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Closing Comments

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Closing Comments

Corn headed into the weekend by giving back another portion of the post-report gains, -1 ¼ at 3.59 ½ (May).  Mexico continues to posture the US by reiterating their interest in South American corn imports as an alternative.  Most recently their economic minister said at Forum in Buenos Aires that they are mulling the idea of allowing tax free imports from Brazil and Argentina.  The next USDA report is Tuesday, and we will get a look at the latest supply and demand forecasts.  Grain analysts are viewing Brazil corn production at 92.5 MMT compared to the USDA’s March of 91.5 MMT and Argentina at 37.8 MMT compared the USDA’s March estimate of 37.5 MMT.  Also world corn stockpiles are predicted by analysts to be 222.0 MMT, which is also an increase over the last USDA report of 220.7 MMT.   And, U.S. stockpiles to mildly appreciate to 2.35 billion bushels compared to the March report of 2.32 billion bushels.  In China, their think-tank, CNGOIC, increased expectations of corn imports  from 1 MMT to 2 MMT (the USDA said 3 MMT).  While cool and wet weather has slowed field work and planting across the mid-section of the U.S., next week is looking much better with warmer and drier conditions.

 

Soybeans – While world news is heating up with the U.S. missile attack on Syria and the Presidential summit between Trump and Xi, the soybean market did not seem to be much affected.  May futures traded both sides of unchanged before finishing + ½ at 9.42.  Negative Chinese crush margins in addition to other bearish fundamentals neutralized gains.  Will the USDA report on Tuesday move the market?  It is hard to see much in the way of new bearish factors, as South American harvest is predicted at record levels and acres expected to increase by 7 million in the U.S. – but do not discount the idea that the USDA may trim export demand.  The average prediction for U.S. soybean carryout is 450 million bushels vs. 435 million bushels last month.  Brazil and Argentina production are both predicted to be up by 2 MMT and 500K MT respectively.  China’s CNGOIC also upped their prediction of soybean imports for 85 MMT to 86.5 MMT, which is now in line with the USDA.

 

Wheat continued trade in a sideways range.  Chicago (+ ¾)  and Kansas City (+1 ¾) were able to head into the weekend with small gains, while Minneapolis Spring wheat struggled to a negative finish, -3 ½.  Large stockpiles on are everyone’s mind, as no big weather events or other announcements have moved the market to a large extent coming into the next USDA report on Tuesday.  The French reported their wheat conditions (for the soft variety) at 90% good/excellent compared to 92% last year at this time.  It is rumored that Algeria is in for 570K MT of wheat for June with the EU being the majority source of origin.  Initially, it was thought some U.S. HRW was part of the tender, but does not appear to be the case.   

 

Live Cattle made a large positive move finding impetus from technical buying and futures’ discounts to expected cash prices, according to traders.  June futures finished at 111.800, up +1.675.   Look for cash prices to weaken with negative packer profit margins, seasonally slow demand, and large numbers of cattle for sale.  Monday is First Notice Day for live cattle deliveries against April.

 

Hogs were bogged down by profit taking from Thursday’s rally and lessening cash and wholesale pork prices, -.925 at 72.775 (June).  Packers are still profitable, but supplies are growing, based by warm spring temperatures that allow pigs to grow faster.  Look for spring and summer pork belly storage to influence wholesale pork prices post-Easter.

 

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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