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Closing Comments

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Closing Comments

May Corn took out both the 100 and 200-bar moving averages on the way down today, -5 ¼ at 3.67.  The USDA Supply & Demand Report did not do anything to help bearish mindsets as carryout was announced at 2.32 billion bushels compared to the previous estimate of 2.31.  World corn carryout was also up, showing 220.7 MMT vs. expectations of 218.5.  The standout stat was Brazil’s corn production pegged significantly higher at 91.50 MMT, against the predicted 87.7 MMT.  Not to be left out, Argentina also came in above expectations for 2016/17 output at 37.5 MMT compared to estimates of 36.5 MMT.  Feed usage was trimmed back by 50 million bushels while ethanol usage was upped 50 million bushels.  The feed usage does not seem to jive with greater cattle supplies, nonetheless must be considered.  Until we get into a bigger “problem”, rallies are not likely to sustain in the short-term. 

 

Soybeans took the USDA news today the hardest of the grains, -10 ¾ at 10.11 (May).  Beans have already been teetering on the precipice of bearish fundamentals, and they did not get a lifeline from the USDA report.   Soybean carryout in the US was pegged at .435 billion bushels compared to estimates of .416 billion bushels.   On the world stage it was more of the same with carryout estimated at 82.8 MMT compared to previous predictions of 81.4 MMT.  Regarding South America, ideas of record yields were confirmed by the USDA as they estimated Brazilian production at 108 MMT vs. the expected 106 MMT.  Argentina followed suit at 55.5 MMT, as compared to projections of 55.1 MMT.   March 31st will now be the next big event, as planting intentions by growers will be revealed.  With two-thirds of American farmers convinced soybeans are the more profitable choice in 2017 (according to Purdue University’s Ag Barometer survey), the acreage announcement will help plot a course for the coming year.  What will be the consequence of breaking and closing below key support at 10.17 today? 

 

Wheat futures were mixed and the least negatively impacted of the grains, with Chicago -3 , Kansas City -3 ½, and Minneapolis +4 ½ (May).  Wheat was slightly under the USDA predicted carryout at 1.129 billion bushels compared to expectations of 1.13 billion bushels.  However when taking the entire world supply into account, wheat came in over expectations at 249.9 MMT compared to predictions of 248.7 MMT.  And, wheat production is up marginally with larger players, i.e., Russian and Ukraine, right in line with expected, with chatter that the Russian crop may even be understated by 800K MT.  For one, the winterkill concerns there have seemed to abated to some extent.  In the macro picture there is just too much wheat.  Minneapolis wheat experienced gains today based on a reduction in the spring wheat numbers.

 

Live Cattle experienced strong gains early and held on for a solid finish, +.525 (April) .  Cattle were prodded along by good wholesale beef demand and futures’ discounts to cash prices, coupled with technical buying.  Boxed cut-outs were up and weekly export sales were well above the four week average (mostly to Japan).  The USDA S & D report had of a jump of 250 million lbs of beef for last month and exports up 10 million lbs, which in actuality were minor revisions.

 

Hogs traded moderately lower, with pork cut-out values pressuring, -.350 (April).  Weekly exports came in over the prior average, at 18,100 tonnes from 16,900 tonnes (mostly to Japan).  Pork production was down 65 million lbs. with imports also down 40 million pounds.  Exports for 2017 were revised up 4.2%.

 

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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