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Closing Comments

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Closing Comments

 

Corn traded right around break even today, before finishing positive, +2 (Dec). Managed funds are very short, as evidenced by the Commitment of Traders report Friday afternoon, at an estimated 258K contracts heading into today – if their bet goes against them, short-covering will commence in earnest. Corn will be transitioning from supply to demand issues over the next 2-3 months. In the short-term, it does not appear that South American weather will be supportive, but there is still a 75% of La Nina forming. Corn may be close to pricing in supply, because demand is definitely present. Weekly inspections gave a little boost, as the USDA announced loadings at 632,793 MT for the week ending Nov 16th, above estimates of 600K MT. China created some recent excitement with up to 10 cargoes booked off the PNW, and room to import more under their 7 MMT current quota regime.

 

Soybeans found weakness in a break in soyoil but persevered to a virtual draw, – ½ (Jan). Palm oil futures led the soyoil move, based on news out of India (world’s largest vegetable oil importer) of them raising the tax on palm oil and other oils. With uncertainty over South American weather and tightening soyoil supplies, soybeans are vulnerable to long liquidation, as the COT report showed them with a significant long fund position. There is a lack of news this holiday-shortened week to spur much action though, and Argentina is forecasted to receive some much needed rain. Weekly USDA inspections were solid, coming in at 2,131,354 MT compared to expectations of 2 MMT.

 

Wheat seems to be taking a “risk off” approach to start the week. Minneapolis spring led the way, -9 ¼ (Dec). Weekly export inspections were disappointing again, as the USDA pegged them at 259,264 MT vs. estimates of 350K MT. Russia has been hard to keep up with, as their export prices are maintaining in the same range, and sales are up 26% over last year. The U.S. is not competitive at this level, making it that much harder for the market to rally in the short-term. However, keep an eye on the lack of rain on the red winter wheat belt, and extensive dryness developing in Europe. The winter wheats ended with Chicago SRW –5 ¼ and Kansas City HRW -6.

 

Live Cattle was down on a less than positive Cattle on Feed report, -1.750 (Dec). Both the On Feed and Placements for October were larger than expected, fueling concerns over large supplies. This in conjunction with the COT report showing a huge net long position by speculators, resulted in more long liquidation selling.

 

Hogs continued the reversal of the past few days after 10 consecutive sessions in the red, +1.375 (Dec). Technically, the daily bars on the chart are showing a pattern of higher lows, and were able to clear and close above both the 100 and 200-bar moving averages. Providing support is a large discount of futures to cash, at $5.45 compared to $0.35 on average year-to-date. Will futures come up to meet cash by contract expiration or will cash continue to push lower and come more into alignment?

 

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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