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Closing Comments


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Closing Comments

Corn traded higher in a very active day at the CBOT, featuring funds as huge buyers of corn futures.  Thought of short-term weather concerns were a driving force as corn finished, +5 ¾ at 3.65 (May) and +5 ½ at 3.89 (Dec).  The next 10 days will feature an active pattern of storms with accompanying lower temperatures across the U.S., slowing planting.  The USDA reported corn planting progress at 17% yesterday, exceeding trade expectations of 15%.  Last year’s progress was at 28%, while the average year-to-date is 18%.  Illinois came in at 34%, while Iowa was at 8%.  Todd Hubbs, Ag Economist at the University of Illinois, says that the Midwest will need to wait a few weeks before starting to panic about planting progress – around May 20th for corn and May 30th for beans.  Nevertheless, perceptions sometimes trump reality in the markets, and large short positions are tending to amplify anxieties.  Look for a possible return to previous highs over $4/Dec if current weather forecasts materialize.


Soybeans did not experience the same buying enthusiasm as corn and wheat, as they fell to 9.54 ½ in the May contract (-6 ¾) and 9.61 ¾ in Nov (-5 ¾).  Soybean planting is just getting started, but is ahead of schedule, as the USDA reported plantings at 6% compared to 3% last year at this time and 3% average (trade was expecting 2%).  All was quiet on the export sales front, and it is reported that China is wanting offers for U.S. soybean offers off the PNW.  Chinese customs data released today indicated March soybean imports were up 3.7% over March last year, and total January-March imports were up 20.2% over same months in 2016.  Safras Mercado’s analysts said Brazil is 93% harvested on beans, which is 2.6% above average.


Wheat like corn, experienced an active day of trading, finding some short covering with a smattering of positive news (including a declining Dollar), +6 ¼ Chicago, +10 ¼ KC and +12 ¼ MN (May).  Wheat growing regions will see the effects of cold weather this weekend, as frost/freeze will spread temps in the 20’s and 30’s across the Plains .  How this will affect reproducing HRW remains to be seen, but anything below 32 degrees puts it at risk. Funds are sitting on record large short positions and not situated for a bullish surprise. Spring wheat is significantly behind last year, as the USDA reported current planting at 22% complete vs. 40% last year and 34% average year-to-date. Winter wheat received a good/excellent rating for 54% of the crop compared to 59% last year and 48% average year over year.  Hopefully the reduction in acres this year will help the picture for wheat, with overall numbers expected to be down in the U.S., Australia, the Black Sea, etc.  Demand should increase again with production down worldwide.  Light may be at the end of the tunnel after a long, bleak stretch. 


Live Cattle rebounded from losses on Monday, receiving support from higher wholesale beef values and futures’ discounts to expected cash prices this week, +.975 (June).  Monday’s average wholesale beef cut-outs and select cuts were up $1.51 per cwt and up 40 cents respectively.  As with pork, the rise in outdoor grilling and impending Mother’s Day preparations are helping to drive supermarket demand.  Tomorrow’s Fed Cattle Exchange is always a barometer for cash direction for the rest of the week.  And, with tight cattle supplies and positive packer margins ($6.85/head), one would think cash will receive a boost.  Look for short-term support at 113.60 and resistance at 117.50 in the June contract.


Hogs took off on a blistering pace today, +2.300 at 71.825 (June).  Up until this week, it appeared that hogs may produce a counter seasonal trend, but made a strong reversal today.  The USDA Cold Storage report yesterday afternoon, showed March total pork stocks up to 555.052 million lbs. from estimates by analysts of 546.1 million lbs. Cash hogs and carcass values are weak while packer margins are strong.  Have downward cash prices now stabilized with the usual tightening of seasonal supplies?


In Other news, Sonny Perdue was finally confirmed by the Senate (87 votes for and 11 votes opposed) and sworn in as Ag Secretary.


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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