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Closing Comments

Corn The markets were not able to shake off yesterday’s less than positive report, as corn continued its downward path to 3.64 ¼, -2 ¾.  Overall, US carryout was at 2.32 billion bushels, which was unchanged.  However, the bigger story was the USDA raising Brazil estimates to a yield of 91.5 MMT vs. the expected 87.7 MMT.  There have been a lot of rumors and predictions circulating, but this gave more validity to the idea.  Another change came in the form of the USDA moving 50 million bushels of feed usage to ethanol.  From here until the end of the month, the focus will center on the March 31st planting intentions report.  Will corn surprise as last year, and end up planting more acres in spite of all the chatter otherwise?

 

Soybeans  have succumbed to pressure from negative fundamentals as well as not the prettiest technical picture, -4 ½ at 10.06 ½ (May).  Last week’s gains were mostly fund driven rather than by fundamentals.  When fundamentals turned negative yesterday, the markets followed.  The supply and demand report confirmed what analysts have been predicting, as the USDA also increased their estimates of Brazil’s yield to 108 MMT compared to expectations of 106 MMT.  This may open the door to a further shift to South America of Chinese buying, which could result in cancellations of Chinese orders from the US.  In addition to more crops in the southern hemisphere, US carryout increased, and there is also the background chatter of whether soybean acres will increase by 4 or 6 million acres?  Will May hold support in the 10.00 area?

 

Wheat fundamentals seemed to be the least negatively impacted yesterday by the USDA report, as ending stocks were pegged at 1.129 billion bushels (off 10), with spring wheat reduced by the largest amount.   But on the flip side, world carryout is estimated to hit another record high at 249.94 MMT compared to 248.62 MMT.  This did not compute into market gains today either, as wheat is a follower of corn and beans and they were up to no good again today.  However, wheat (Chicago) was able to hold above the 100-bar moving average.  Kansas City showed the largest losses at -7, followed by Chicago SRW – 3 ½ and Minneapolis’ Spring variety at -¼.     

 

Live Cattle found support in solid wholesale beef demand and futures’ discounts to this week’s cash prices.  April cattle finished at 117.600, +1.100.  Wholesale beef prices were up $1.95 per cwt and select cuts followed suit by $1.71.  Cash cattle in the Plains sold for $124-126 per cwt compared to $123-126 last week.  Packer margins also continue to show good profits.  Will Lent temper buying enthusiasm over the next weeks?

 

Hogs felt some weakness from follow-through selling in conjunction with yesterday’s lower cash prices.  April was still able to eke out a positive gain, ending at 68.175 and +.100, while June showed a small loss at 76.900, -.025.  Exports have maintained reasonably good levels which has helped packer margins.  Hogs are expected to see a boost in 2nd quarter production, up 6% from last year.

 

In Other news, bird flu is once again in the headlines as a second case was discovered in Tennessee.  This time the unsuspecting victim was a commercial chicken flock, infected with a low-pathogenic strain, as compared to the high-pathogenic case at a Tyson producer last week.

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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