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Closing Comments

Corn was unable to sustain positive momentum as weather is not helping the cause, with generous rains canvassing most of the US yesterday and planting conditions showing the southern states well ahead of schedule compared to average.  May futures fell -4 ¾ (3.63) with Dec following suit at -4 ¼ (3.87 ¾).  Corn is likely going to need an assist from weather to get jump started on a rally.  In the US, weather forecasts are predicting more precipitation on the way over the next two weeks.  The market will continue to see resistance on rallies from producer selling, as on-farm stocks are a healthy 4.9 billion bushels.  On another note, bird flu continues to hover over the news, as an industry group said that France will not need 330K tonnes of feed this year due to widespread culling of ducks in efforts to contain the virus.  A good portion of the ration is composed of corn.  It is also affecting the chicken population, which could potentially lead to the drop of another 80K tonnes of animal feed in France.

 

Soybeans were able to stabilize on the heels of a 2-day freefall, – ½ at 9.37 ¾ (May) and -1 ¼ at 9.49 (Nov).  May soybeans are down over $1.40 from highs in January, now in oversold territory as funds are building a short position.  The market is still trying to decide how to process Friday’s report of high stocks and planting intentions, as well as the big numbers predicted from our southern hemisphere neighbors, as the Argentine crop roundup has production at 56.5 MMT vs the USDA estimate of 55.5 MMT.  The harvest is just beginning in Argentina, but so far reports are exceeding yield expectations.  And, in Brazil, soy exports are up 30% over last year.  The USDA has US soy shipments at 85% of the target compared to the five year average of 86%.  Soybeans are running short on fresh sellers after the big decline.  Will we experience a relief rally correction in the short-term?

 

Wheat gave back early gains yesterday but still finished positive.  Futures continued sideways trade today with mixed results: Chicago – ¾, Kansas City +2 ¾ and Minneapolis -3 ¾ (May).  Some support may be found in dry weather issues developing in Europe combined with speculators holding a very large net short position.  The USDA reported winter wheat  at 51% good/excellent vs 59% last year and 56% on average.  It was reported that South Korea bought 65K MT of feed wheat, assumed to be of Black Sea origin.  In India, they are reporting a record wheat crop of 98 MMT.  Look for wheat to continue to trade weather and to follow the other grains.   And, as always keep an eye on the Dollar, which has snuck back up over 100. 

 

Live Cattle continued to show weakness today, with beef demand exhibiting complacency that could affect cash prices later in the week, -1.400 at 109.300 (June).  Market losses also resulted from technical selling and sell stops according to traders. Looking at prices yesterday, wholesale beef prices fell 69 cents per cwt compared to Friday, while select cuts also shed $2.65 according to the USDA.  Other influencing factors include negative packer margins and a larger pool of cattle for sale this week.  Speculators have a large net long position but cash is leaning negative.  Investors may want to consider selling rallies.

 

Hogs were pressured by the cattle markets as well as declining cash prices today, -.675 at 71.975 (June).  According to Reuters, some speculators sold nearby hog contracts and simultaneously bought deep-deferred months in a trading strategy known as bear spreading.  The large supply of pigs is keeping pressure on the market, with some speculators liquidating positions.  Look for pork bellies to be a key price influencer with expected solid demand, as ham will likely decline as the Easter buying slows. 

 

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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