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Closing Comments


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Closing Comments


Corn got through liquidation ahead of First Notice Day for Dec with a modest gain, +3 ¾ (Mar). Ethanol production continues to outpace last year, in spite of concerns over declining exports to Brazil and China, as positive ethanol margins are encouraging more output. The EIA Ethanol report showed production up 5.34% over the same week last year, the 2nd highest weekly output on record. Stocks are up slightly over last week, but in a large way over last year by 19.49%. Corn used for ethanol is impressive, at 110.93 million bushels, well over the weekly average of 104.06 million bushels needed to meet the USDA overall yearly estimate. In exports, the USDA reported a private sale of 101,600 MT of corn to “unknown” destination for 2017/18.


Soybeans traded both sides of even before finishing – ½ (Jan). If concerns about dryness in Argentina began to get “legs”, soymeal would be hit the hardest from a major crop loss. In U.S. terms, Argentina and Southern Brazil’s growing season now is equivalent to the May timeframe. So, there is still a long ways to go, but the soil profile is being closely monitored. Funds do not seem to be eager to find themselves in a short position with time and risk on the table. In exports, the USDA announced a private sale of 263K MT of soybeans to China for 2017/18. While South American weather has not been threatening to-date, Brazil still has 15% of its soybean crop to plant, and with a possible La Nina pattern looming in the future, it is still too early for analysts to get too overconfident about yield prospects.


Wheat was able to benefit from a bounce, with buying occurring in the winter wheats, as prices have been trading in areas of new lows. Chicago SRW +5 ½ and Kansas City HRW +3 ¾ (Mar), while Minneapolis spring wheat joined the party, +1 ½ (Mar). The upcoming week will feature a more active export trade, which should provide some support to the market. Also, keep in mind that managed funds are positioned very short, so there is less incentive for them to drive the market lower. The USDA long-term baseline projections released yesterday indicated that U.S. 2018 all-wheat acres will be down from 46 to 45 million acres. In South Africa, the crop estimating committee is predicting their 2017 wheat production to be 4.4% lower than their last estimate, while India is expecting a 5% increase to 2018 production.


Live Cattle futures tried to push lower yesterday but were met with selling indecision. Today, futures continued the recent uptrend, finishing +.825 (Dec). While federally inspected cow slaughter is up 7.3% over last year and supplies are up, the market is still trying to get a handle on cattle herd liquidation/expansion in the year ahead. Demand for beef is good, and opportunities abound with China in the future. Will big supply ahead limit a technical bounce in the near-term?


Hog futures had a setback from their sharp ascent this week, -.675 (Dec). Bearish news this morning related to increasing hog weights were a reality check to long speculators. The weekly Iowa/Minnesota average weights for the week ending November 25th came in at 285.8 lbs, up 1.3 lbs from last week and 5.3 lbs above the same week last year. What does this mean? Some hogs were backed up in the country and there could be a short-term surge in pork production, according to Hightower.


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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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