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Closing Comments


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Closing Comments

Corn found support in a USDA reported private sale of 120K MT of corn sold to Mexico and rumors of an even larger sale to China (up to 500-600 tons due to quality issues), +1 ¼ (May) at 3.62 ¼.  There has been a lot of chatter around the idea that Mexico is shopping South America as an alternative to US corn.   It will be difficult for them to justify financially and logistically, but it is still a brooding market concern.  Brazil is expected to yield up to 4 MMT more than previously thought, according to the USDA supply and demand report last week.  Informa recently forecasted US corn acreage to be 90.8 million acres, with production of 14.22 billion bushels and an average yield of 170.4 bpa.  Other potential US corn sales include 65K MT to South Korea and the possibility of a Taiwan purchase of 40-65K MT.  Expect more sideways trade leading in to the March 31st planning intentions report.   May support at 3.59 ¾ held today after six consecutive sessions of losses.


May Soybeans made a big break down to 9.92 early in the session but bounced back modestly, -6 ¾ at 9.99 ¼.  There is a sizeable open interest of 20K contracts in May 10.00 puts and another 14K open interest in May 9.80 puts that are influencing trade.  Beans seem to be looking to find a level to lure demand their way.  Bird flu in China is putting a damper on meal demand, as the poultry industry is trying to regroup from the rash of outbreaks in Asia.  In South America, Brazil crop just continues to garner more glowing reports, as Dr. Michael Cordonnier, well-known crop scout, was the latest to get behind the notion that the crop will outperform expectations, raising his estimate from 106 MMT to 107 MMT.  He also raised Argentina’s forecast by 1 MMT.   Could this open the door to future Chinese cancellations of US orders?  Informa pegged soybean planted acres at 88.7 million, compared to the USDA 88 million.  At a 48.5 bu/acre yield, this would give an ending stocks tally of 651 million bushels compared to 435 million this year and 197 million last year.  The NOPA crush report will come out tomorrow.   Watch May bean resistance at 10.16 ½ and 10.24.


May Wheat avoided closing lower for the sixth day in a row, with Chicago flat.  Kansas City was – ¼ and Minneapolis +1 to round out the complex.  Wheat  has been very weather driven, and needs a drier forecast in order to correct its oversold condition, as the Southern Plains look to be receiving a round of rains in the next few days.   Wheat, like the other grains, has been in a bearish mindset with a glut of world supply and no real big stories to sway the market.  Wheat planted acres are down to record low levels in the US along with possible winterkill, and this will help the cause, but the Dollar’s strength will continue to work against exports.  Will US wheat be able to compete with the Black Sea for more cargos in the coming months?  


Live Cattle experienced a substantial pullback today pressured by profit-taking and uncertainty about this week’s cash prices, -1.425 (April).  Traders are apprehensive that spring demand may be lower than expected with supplies predicted to increase.  Production in the 2nd quarter could be up to 520 million pounds higher than the 1st quarter compared to only 252 million pounds higher for the same period last year.  Futures are continuing to show a major discount to the cash market and packer margins are still very profitable. 


Hogs have continued to surprise and confound the experts, supported by firm cash and wholesale prices, with April +.600 and June +.450.  The USDA data on Monday afternoon showed wholesale pork prices up $.48 and picnic shoulder cuts up $1.91.  Average packer margins are also thought to have increased by $.40. Other positive influences include abnormal basis levels and the idea that China and other countries may be increasing their demand for imported pork. 


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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