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Closing Comments

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Corn gapped higher with the rest of the grains, as weather over the weekend dominated the headlines, +11 at 3.77 ½ (July) and +9 ½ at 3.94 ½ (Dec).  Corn is following wheat, but corn also has reasons of its own with 75%+ of the Corn Belt getting 1-3” of rain and some areas in southern IL and IN with 6”+.  What impact will this have on re-planting?  This combined with thoughts of fewer planted acres and a huge managed money short position on the CBOT are a lethal combo.  The Commitment of Traders report last Friday showed managed funds short almost 200K contracts.  Longer term, corn needs a story in addition to the planting issues, as the crop always ends up getting planted.  But, the overall health of the plant is dependent on multiple variables, and cold/wet is not a good start.  In weekly USDA inspections, corn numbers came in at 1.093 MMT for the week ending April 27th, compared to estimates of 1.150 MMT.

 

Soybeans are following wheat and corn this time, and follow they did with a robust day in the “pit”, +14 at 9.70 ¼ (July) and +11 ¼ at 9.64 ½ (Nov).  Despite the large supply on hand, demand continues to carry a good load of the burden, as the USDA announced weekly inspections at 521,218 MT vs. expectations of 500K MT.  An interesting side note, Brazilian farmers may actually be helping the U.S. soybean export cause because they have been so reluctant to sell, hoping for higher prices. The Brazilian farmer’s price equates to about $7/bushel, down from $8 a month ago.  Normally, U.S. weekly exports this time of year are around 300K MT, but have been solidly above that.  Historically this has only happened when there have been South American crop issues, which is not the case this year.  Regarding reporting by the Commitment of Traders last Friday, soybeans have less shorts to cover than corn and wheat, and will be the least affected by a weather rally.  As a matter of fact, planting issues with corn may only add burden to beans, as corn acres could switch to bean acres.  But, beans will still tend to find some strength on enthusiasm from its grain siblings.  Look for the USDA March census crush later this afternoon.

 

Wheat gapped higher today through both the 100 and 200 bar moving averages, with major concerns over potential damage to the hard winter variety, with weekend snows and cold temps blanketing the western Plains over the weekend.  This is the major short-term story the market has been looking for, as corn and beans hopped on for the ride.  Kansas City’s HRW flirted with limit up, before settling at +28 ½ (July).  Chicago was close behind at +23 ¾, while Minneapolis HRS was +6 ¼. The Kansas City wheat tour is this week, and scouts will undoubtedly be passing along lots of pictures and stories.  It will be hard to assess how much damage has occurred this early, but there will be lots of speculation.  Wheat has a huge short position in managed funds, which is only helping provide kindling for the fire.

 

Live Cattle kicked off the new month by trading both sides of unchanged but kept positive gains alive, +.100 at 124.125 (June).  Providing support was futures’ discounts to cash prices, which was 14 cents coming into the session compared to a normal 7 cents.  May is usually not a bullish month, but recent chart action is strong and looks to still have upside momentum.  Demand is good and supplies have been tight due to a sharp drop in cattle weights.  The Commitment of Traders report showed all investor categories net long, with non-commercial traders at a record high 159,874 contracts.

 

Hogs took a step back after big gains last week, -.725 at 73.275 (June).  It is thought that U.S. demand could spike in May and that export demand will stay strong. Chinese demand is improving and they are the world’s largest importer of pork.  The Commitment of Traders report showed all trader categories net long, but with significant decreases in long positions.  Keep an eye on the 75.25 area for near-term resistance.

 

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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