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Closing Comments

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Closing Comments

 

Corn is struggling under the weight of large supplies and a lack of substantial news, -1 (Mar). Some positive factors providing a measure of optimism include a hot and dry outlook for the next couple of weeks in Argentina, a sixteen month high in Chinese corn futures, and a potential cut in Brazilian second crop corn acres by 20-30%. Managed money continues to hold a very large net short position, and is cautiously monitoring any changes to the market dynamics. The EIA Ethanol report came out today and it showed production up a solid 3.94% over last week and 8.31% over last year. Ethanol stocks are also up (2.27% over last week and 21.66% over last year), so demand will be key to maintain these levels. Corn used for ethanol needs to average 103.76 million bushels weekly to hit the USDA yearly target, and this week eclipsed that by over 11 million bushels. Stats Canada predicted their 2017 crop to exceed last year’s by almost 1 MMT.

 

The Soybean complex had a correction after yesterday’s strong action, -5 ¾ (Jan). Soymeal and Soyoil futures fell in step. January futures ran into resistance at 10.13 for the second consecutive day and failed to sustain. It is a weather traded market, and today featured scattered showers across Central Argentina. It is premature to expect weather to prop up the market indefinitely, even with complete dryness on the map in the near-term. There were no new export sales announced today, other than a reported correction to a Nov 30th sale to China from the 525K MT originally reported 393K MT. Stats Canada’s latest soybean estimates are for a yield 7.717 MMT, down from the last projection of 8.32 MMT in September, but well above last year’s production of 6.55 MMT.

 

Chicago Wheat pushed into new lows, influenced by the crop report out of Canada, -7 ½ (Mar). KC hard red winter and Minneapolis hard red spring varieties followed, -8 and –13 ½ respectively. Stats Canada’s “all wheat” estimate came in at 29.984 MMT compared to the expected 28.00 MMT and 27.1 MMT in November. This is still behind last year’s 31.73 MMT production, but considered bearish vs. expectations.

 

Live Cattle continued to affirm bearish mindsets, with February down for the 5th consecutive day, -1.250. Long liquidation selling is continuing in the absence of supportive supply news. January feeders are at the lowest level since September 15th, with poor chart technicals. Seasonal strength in beef is providing a measure of support.

 

Hogs pushed lower, filling the gap left on the February chart from trading the day after Thanksgiving, -1.550. It is a battle between short-term large production and recent positive exports and firm cash markets. The pork cut-out yesterday at $84.03 is at the highest level since September 5th and the Lean Hog Index is on the rise. The large premium of Feb futures to cash is causing some indigestion, as traders are not comfortable with this ratio at this time of the year, with growing supplies on the horizon. 

 

Closing Market Snapshot  

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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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