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Closing Comments


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Closing Comments

Corn was much lower today at -8 ¼ (3.66 ¼ July), a combo of weaker crude oil and weather forecasts starting to trend more favorable over the next week and through the end of May. Corn weekly sales were on the low end of expectations, as the USDA announced 771,600 MT vs. estimates of 750K-1.1 MMT. Related to weather, it is East vs. West, as the East Midwest has experienced heavy rains/flooding coupled with cool temps.  This in contrast to the West Midwest looking for improved planting conditions. Look for planting progress through the weekend to be around 42-45%, which is below the 5-year average.


Soybeans could not stay positive, fighting the negative pull of corn and wheat, -1 at 9.74 ¼ (July) and –5 ¼ at 9.66 ¾ (Nov).  All eyes are on the Commerce Department, which is due out with a decision as early as this Friday as to whether Argentina and India are dumping biodiesel into the U.S.  If the decision is “yes”, look for this to be impactful, as the ensuing tariff could be as much as 25%, which will definitely influence beans. Soybeans fell below weekly sales expectations of 400-750K MT, as the USDA pegged last week at 318,500 MT. Pakistan was the most recent buyer of U.S. beans, with an order for 65K MT. Brazil has been on a record pace with soybean exports, as they notched an April milestone of 10.4 MMT.  On the other hand, Brazilian farmers have been less willing to part with their crop due to low prices, which has helped the U.S. pick up some of the slack to the Chinese from the PNW. China typically buys about 78% of the Brazilian offerings. What will next week’s report say about ending stocks? Probably nothing that will stimulate buyers.


Wheat led the grains lower today, giving back much of the gains earlier in the week, as yield reports for the Kansas Wheat Tour have been better than expected. If final results show anything over 300 million bushels, the market will likely react negatively. The Tour is not making judgments as to losses from the recent storms, as it is still too early for the stress to be revealed. Wheat weekly sales were on the low end of expectations at 258,400 MT vs. ideas of 200-600K MT.  Sales penciled for 2017/18 were much higher though at 563,400 MT. Look for the WASDE report next week to show a decline in U.S. and world stocks.  Chicago -16 ¼, Kansas City -18 ¾, and Minneapolis -13 ¾   


Live Cattle has had a bonanza week, and the volatility continued today as futures were “limit up” on expanded limits early in the session, but fell hard late with the front months still finishing positive, +1.250 at 131.300 (June).  What caused this historic spike?  There are several reasons, including marketing numbers pulled forward producing less beef, compounded by the counter seasonal blizzard which killed many cattle and affected performance of the rest, and the idea that China may be flipping some of their Brazilian beef purchases to the U.S.  Carcass weights will be released today, and the trend from last week showed steers declining 4# to a level 30# below last year and heifers 25# below last year.


Hogs continued their trend higher, buoyed by seasonal and increased Chinese import demand, +.925 at 76.475 (June). There is continued talk of tightening supplies, and with strong packer margins it is likely cash will move higher.  It is advisable to prepare for a correction, as the market is overbought and futures are at a premium to the cash market.


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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