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Closing Comments


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Closing Comments

Corn is trading weather, and short-term this is not enough of a story to stave off the bears, -4 ¾ at 3.61 ¾ (May) and –4 at 3.86 ¼ (Dec).  The corn crop is only 6% planted so far this season, compared to 9% on average historically.  All the “I” states are started planting but running behind.  If planting progress continues to lag, this will build strength for corn with each passing week.  Export sales have been great (1.328 MMT vs 1.100 last year same week), but it is imperative for this trend to continue in order to cut into the large stockpiles on hand.  While futures did not reflect positive sentiment today, it is worth the reminder that speculators are holding shorts for both corn and other grains, at a level that is not typical for this time of the year.  If we are to have a spring and/or summer rally, this positon could add fuel to the fire.  Hedge funds and other money managers are bearish based on the fundamentals of big stockpiles and production estimates.  They seem unimpressed by the thought of potential weather delays at this point.


Soybeans made a larger than expected move to the downside, but rallied at the finish to end -7 ¼ at 9.46 (May) and –5 ½ at 9.56 ¾ (Nov).  Factors on the minds of traders include the big South American crop, large stocks, normal weather patterns, talk of China increasing their domestic production and a less than bullish NOPA report yesterday.  Not to mention USDA inspections yesterday were on the low end of estimates.  Will large crop expectations force sideways trade instead of the usual seasonal rally?  As with corn, it is interesting to follow the specs short position, as only in 2015 did they hold a short position going into a June rally.  There is still room for a South American problem, as Argentina is only 9% harvested on their beans. Stay tuned, as last year saw a rally with record size grain and oilseed supplies.


Winter Wheat succeeded in climbing into positive territory, battling the negative pull of corn and beans, while spring wheat got a good boost from lagging planting progress: Chicago SRW +1 ½, Kansas City HRW +3, and Minneapolis HRS +8 ¾.  Winter wheat is 19% headed, which is 6% above the five year average and 54% of the crop is rated good/excellent.   Spring wheat is running behind the average planting pace of 21%, at 13%.  One would think U.S. wheat would be competitively priced for export trade, with the recent setback in futures and a lower dollar.  


Live Cattle continue to show gains, +.075 at 115.650 (June).  Early grilling season and higher international demand have been partly responsible for the recent rally.  It is likely prices will retreat at some point, as supplies are abundant.  Brazil’s meat scandal did not have a measurable positive effect on U.S. beef sales, as most of the countries affected by Brazil’s exports were not customers of the U.S., and they have now begun to reopen the doors to Brazilian imports.  If this situation were to broaden, it could potentially be beneficial stateside.  And, China’s announcement that they will lift a ban on U.S. beef has been helpful to optimism, but has not resulted in trade to this point.  U.S. plants need to be certified first, which takes time.  But, the idea of a new market with 1.3 billion appetites is a delicious thought.  Look for the Cattle on Feed report this Friday afternoon at 2pm.


Hogs continued to slump today as they are trying to find a bottom as we move into grilling and summer BLT season, -.850 at 71.500 (June).  Saturday’s slaughter is expected to be exceptionally large, as packers are working to get caught up on the backlog resulting from the holiday.  Supplies should start to whittle down over the next few weeks as farmers direct their attention to field work and planting.


In Weather news, the U.S. is at its lowest level of drought in seven years.  In the lower forty-eight states, 73% of the entire area is drought-free.  August of 2010 was the last time a better level was recorded – one point higher at 74%.  In the 1-5 day outlook, KS, MO and IL should see more precipitation, while the 6-10 day is looking drier for the Midwest.


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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