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Closing Comments


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Closing Comments

The Corn chart looks more positive than beans technically, but still was not able to overcome bearish mindsets with a lack of news, -2 ½ at 3.76 (May).  Of some growing concern, a second case of bird flu was discovered at a Wisconsin turkey farm that was a different strain than the H7 virus found recently at a TN facility.  It was announced yesterday that South Korea bought a total of 60K MT of US corn for May delivery.  And, this morning the USDA reported another private sale of 120K MT of corn to “unknown” destination for 2016/17.  FC Stone is estimating Brazil’s first crop corn production to eclipse the original estimate by 2.2 MMT while the second season crop may be down slightly.  Stateside, Texas is ahead of schedule with their corn planting, as they are showing 15% complete compared to the long-term average of 9%.  This Thursday will feature the USDA crop report, and analysts are predicting corn ending stockpiles at 2.31 billion bushels, down slightly from last month’s 2.32.


Soybeans fell sharply below the 100-day moving average on profit-taking ahead of the crop report, -12 at 10.25 ¼ (May).    AgRural was the latest to up their Brazilian soybean production estimate, from 105.4 MMT to 107 MMT.  And, FC Stone also increased their number to 109.1 MMT from last month’s 104.1 estimate.  It appears that Brazil’s most recent logistics issue is cleared up, as the Brazilian army reported they have been able to re-open the critical passage to the north out of Mato Grosso that is utilized to transport soybeans to northern ports.  The US was not able to capitalize on this short-term disruption.  A factor that could apply selling pressure to soybeans, is the fact that Brazilian farmers are 15-18% undersold compared to the 5-year average.  Once that selling happens, you will see more of an impact on the board.  The Thursday USDA crop report is expected to show soybean ending stockpiles down slightly from the last report at 418 million bushels compared to 420 million bushels.  It will likely take a violation of 10.00 to shift the bias to negative, in spite of the contrary fundamentals.


Wheat was not able to resist the negative pull of beans with little fresh news leading into the Thursday report, with Chicago –2 (May), Kansas City –1 ½ and Minneapolis -2 ¼.  On the world stage, Egypt rejected 3 cargos of wheat from Russia and Argentina due to quality issues.  Regarding winterkill concerns, Russia says their crop is in great condition with only 3-5% showing poor conditions.  An official expressed that he does not see winterkill being a big issue for them.  If they stay on track with their current pace, they should produce another record level wheat crop.   Jordan was in for 50K MT of optional origin wheat, according to cash traders.  Japan decided to skip their weekly tender this week.  Weather has trended somewhat negative here in the US with hard red winter dryness and early planting delays.


Live Cattle found support in short-covering and futures’ discounts to cash price expectations for this week, but still finished down slightly -.200 (April).  This is the first of 5 days that will see rolling of April long positions to June by market funds that track the Standard & Poor’s Goldman Sachs Commodity Index.  Wednesday’s Fed Cattle Exchange will feature 3,400 animals, and will help to give cash price direction for the remainder of the week.  Supplies in the north remain fairly tight, while they have loosened up in the southern plains.  Ironically the bird flu story could be friendly to beef and pork if it gains further traction.


Hogs got a boost from higher cash prices and higher wholesale pork values, with bellies leading the way on a $7.25 bump, +.875 (April).  Positive packer margins and good pork demand have enabled the flow of hogs to continue moving.  Look for the April contract to likely decline in value, while June may see its customary seasonal spike.


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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