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Closing Comments

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Closing Comments

Corn could not seem to find much to rally on today in spite of wet forecasts and below normal temps to come, +2 ½ at 3.59 ½ (May) and +1 ¼ at 3.83 ¼ (Dec).  Crop progress will be announced at 3pm today, at it is expected that corn will show 15% completed, compared to 30% last year.  USDA weekly inspections did not disappoint, with corn leading the way at 1.453 MMT for the week ending April 20th, compared to expectations of 1.150 MMT.  Corn and all the grains are trading weather, and the next ten days looks wet.  So, watch for a potential bump of up to 20 cents in the near-term.  But long-term, the markets need a major North American weather event to change the overall neutral to bearish fundamentals.  However, based on history, spring and summer highs always top prices in early April with the median change in price from April to July being around 9%.  This being the case, it is likely Dec corn will achieve an area in the $4.05-4.10 area (even if briefly) within the next 2-3 months.

 

Soybeans received a boost from wet weather forecasts and the declining Dollar, with May ending the session +8 ¾ at 9.59 ¾ and Nov +5 ¾ at 9.65 ¼.  Weekly inspections for beans were over expectations at 634,877 MT compared to thoughts of 500K MT.  Like corn, based on the history of spring and summer rallies, it is likely soybeans will test an area of $9.85-10.00 in the next 2-3 months.  Much of the fundamental bearishness has been baked into the cake and managed money is short (they are trend followers), which could create the fuel for a short term rally if the funds flinch in their positions.  The Commitment of Traders report on Friday afternoon showed managed money to be short soybeans by 45,828 up by 16,095 from the week before.  In comparison to last year, beans were long 100,000 contracts.  The crop progress report this afternoon is expected to show soybeans at 2% planted. 

 

Wheat was down across the board, combining weak technical indicators and a very large short position among large managed fund traders: Chicago SRW -3, Kansas City HRW -2 ¾, and Minneapolis HRS -5.  Not to be outdone by its grain siblings, wheat USDA weekly inspections were over expectations, showing 612,536 MT compared to projections of 500K MT.  Wheat is also swayed by weather, and there is talk of possible frost and freeze across the Plains later in the week.  In Europe, analysts are predicting the soft wheat yield to be up 8.2% over 2016.  Look for wheat to continue to follow corn and beans, and may be susceptible to a near-term bounce due to short-covering.

 

Live Cattle responded in kind to the Cattle on Feed report last Friday afternoon, -1.425 at 115.275 (June).  Large placements had the biggest effect on the charts, as they were predicted to be 106.5%, but instead were reported to be 111% by the USDA.  Marketings were basically on par with expectations and On Feed were slightly above.  The beef market is living up to seasonal trends and cash last week was up $4-6.  Open interest has reached an all-time highs this month with big specs buyers, and hedgers sellers – shorts are at record levels. 

 

Hogs have not had the seasonal bounce in the June contract to-date, but were able to get things turned in a positive direction to start the week, +1.150 at 69.475.  Short-covering and bargain buying in the technically oversold market, was the fare of the day for traders. There is a very large supply of hogs that packers are in the midst of processing, which once pared down should bring some relief to declining cash prices.  Demand should continue to be solid with grilling season and Mother’s Day festivities around the corner.

 

First Notice on May futures is Friday, April 28th.

 

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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