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Closing Comments

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Closing Comments

 

Corn has reverted back and found support at the magnetic 3.50 price level, as the dust is settling from the move in contract month from Dec to March. Today futures eked out a small gain, +1 ¼. The current price level may offer some value as we get further into the South American growing season. Will La Nina lower yields there and provide the market with opportunities? Here stateside, the drought monitor is starting to expand, as a mere 5-30% of normal precipitation has fallen across the Plains in the last 60 days, and the Midwest is still completely dry. Outside markets provided a boost to sentiments, as crude and raw materials were higher, the DOW up, along with gasoline and ethanol markets.

 

Soybeans have fallen down to a level that may invite some fund liquidation if they fail to support, -2 ¼ (Jan). However, futures rebounded into the close and held above previous lows. The GFS weather model today is showing a much wetter trend in Argentina beyond Dec. 17th, but there are mixed feelings in the meteorological sector as to whether these rains will come to fruition. In the meantime, it gave cause for a pause in the market, with the focus on Sunday’s weather update to confirm. Look for Monday’s trade to reflect any significant changes. A couple of export sales were announced (to China and unknown) that totaled 331K MT. U.S. soybean exports have catching up to do, and hopefully China has more unfulfilled needs. Brazil may have exhausted its inventories for now, as South American premiums are on the rise.

 

Wheat futures continued their pattern of weakness, as the winter wheat complex finished in the red: Chicago SRW –2 ½ and Kansas City HRW -2 ¾. Minneapolis spring wheat was able to inch  above breakeven, + ¼ (Mar). In global news, China’s wheat production is estimated by the National Bureau of Statistics to be higher than the USDA’s projection, 129.8 MMT vs. 127.25 MMT. Australia is still battling heavy rains and related quality issues, while India announced their winter wheat plantings are down from 20.36 million hectares to 19.09 million hectares. Wheat continues to be an uninspired follower of the rest of the grains.

 

Live Cattle has been under a lot of pressure the last few sessions, trading both sides of unchanged before settling, -.375 (Feb). Both beef and pork production are expected to be up about 4% in 2018, so pressure will be on demand to rise to the occasion. The value of the Dollar and the economy will be key moving forward, as both are trending “favorable” at this time. The USDA is expecting beef exports to increase in the coming year, which is also supportive.

 

Hogs featured a modest correction after the recent tumble in Feb futures, +.375. An important factor in 2018 will be for producers to keep feed lots current, as extra animal weights add to supplies and pressure on demand.  Once spring arrives, one would expect a little boost as grilling season kicks in. It will likely be tough for prices to appreciate much in 2018 above this year’s levels.

 

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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