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Closing Comments


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Closing Comments

Corn was not able to generate positive momentum today, causing one to wonder if the recent USDA confirmation of a case of the H7 bird flu strain at a poultry farm in TN that contracts with Tyson Foods may have weighed on the markets (South Korea moved immediately to ban US poultry imports)?  May futures finished at 3.78 ½, -2 ¼.  On the positive side, USDA weekly corn inspections this morning were a solid 1.444 MMT for the week ending March 2nd, compared to expectations of 1.200 MMT.  South American corn seems to still be in great shape, in spite of a wet weekend in Argentina and Brazil having some logistics issues.  This Wednesday will give us another look at the USDA’s view, but will probably not offer much to change the status quo.  For May corn, look for upside targets at 3.90 and 4.08, with support around 3.67 ¼ (from last week’s low).


Soybeans continued in their broad-range trade, finishing weakly at 10.37 ¼, – ¼ (May).   A story that garnered a lot of press last week and will continue to be worth watching is the Trump Administration reviewing the possibility of a key change to US biofuels policy that could have market and political ramifications.  The USDA released their weekly inspection numbers this morning and they pegged soybeans above the estimated 875K MT at 921,779 MT.  Futures have been trading in a whipsaw fashion with “decision time” approaching on the chart.  Will we break down below the 10.00 level or come out to the topside, where 11.00 would then potentially be in play?  The 10.17 low from February 27th is a short-term risk parameter, and keep an eye on 10.88 resistance as a key directional level.


May Wheat was the grain leader today with Chicago +5.  Kansas City and Minneapolis were +2 ¼ and -5 ¾ respectively.  Wheat has been down of late, but had a nice recovery last week.   This morning there was a show of continued strength as May futures gapped higher at open and broke through the 4.40-4.50 area of resistance. USDA weekly inspection numbers this morning were not as friendly to wheat, as they showed 535,920 MT for the week ending March 2nd vs. ideas of 650K MT. 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. If wheat is able to get more of a story to trade, it may be able to break out to the 5.00-5.15 level.  The overall trend remains up.


Live Cattle futures were in a mode of technical correction for the 4th consecutive session, -.425 (April).  Cash cattle is trading at a $10 premium to futures and the wide basis may provide some support.  Look for a seasonal bump as we move into March, as trade will probably will be in a broad range trade between 111.00-120.00.  It will be important for the market to stay above the risk level of 114.60, as a break below could be significant, with managed money holding a very large long position.


April Hogs have abated and likely will continue to weaken after the poor finish last week (they were down 127 points).  Today, futures were able to eke out a modest gain, +.425.  Like cattle, the market is vulnerable to steep losses with managed money holding a large long position.  Prices have adjusted to lower levels, as some of the variables that powered the rally are running out of gas, i.e. big demand in domestic and exports markets, pork supplies that were under projections, and a short term squeeze in the spot belly market.   Because belly prices are sharply lower, packer margins have followed.  What will the outlook be for belly prices this spring and summer?  Keep an eye on the trade situation, as it will be key for US pork to continue to flow uninterrupted to its demand destinations.


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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