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Closing Comments


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Closing Comments


Corn moved yet lower, closer to support resting under $3.46 December, – ¼. Managed funds have placed their bet with a very large net short position heading into the report on Thursday. This will be the last report from the USDA on production until January 12th. While it is expected that corn yield will be raised from 171.8 bpa to 172.4 by analysts, it remains to be seen how this will affect prices as the market has known yields were rising for some time. The Thursday report seems particularly compelling this year, with many growers holding a significant inventory and hoping for an escape hatch. On a positive note, the USDA reported a new crop sale today of 130K MT of corn to “unknown” destination for 2017/18.


Soybeans seem to be the grain with storylines, as the market is anticipating a further reduction of the national yield on report day, +2 (Nov). Managed funds continue to hold a substantial net long position, as beans are not expecting any bearish surprises this Thursday. However, soybean exports are running well behind last year, with commitments down 16%. Soyoil has shown promise, and reached a high close today not seen since mid-September. Domestic demand has been helped by the duties on Argentine biodiesel, as Argentina is looking to Europe to fill the void of sales. As Argentina lowers their soyoil prices to obtain new European business, this does provide a challenge to U.S. exports. Look for January soybean resistance in the $10 area to be a key barrier for them to eclipse.


Wheat battled unenthusiastic trade by the grain complex and a strengthening Dollar. The winter wheats both had setbacks, with Chicago SRW –3 ½ and Kansas City HRW –3 ½ (Dec). The Crop Progress update yesterday afternoon showed wheat planting and crop conditions pretty much right on track with normal, 91% planted and a 55% good/excellent rating across all states. It is still a bit early for the condition rating to be taken too seriously. Minneapolis spring variety forged another modest gain, +2 ¼ (Dec).


Live Cattle continued the steep sell-off of yesterday, with more long liquidation and profit-taking, -.700 (Dec). However, providing counter-support to the market are healthy packer margins and a growing beef market, with boxed beef cut-out values up another $1.83 to $210.57. The premium of futures to cash is likely behind some of the selling, along with talk that China has lifted the ban on Australian beef.


Hogs were down for the 5th consecutive day, -.700 (Dec). Weighing on the market is the outlook for higher production in December, and a recent decline of the pork cut-out and the CME Lean Hog Index. Exports were up to 523.8 million lbs in March, but have been sluggish the last few months, according to Hightower. Like cattle the market is overbought and speculators have taken some profits and liquidated long positions.


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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