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Closing Comments


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Closing Comments

Corn was buoyed by a wet weather forecast and a bounce in beans, +1 ¾ at 3.64 ¾ (May).  The EIA Ethanol numbers were released today, and they showed stocks up for the week ending March 31st by 448K bbl to 23.71 million bbl.  EIA refinery capacity was pegged at 90.8% compared to expectations of 90% and last week at 89.3%.  Production dropped sharply but is still 4.4% above last year, dropping 300 million gallons/week from 310 million last week.  If corn for ethanol usage continues higher than last year, the USDA will need to continue to make upward revision adjustments.  As with wheat, weather is becoming a more important barometer short-term.  Many areas across the growing area are receiving large amounts of precipitation, which could delay planting.  Longer term, what happens in July will dictate yield to a greater extent.  Another interesting dynamic is the potential for a clash of exports.  Louisiana and Texas corn plantings are way ahead of schedule this year, which could bring early harvests into direct conflict with the apex of South American corn exports.  This would not be helpful to global corn prices and could have a negative impact on a languishing US farm economy. 


Soybeans, after reaching lows yesterday not seen since last fall, responded positively today with a “relief rally”,  +6 ½ at 9.44 ¼ (May).  Futures are considerably oversold, and overnight trading saw heavy volume in the May/July spread.  Also, rains in Argentina are playing a small part, as there are always the accompanying thoughts of risk to harvest.  Additionally, the Chinese returned to the market after a holiday.  It is likely the positive vibes will be short-term in nature, with  fundamentals remaining bearish, as South American production estimates continue to climb.  The latest to raise the bar, Celeres, is now predicting a Brazilian soy crop of 113.8 MMT, up from previous March estimates of 109.7 MMT.  


Winter Wheat was able to piggyback on the strength of corn and beans, with Chicago +2 ¾ and Kansas City +3 ¼.  Minneapolis was of a different persuasion, with the May contract showing a loss today, -3 ½.  There has been a lot of talk about wheat planted acres predicted to be down to the lowest level in 108 years.  In that vein, Informa released their 2017 winter wheat production estimate at 1.285 billion bushels, a significant drop from last year’s 1.672 billion bushels.  Will the USDA confirm this line of thinking on May 10th when they release their first winter wheat production estimate?  Areas that were dry are now getting much needed rains with widespread wet weather across the mid-section of the growing areas and into the Central Great Lakes.  In Europe, there is growing concern of dryness, which could help support the wheat complex.  On the global stage, Algeria is tendering for 50K MT of soft wheat, while Japan is in for 120.5K MT of US/Canadian wheat.


Live Cattle followed yesterday’s losses with a strong close today to finish slightly positive, +.125 at 109.425 (June).  Factors negatively influencing include seasonally slow beef demand, poor packer margins and large numbers of cattle on the sale block this week.  According to the USDA, average wholesale beef prices were down $1.74 per cwt to $211.69 and select cuts shed 96 cents to $200.39.  The Fed Cattle Exchange today will help give price direction for the remainder of the week, as 3,500 animals are offered for sale.   Look for a support level in the area of 107.85 and resistance at 111.60 in the June contract.


June Hogs traded both sides of unchanged, finishing +.050 at 72.025 (June), while April ended slightly negative, -.05.  The April contract experienced weakness on Tuesday’s lower cash and wholesale pork prices against a backdrop of large supplies.  The lean hog index also fell by -.710 to 67.590, as the April 17th settlement day approaches.  The Saturday slaughter numbers are expecting to be down as most buyers have wrapped up their Easter holiday ham purchases.  Will June be able to turn the corner and into a more seasonally positive trend?  Give consideration to support around 69.85 and resistance at 74.60 (June).


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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