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Closing Comments

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Closing Comments

Corn follow through buying overnight continued positive through the session today as there have been several good export orders from Mexico, China and other Asian this week, +1 ¼ at 3.63 ½ (May).  EIA Ethanol weekly report highlighted an unexpectedly big bounce in production over last week (307 million gal. vs 300), with a small decline in ethanol stocks and gasoline demand lagging behind a year ago.  Last year, ethanol production began to dip starting next week all the way through May, so it will be worth watching to see if demand continues at the current 4.5% over last year.  If it does, the USDA’s corn demand estimate may be too conservative.  Of note, weekly gasoline demand is down 5.1% year-to-date from last year.

 

Soybeans were not able to find a silver lining today, as the NOPA report was less than impressive and there is always the looming threat of Chinese order cancellations this time of year.  May futures saw another decline, -1 ¼ at 9.98.  The NOPA crush report showed that February soybean crush production was lower than expected (142.79 million bushels vs 146.1) and soybean oil stocks were higher than expected 1.770 billion lbs vs 1.75), for members of the organization.  Soymeal exports were pegged at 738,825 MT vs prior month of 891,143 MT.  The slowdown in crush activity can be attributed to the influence of declining crush margins and tepid soybean meal demand.  To sum it up, in order for crush to hit the USDA projection for the marketing year, crush will need to eclipse its 2nd half of the year record by 3%.  On a positive note related to trade, President Li from China was quoted as saying that he hopes that the trade relationship with the US will move forward in a positive direction.  He plans to meet with President Trump in FL early next month.

 

Wheat was the star of the grains today, buoyed by news that Egypt was back in the buying mood after a two week hiatus, as they announced they are in for 420K MT of wheat.  The US has several competitors vying for this opportunity, with main competition coming from Russia, Ukraine and France.  Weather news continues to also be closely watched with freezing temps all the way down to Alabama, which could nip production up to 10% in the southeast.  There are forecasted rains for the Southern Plains in the next several days, which will help boost crop conditions.   May Chicago +5 ½, Kansas City +4 ¾, and Minneapolis +8   

 

Live Cattle regained most of the losses from yesterday with a big move to the upside, +1.375 (April).  Of concern to traders is the surging beef supplies and lessening demand as we get into Spring.  Bird flu may not become a major issue without the threat to humans, but could result in larger meat supplies stateside, which will be a bearish weight on the market. 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 due to the jump in placements and the shift to heifers on feed.  Snowstorms in the east and cold weather elsewhere could also slow demand.  Look for 115.87 as support for April.

 

Hogs lost some momentum today after solid gains the last two sessions with April down -.750 and June -.350.  Hogs are seeing their highest cut-out values since February 21st.  Hogs could experience greater import demand from China due to bird flu and poultry issues, as consumers in the PRC are shifting away from poultry to pork.  Technical action has been impressive of late, spurring more short covering yesterday.  Key June support is at 78.15.

 

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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