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Closing Comments

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Closing Comments

Corn could not generate any excitement going into the weekend, as May futures traded both sides of unchanged before settling slightly positive, +1 ¼ , at 3.80 ¾.  Brazilian corn exports are largely behind last year with only 487K MT exported in February, compared to the super-sized February last year of 5.4 MMT.  To put in a longer-term perspective, it was the 2nd lowest February in nine years.  However, the 2nd crop safrinha corn could change that story in a hurry if the June-July crop is as large as currently predicted.  Informa came out with their most recent numbers, and they showed an increase in estimated Brazilian corn crop of 2 MMT, from 89.0 to 91.0.  This is significantly higher than other predictions, and exceedingly above last year’s crop of 66.7 MMT.  Informa’s view of Argentine corn stayed the same and is more in line with the USDA.

 

Soybeans traded on bearish news for the majority of the session; however a late comeback pushed them up into positive territory, + ¼, at 10.37 ½ (May).  In Brazil, logistics with moving crop has proven to be a temporary challenge, affecting up to 600K MT (11 vessels).  In Mato Grosso, one of the major roads used to transport grain to northern ports has been impacted by rains and wet conditions.  However, it is not viewed to be a major stumbling block when one considers that Brazil exported 3.5 MMT in February, well above last year’s 2.0 MMT.  Mato Grosso’s IMEA estimates the state’s harvest is 78.4% complete compared to 65.9% last year at this time.  Informa increased their projections of the Brazilian soybean crop to 108 MMT from the previous 106.5 MMT.  This exceeds the USDA and CONAB which came in at 104 MMT and 105.6 MMT respectively.  To put this in perspective, last year’s crop ended up tallying 95.4 MMT.  Informa’s estimate of Argentine soybeans is unchanged and more in line with the USDA.

 

Wheat had mixed results today with the soft red winter version finishing + ¾ at 4.53 ½.  Kansas City and Minneapolis followed at +1 ½ and -6 respectively.   Weather is a closely watched factor for wheat this time of year, as winterkill continues to be a concern with variable temperatures causing early emergence from dormancy and then dipping back below freezing.  The central and western plains do not have any rain in the 7-day forecast.  The Russian Ag Minister is looking for special permission to export up to 500K MT out of state reserves in order to free up some of their space ahead of another great yield.  In France, the crop is also looking stellar, as the most recent ratings show conditions at 93% good to excellent.  The Dollar is trending lower today, and coupled with a reflation mentality could support wheat on breaks.

 

Live Cattle saw technical correction of its overbought condition with pre-established sell orders and technical selling, -.175 (April).  Losses were blunted by strong wholesale beef demand and futures’ discounts to this week’s cash prices.  Short-term cash fundamentals are a positive, but traders are also focusing on the potential spike in production expected in the 2nd quarter.   It has been reported that packer margins were up over $20/head today. 

 

Hogs are continuing to churn out production, and this will continue to provide pressure coming into spring.  The April contract was down notably on sell stops and declining wholesale pork and belly prices, -1.525, with June following suit, -1.350.  Long-term fundamentals are tending bearish.  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 from the 2017 Commodity Classic in San Antonio, TX – There is cautious optimism as well as trepidation being expressed by the American farmer.  Rural America may have put Trump in office, but it remains to be seen how well rural America will be represented.  Tough talk from the White House on trade has left some wondering when we will have the first bilateral trade agreement, as Trump prefers bilateral agreements with single nations rather than multi-nation agreements.  About one-third of farmer income is based on exports.  It is also essential that a Farm Bill is inked in the near future. 

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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