finished off its lows with May -2 ¼ at 10.22.  Preliminary acreage estimates are bearish with another 4+ million acres of plantings more than last year expected in the US.  Not helping the cause is slowing Chinese demand (no new sales announcements again this morning) and the rising production estimates for South America, particularly Brazil.  USDA weekly soybean inspections came in below expectations at 704,945 MT vs. 875K MT.  On Friday, the Commitment of Traders reported managed money positions as soybeans long, 154,307 off 16,361, with index funds long 120,356, off 2,509.  May was able to hold above the 200 day moving average. Look for a close above 10.36 May to shift the market back friendly. 


Wheat has not shown a sign of a short-term low yet, and spring weather will be a crucial factor yet to play out. May Chicago closed close to its lows down -9 ¼ at 4.38 ¾.  India is expecting wheat production for 2017/18 to set a new record, at around 96.6 million tonnes.  If so, will the Indian government reinstate import duties?  This will be worth watching and will affect the export market.  USDA weekly wheat inspections were pegged at 537,877 MT compared to expectations of 450K MT.  The Commitment of Traders Report on Friday showed managed money short wheat 27,385 contracts, off 12,662, while index funds were long wheat 85,258, off 4,824.  Look for May wheat to shift friendly again on a close above 4.48. 


Live Cattle is receiving support led by bargain buying of forward months with discounts to cash and a fairly tight supply for March coupled with good beef demand.  Behind the tight March supply is the largest drop in production from the 4th quarter to 1st quarter on record.  Longer term production could be a bearish factor as the USDA is predicting an increase of 2.9% over last year.  But, on the other hand we are slaughtering 10% more cattle currently than last year.  The Cattle on Feed report on Friday afternoon lacked any surprises: On-Feed 101% (est 100.7%), Placements 111% (est 111.1%) and Marketed 110% (est 109.8%).  The Cold Storage reports has beef stocks at record high levels for this time of year. 


Hogs got momentum from short-covering and higher pork wholesale prices.  The USDA is forecasting pork production up in 2017, to a record high, with a 4.9% increase over last year.  April hog futures are currently at large discount to cash, well over double the premium demonstrated by the 5-year average.


Today is “Position Day” for March futures as First Notice Day is tomorrow.


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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