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Closing Comments


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Closing Comments

Corn was not able to repel the negative pull of soybeans today, -2 ½ at 3.79 ½ (May).  Informa did not help the cause, as they announced numbers today showing 2016/17 Brazil corn production estimated at 91.0 MMT, up a full 2 million over the previous outlook.  USDA weekly export sales announced today were at the extreme bottom end of expectations at 692K MT, compared to the expected range of 700-900K MT.  Total sales are still up 57% over last year, but the pace has slowed significantly and may have a hard time keeping up, as sales last year were strong through mid-June.  The corn/bean ratio is an indicator to watch.  It is calculated by simply taking November soybean futures divided by December corn futures.  The balance is considered in “equilibrium” if 2.5:1.  It is used as a gauge to predict if acres will swap (but farmers will still plant what they want to if they can make a dollar).  This year it is likely that the ratio will stay similar through planting at around 2.55:1.  This will be monitored leading into the March 31st report. 


Soybeans plunged sharply today, after bio-diesel “news” yesterday proved to be unsubstantiated and fund flows started to taper off, -14 ½ at 10.37 ¼ (May).  The Renewable Fuels Association said they had heard from the White House that they planned to change the point of obligation regarding blending fuels, with a shift from a blender’s credit to a producer’s credit.  While the White House denied the report, there is still speculation brewing that a change may be in the works.  Informa announced their estimate of Brazil’s 2016/17 crop production forecast at 108 MMT, up 1.5 MMT over the most recent outlook.  The news from South America seems to only get better and better, and only time will tell if the yield projections bear out the speculation.  The USDA announced export sales within expectations of 300-500K MT at 428K MT.  However, sales appeared better than they actually were, as last week’s soybean sales were revised lower.  Also, there were no new crop sales this week, as the market was expecting 200K MT.  To give an idea where we stand, soybean sales will need to average about 6.3 million bushels/week through the end of the marketing year in order to hit the target, which would be the highest average in the last seven years for which there was not a South American crop problem.


Wheat once again played “follow the leader”, as they could not muster a story of their own – down across the complex: Chicago -4 ¼, Kansas City -7 and Minneapolis -8 ½.  USDA weekly export sales were not able to provide a spark as they were the lowest in six weeks, rounding out the bottom of market expectations at 353K MT compared to estimations of 300-500K MT.   The US Dollar has once again rallied to highs not seen since early January, which is never a help to the export market.  Weather will play a factor, and it should be noted that variable temperatures are not a plus for winter wheat, as this can result in damage to crops that have progressed well ahead of schedule due to unseasonably warm conditions.  Also Russia, the world’s largest wheat exporter, is expecting a solid crop of 107 MMT, and with a stockpile to draw from last season as well for their export offerings. 


Live Cattle were influenced in today’s trading session by profit-taking and the idea circulating that wholesale beef prices may be reaching their peak.  April cattle futures were down, -1.425 at 116.150, while feeders also plummeted, -1.825.  Not all news is negative though, as cattle feeding margins have climbed to over $300/head.  This is the 14th straight week of feed yard profits. 


April hogs went higher earlier today based on technical buying and Wednesday’s cash price turnaround, according to traders.  They ended up finishing slightly negative, -.150 at 68.275.  Packers have still been experiencing good margins and have continued to raise cash bids to keep the flow of hogs moving.  Hog demand will be offset by Lent and increased by the start of grilling season over the next few weeks.


In Other news, the National Cattleman’s Association and other groups are praising the choice of Montana Rep. Ryan Zinke as Interior Secretary.  He is viewed as common sense on land and conservation.

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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