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Closing Comments

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Closing Comments

Corn had a volatile last day of February yesterday, with rumors surfacing about the possibility of a favorable ethanol edict from the Administration (funds were net buyers of about 20K contracts), that proved to be unconfirmed.  Whether true or false, futures were able to build off the momentum with an even stronger bar today, +8 ¼ (May).  The EIA ethanol weekly report was released today and it showed production unchanged from last week, but 4.8% above last year’s same week.  Worth noting is the fact that production is well above the USDA’s 2016/17 estimates of corn for ethanol usage.  At the current rate, ethanol usage would tally around 5.435 billion bushels compared to the USDA number of 5.350 – this is significant.  Ethanol stock were up again over last week from 952 million gallons to 970 million gallons.  Japan has been an active buyer of late, as they have recently dipped into their emergency corn stockpiles to fill the gaps left from logistics issues with imports.

 

Soybeans have found support from short-term focus on fund buying (new month fund flows) and the idea of higher bio-diesel demand, with a big up-swing, +16 (May).  Reports yesterday suggested that President Trump was prepared to issue an executive order on renewable fuels, but the report was later denied by the White House.  However, soybean futures soared yesterday before returning to more modest level gains by the end of the session.  Today, as with corn, the rally re-started, with May soybeans finishing very strong at 10.51 ¾.  The market has been in need of fresh news and the implication of higher soybean oil usage provided the impetus.  The financial markets were also in an upbeat mood today, with overall optimism resulting from the President’s address to Congress. 

 

May Wheat also rode the optimism of corn and beans with Chicago +13 ¼, Kansas City +13 ¾, and Minneapolis +11 ¼.  Futures received support yesterday from a large Egyptian order which will source from the Black Sea region.  Even though it is not a US sale, it will help diminish supplies from rival exporters and hopefully help allow the US future opportunities this year.  Additionally, India has been stepping up to the plate recently, with purchases from Australia and Russia/Ukraine.  Weather has also come into play again, as there are concerns regarding crop damage due to variable conditions of warmth (causing crop to mature) and then back to cold.  Montana downgraded their crop from 70% good to excellent to 51%.

 

Live Cattle experienced profit-taking which tamed market advances, finishing down slightly at -.350 (April).  Packers are counting on spring grilling to help demand, while Lent usually counters with a 40-day damper on beef sales.  Beef cut-out values have remained solid and cash prices are expected to be strong this week. 

 

Hogs have been able to gain back some of their recent losses, propelled by short-covering and higher wholesale pork prices, mainly resulting from high belly prices.  April futures rounded out the session at 68.425, +.825. 

 

In Other news, investor optimism following President Trump’s address to Congress sent the Dow Jones through the roof – easily eclipsing the 21,000 mark for the first time.  His comments on “massive tax relief” and $1 trillion infrastructure investment were well received, as well as the manner in which the speech was delivered.

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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