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Closing Comments


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Closing Comments

Corn traded both sides of positive, finishing even at 3.61 ¾ (May) and + ¼ at 3.86 ½ (Dec).  Planting is getting off to a slow start, with only NE achieving the 5-year average.  Spring showers are keeping some farmers out of the fields temporarily.  However, modern farm equipment removes some of the anxiety from the mix, as lost time can be made up relatively quickly.  On the weather front, it looks like a several-day planting window may open up for a good portion of the northern, central and eastern Midwest.  This should help bring early planting progress more into alignment with expectations.  EIA Ethanol numbers released today for the week ending April 14th showed ethanol production up .71% vs last week and up 5.75% vs. last year.  Ethanol stock were also up by .57% over last week and 4.48% vs. last year.  Cumulative corn used for ethanol is estimated to be 3.46 billion bushels, with a target of 5.45 billion bushels for the crop year.  Tendering for optional origin corn are South Korea and Turkey, looking to buy 60K MT and 118K MT respectively.  Managed funds continue to hold a large short position in corn. 


Soybeans were able to reverse course today, +4 ¼ at 9.50 ¼ (May) and +1 ½ at 9.58 ¼ (Nov).  Yesterday saw steep losses early in the session, but futures were able to bounce back into the close on strong meal buying.  The supply base is the biggest concern among investors.  Part of the pressure on markets earlier in the week, resulted from a broader pessimistic mindset in overall commodities.  Crude oil also dropped, as the macro issues of turmoil with North Korea and uncertainties surrounding relationships with key trading partners are on traders’ minds.  Buyers seem content to wait for the South American crop, as Argentine forecasts look good over the next 10 days and DERAL estimates harvest in Parana, Brazil, at 97% complete.   It is interesting to note however, that a well-known South American crop scout lowered the Argentine production by 1 MMT due to heavy rains that damaged crops.  Managed funds continue to hold a modest short position in beans.


Wheat was down today, with Chicago SRW -3 ½, Kansas City HRW -2 ½, and Minneapolis HRS -4 ¾.  Spring wheat has rallied over 21 cents from its April low, due to strength garnered from a wet and cold start to planting in the North and South Dakota farmers opting more for soybeans over wheat due to lender pressure over insurance economics.  According to a seed salesman, he has sold the least amount of wheat seed ever this year.  On the global scene, Russia and Turkey have reportedly come to an understanding regarding their trade issues, as Turkey had banned Russian grain imports the last several weeks.  This was a significant problem for Russia as Turkey is a major customer.  Stats Canada will release their 2017 acreage estimates on Friday, and wheat is expected to decrease from 57.3 million acres to 55.3 million acres.  Look for wheat to continue sideways trade as sellers are starting to dwindle, but there is not much incentive to buy either.  Managed funds continue to hold a large short position in wheat.


Live Cattle, were able to build on recent gains while technically overbought, +.300 at 115.950 (June).  A few factors that have helped fuel cattle’s rise are a significant futures’ discount to cash, declining average weights, strong packer margins and rising beef values.  Today, over 4,200 cattle will be offered on the Fed Cattle Exchange, and this will be closely monitored for cash direction later in the week.  The Cattle on Feed report will be released this Friday.  Estimates are as follows: on feed 99.7%, placed 106.5% and marketed 109.4.


Hogs, expecting a seasonal recovery bounce, instead continued to see falling prices today into lows not seen since October, -1.550 at 69.950 (June).  Strong packer margins and rising pork values should provide impetus for a turnaround soon.  It is thought the backlog of hogs across the country due to the holiday and weakness in the cash market, has kept the market in check.  Supplies should start to whittle down over the next few weeks as farmers direct their attention to field work and planting.


In Other news, Vice President Pence headed for Japan yesterday to further economic ties and negotiate a bilateral trade agreement.  Despite the U.S. withdrawal from TPP, Pence indicated that our two economies are intertwined.  Japan, on the other hand, is trying to revive the TPP without the U.S.  TPP was estimated to be worth over $4B to Agriculture.   Switching gears and looking at the 2018 Farm Bill, with the budget situation and political challenges, it will be a tall order to accomplish.  Crop insurance as well as other traditional farm programs will be up for a vigorous debate, as funding will be an issue this time around, according to Pat Westhoff, an Economist at the University of Missouri.


May options expire this Friday, April 21st.


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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