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Closing Comments

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Closing Comments

Corn responded positively to a mixed forecast showing repeat heavy rains and cool temps on the southern/eastern portions of the Corn Belt, +2 ½ at 3.74 ¾ (July) and +2 ¼ at 3.92 ¼ (Dec).  Large old crop inventories are helping to dampen attempts to rally, and planting progress is on track in spite of the weather.  Managed funds are still short around 140K+ contracts.  EIA Ethanol reported production down 1,000 barrels to .986 million barrels/day, down .10% from last week but up 6.83% vs. last year.  Ethanol stocks were down 56K to 23.21 million barrels, down .24% vs. last week, but up 4.56% compared to last year.  Ethanol Refinery capacity showed 93.3% vs. expectations of 94.1% and last week’s 94.1%.  Corn used in last week’s ethanol production is pegged at 103.53 million bushels.  In order to hit the USDA mark for the year, corn used for ethanol will need to average 99.746 million bushels per week. In exports, Taiwan bought 65K MT of corn that is thought to be sourced from Argentina.

 

Soybeans are trying to find a way higher without a major production threat to-date, as gains in the market seem to be offset by willing sellers, +6 ½ at 9.75 ¼ (July) and +5 ¼ at 9.70 (Nov). Short-covering in corn and wheat could provide the fuel to help propel beans, if another good story emerges. Brazil is almost completely harvested and expected to eclipse record levels above 110 MMT, but Brazilian farmers are hesitating to sell, given the very low prices (around $7 bushel equivalent).  This has given new life to U.S. exporters, who have taken advantage of the window of opportunity, at a time of year that is not usually as friendly. Another interesting angle, is that the full Brazilian storage bins may not have adequate room to store the impending safrinha corn crop, bringing future pressure on prices in that sector as well.

 

Wheat traded mixed in a narrow range, with Chicago SRW flat, Kansas City HRW -4 ½, and Minneapolis HRS +2 ½.  After Monday’s rally, U.S. wheat became the most expensive in the world and the relatively stable Dollar has not helped matters.  Once June arrives, there will emerge a clearer picture of what we actually have for a crop yield.  The Kansas City Crop Tour has not yet visited the hardest hit areas in the West, as their initial findings are showing yield estimates from 10 to -10 bpa above and below last year’s record crop, with less disease issues than expected.  Tomorrow the Tour will visit the western third of the state, and the conversation will be more interesting.  More importantly, keep an eye how crop adjusters assess the situation. “The million dollar question is can the wheat recover?” according to Kansas State University agronomist Jeanne Falk Jones.

 

Live Cattle has reacted explosively this week to the weekend snow storm that hit parts of Kansas and the Midwest. It is thought that possibly thousands of head met their demise, which will have a significant impact on supplies, in addition to decreased cattle weights.  The area that was hit by the storm contains up to 50% of the nation’s feedlots, many receiving 12”+ of snow.  Wholesale beef was propelled to a 13-month high.  Today’s action resulted in “limit up” in the June and August contracts, +3.000. In the short-term, expect more positive action, as grilling season and upcoming holidays, i.e. Mother’s Day and Memorial Day, are keeping demand at a high level.

 

Hogs are responding positively to the lead of cattle as well as a seasonal shift in fundamentals, +1.400 at 75.550 (June). Several market barometers are up including the national bid to $58.47, IA/MN bid to $59.81, and the CME Lean Hog Index for 4/28 to $59.88 (up $.24). Industry analysts are expecting a Saturday hog kill of 120K head.

 

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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