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Closing Comments


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Closing Comments


Corn could not break free from the pressure of beans and the heavily net short position and mindset of funds (in corn and wheat combined), + ½ (Mar). Even though there was above expected rainfall in certain Argentine areas over the weekend, the factor keeping some speculators from over-extending to the short side is that the GFS and EU South American weather models are far from agreement, even in as short of a timeframe as the 7-day outlook. Money managers are holding a net short position of 200K+ contracts, and if anything causes them to cover these positions, a bounce will be in order. No new corn exports were reported in the daily log.


Soybeans continued to shed length and price value, -5 ½ (Jan). While South American weather and potential La Nina tends to be the focus this time of year, one should not forget about overall government stability. Brazil, for instance, is seeing volatility with their Real currency, as needed reform programs have been pushed to the back burner. A weak Real affects U.S. exports negatively. Also weighing on soybean futures is the steep decline of palm oil, losing 16% in November alone. In daily export reporting, the USDA announced a sale of 145K MT of beans to “unknown” destination for 2018/19. Sales of late have been a bit disappointing considering that beans off the PNW are the lowest priced option for Asia, However, China has not been quick to resume buying with non-threatening current market forces.


Wheat was mixed in trade today, with support coming from a U.S. forecast that is still too dry and cold: Chicago SRW -1, Kansas City HRW + ¾ and Minneapolis HRS -1 ½ (Mar). Cold temps bring the elevated threat of winterkill to the North Central Plains. The trend the last few sessions has been for positive gains in the overnight, followed by the days being unable to sustain. The Commitment of Traders report showed almost net record fund short positions in both SRW and HRW contracts. There were not any fresh wheat sales reported today, but the U.S. has the lowest bid for Iraq’s latest tender, which will be reported next week if transacted.


Live Cattle traders liquidated more length, especially in the deferred months, with Feb finishing -.150. Key reports this Friday include Cold Storage and Cattle on Feed. Estimates for the Cattle on Feed report (for feedlots with greater than 1,000 head capacity) include: On Feed 106.5% of a year earlier, Placements 105.3% and Marketings 105.3%.


Hog futures seem to be under the control of the bears, -.500 (Feb). This following a volatile day yesterday that saw the Feb contract trade to its highest level since Dec 6th only to sell off sharply into the close. Ample supplies are winning the fight, as it is thought there is plenty to go around to cover retailer holiday needs. Look to Friday’s Hogs and Pigs Report and Cold Storage as a barometer for near-term direction.


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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