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Closing Comments

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Closing Comments

Corn

December corn had a mixed feel today, as early in the session it felt heavy with wheat rallying strong, but by the close it rallied off its lows despite soybeans closing down 33 cents. On the one hand a strong dollar will make moving corn on the global market harder, and falling crude prices could limit ethanol demand at some point. On the other hand ethanol futures have been every bit as strong as crude has been weak over the last month, and lower gas prices will mean increased demand for fuel and fuel additives. Additionally, talk of fewer acres for next year has continued to spark fund buying despite the generalized bearish fundamentals surrounding this crop. While soybeans have formed and begun to execute a head and shoulders pattern, corn has formed one but does not seem interested in executing it yet. This could be the direct impact of competition with the wheat market, and easily overcome if soybeans continue their mover lower, but for now corn seems trapped between two stronger forces and indecisive about which way it wants to try.

Soybeans

A surging US dollar, sluggish demand tone out of China, good weather in South America, and incredibly thin volume helped to create yet another roller coaster say in the soybeans. After opening lower only to climb into positive territory, soybeans plummeted from 2 higher to lows of 34 lower and closing within a penny of the lows. This trade has put in a decisive head and shoulders on the chart, with an area of execution at a neckline of roughly 10.08 in the January contract. Despite weekly sales numbers coming in above the expected range at 1.45 mmt and up 34% from the 4-week average, soybeans may have begun the journey back to retest their lows. A substantial hurdle remains for those bearish beans, as crush margins still favor higher prices, but for now the balance seems to be tipping back toward ample present and predicted supply.

Wheat

Wheat broke through into new highs today on low volume and news of cold weather out of Russia could impact their previously expected exports. Russian Sovecon updated their estimates of the Russian grain crop today to 86 mmt versus this year’s production of 104 mmt. Offsetting this contraction slightly are Ukrainian wheat exports that are nearly 1.6 mmt over last year’s numbers.

Weekly export sales jumped this week to 431k metric tons, up 19% from last week and 16% from the average of the past four weeks. Overall thin volume and a continued flow of positive fundamental information helped to propel the wheat market sharply higher today.

Beef

Feeder and Live cattle trade was mixed today, with Feeders higher and lives pressured in the front months and higher in the deferreds. Front months could have been pressured also by long liquidation as a weekly close under 170.90 confirms Monday’s key reversal day.   Cash cattle were steady to lower today, and boxed beef was supportive as well with the select up +1.89 at midday. The USDA estimated slaughter came in at 115,000 head on Wednesday bringing the weekly total to 347,000 head.

Pork

Hogs were weaker today led lower by cash trade and spiraling cut-out values. The February contract looks especially weak as the mix of net long speculators and low closes could set the tone going forward unless the market encounters a production problem in the near-term. Meanwhile, cut-out values are at their lowest level since February, with new lows forged today.

USDA estimated slaughter came in at 431,000 head on Wednesday, bringing the total weekly to 1.3 million head ahead of last week’s and last year’s slaughter pace.

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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