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Closing Comments

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Closing Comments

Corn joined the other grains, down -4 at 3.60 ¾ (May) and -3 ¼ at 3.86 (Dec).  There does not seem to be any correlation between export sales reported this morning and action on the charts as corn came in with strong weekly report numbers.  It is obvious the market has shifted focus to new crop supply, which offers more uncertainty than answers.  Corn sales announced this morning for the week ended March 30th featured corn above the market expectations of 700K-1.0 MMT at 1.138 MMT, a welcome departure from last week’s disappointing results.  Seasonally, this is a favorable time of the year for US corn export sales with Brazil usually getting heavy into the mix by June/July.  U.S. Corn customers this past week included Mexico, Korea, Colombia and Japan. 

 

Soybeans were back to their negative bias, after a positive binge yesterday, -2 ¾ at 9.41 ½ (May) and -3 ¼ at 9.50 ¾ (Nov).  Soybean sales announced were right in line at 482K MT compared to a range of expectations of 350-550K MT.  Considering the large size of the Brazilian crop, U.S. sales have kept a very respectable volume, as sales have averaged 19.8 million bushels/week compared to 14.7 million/week last year.  China has been a strong buyer of old crop, and once these reserves are all spoken for, there will likely be a significant decline.  Of particular interest to soybean traders is the visit this week of Chinese President, Xi Jinping, to President Trump’s Mar-a-Lago club in Florida.  A lot is riding on maintaining a positive trade relationship with our primary economic and military rival.  Almost half of the U.S.’ trade deficit is with China, as they account for $347 billion of the pie.  Mr. Xi wants very badly to avoid major conflict with the U.S., which could undermine his credibility at home where they are enduring an economic slowdown.  Speaking of China, it has been promulgated that they have bought 4-15 cargos of Brazilian soybeans this week.  Also of note, Argentina was brought to a standstill as union employees walked off the job last night, completely paralyzing the grain export sector – will this be a developing story over the next few days?

 

Wheat was down across the complex, despite good export numbers, with Chicago SRW -6 ½, KC HRW -5, and the Minneapolis Spring variety -1 ¼ (May).  Sales announced were 568K MT compared to estimates of 250-450K MT.  This is in stark contrast to last year same week, which highlighted net cancellations of 2.1 million bushels.  However, new crop sales were on the low end of expectations, showing only 87K MT vs. 50-250K MT.   Buyers included Mexico, Taiwan, Japan, Korea, Algeria and “Unknown” (which took the largest amount).  The United Nations’ Food and Agriculture Organization is predicting world ending stocks to rise to the highest level in 17 years.  But, weather issues continue to be a leading concern that could influence the wheat market.

 

Live Cattle found market support in futures’ discounts to prospective cash prices, +.700 at 110.125.  Of note, no animals sold on the Fed Cattle Exchange yesterday for the first time since the exchange started publicly reporting on May 25, 2016.  Packer margins have become unprofitable, and that coupled with large supplies, could impact cash prices.  The USDA export report showed strong results for the week ended March 30th, with sales at 19,300 tonnes compared to 10,900 tonnes last week (mostly to Japan).

 

Hogs found support in a positive U.S. export report, with a reported 21,500 tonnes compared to 21,100 last week (mostly to Mexico), +1.675 at 73.700 (June).  While Easter ham sales are declining, grilling season is ramping up.  Applying pressure to the market is declining cash and wholesale pork prices.  Technically, there is bullish divergence between price and the RSI in the June contract – have we bottomed out?

 

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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