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Closing Comments

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Closing Comments

Corn dropped today as the 6-10 day and the 8-14 day forecasts have improved, -2 ¾ at 3.66 ½ (July) and –1 ¾ at 3.85 (Dec).  Futures experienced a volatile week, dealing with weather concerns, NAFTA rumors and speculation, chatter about an ethanol mandate, and an improved outlook to Brazil’s safrinha crop.  Related to NAFTA, Mexico is the top importer of U.S. corn and barley and number two for DDGs and sorghum – so, there is a lot at stake. Even a 10-15% drop in purchases will have a big effect. It will be interesting to see the next USDA planting report, as many farmers in the south and east had a great chance to get seed in the ground, while much of the north and northwest band of the corn belt is behind due to cool and wet (snow in some cases) conditions.  Other market factors to consider include managed money still short about 175K contracts, solid weekly export sales, declining ethanol profitability (about 10 cents over the last couple of weeks) and weekly production/stocks report were near unchanged.  Look for new crop fundamentals to drive old crop pricing after May 10th. There is still a lot of old crop in bins to be sold, which may limit some of the rally potential, when funds seek to cover some of their short positions.  The mid-May timeframe will be critical for direction.

 

Soybeans and corn were in the same boat today, trading an improved weather outlook, -1 at 9.56 ¼ (July) and –1 ¼ at 9.53 ¼ (Nov).  It is the last trading day of the month, so the next couple of sessions next week could gain from improved money flows.  Not to mention changes in weather forecasts and global politics always add a wildcard to the mix.  Soybeans don’t have a reason to move too far in either direction, as the upside offers little fundamental reason to go long other than covering of some shorts, while much of the bearish factors have already been baked in to the downside with large stocks and big production numbers out of South America.  Offsetting the downside is strong demand and the U.S. planting and growing season ahead.  What actually happens this weekend regarding rain and cold weather will be important to trade early next week.

 

Wheat was up across the complex, with Chicago SRW +1, Kansas City HRW +3 ½, and Minneapolis HRS + ¾.  Wheat has been the most influenced by weather in the short-term, with continued concerns regarding frost/freeze this weekend across the Plains.  Chicago has the large shorts, with the CFTC report this afternoon expected to sport close to 200K contracts.  Could there be a rally around the corner next week?  If so, this should help boost other grains, especially considering their short positions.  In Europe, France saw a decline in soft wheat condition, with AgriMer decreasing the good/excellent from 85% to 78% this week.  This is due to the dry conditions France is experiencing. Monday is the start of the Wheat Quality Tour by NASS, so watch for chatter and pictures on social media.

 

Live Cattle experienced a volatile session, starting off in the red and then breaking out to another big gain, +2.500 at 124.025 (June).  Volatility was expected today, as traders adjusted positions on the last trading day of the month.  CME live cattle was trading with expanded limits today, up to 4.500 cents.  Positive factors for futures this week included tighter supplies at lighter weights and good logistics with movement of animals.  Demand is growing as grilling season is in full swing and Mother’s Day is fast approaching.

 

Hogs, not to be outdone by cattle’s run up the charts, had another strong day, as June finished +1.175 at 74.000.  Traders attributed the spike to a recent cash price uptrend and month end short-covering, according to Reuters. Seasonal meat demand trends are also supporting hogs, as grocers and restaurants are preparing to satisfy hungry grilling appetites and Mother’s Day celebrants. 

 

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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