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Closing Comments

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Closing Comments

 

Corn battled to a virtual draw today, + ¾ (Mar). USDA weekly corn inspections for the week ending Dec 21st were under expectations, announced at 609,281 MT vs. estimates of 750K MT. However, it was announced this morning that Mexico purchased 134,148 MT of corn for 2017/18. Impending NAFTA negotiations the second half of January will be closely monitored by the Ag community, with Mexico playing a very important role. Corn export shipments are down 40% from last year. According to AgResource, with managed funds sitting on sizeable net short positions, the risk vs. reward favors the bulls heading into the January Crop Report.

 

Soybeans saw short-covering in the post-Christmas trade, with support from rising palm oil, proposed legislation for a renewal of the U.S. biodiesel tax, and South American weather uncertainty, +10 ¼ (Mar). From a technical perspective, beans are oversold, with a RSI in the 20’s. USDA weekly export inspections had soybeans right around estimates of 1,300,000 MT at 1,283,200 MT. Soybeans are still lagging last year’s shipments by 13%. U.S. soybean quality was given a boost by the Soybean Export Council, which has evaluated this year’s crop as equivalent quality to last year. Hopefully, this will boost China’s confidence to ramp up their purchases.

 

Wheat traded in sideways range, falling –2 ½ (Chicago March). Hard red winter also demonstrated weakness, -2 ¼ (KC March), while Minneapolis spring ended – ¼. There is some continued concern about the potential for winterkill over the next few days, as extremely frigid temps will be experienced across the U.S. Plains, with little to no snow cover. Longer term, the extended forecast for the Central U.S. is trending warmer for early 2018. USDA weekly inspections were a bright spot, reported at 493,550 MT compared to projections of 450K MT.

 

Live Cattle had a break-out session, in spite of Friday’s more bearish than expected Cattle on Feed Report, +2.900 (Feb). The Dec Cattle on Feed report featured significantly larger Nov Placements and total Cattle on Feed supplies at 108% of a year ago. Providing support, the Cold Storage report indicated that frozen boneless beef stocks declined at a greater rate than expected in November, even with Australian imports filling some of the demand.

 

Hogs showed particular strength in the front month, +1.550 (Feb), while the deferred months did not share quite the same enthusiasm. The Hogs & Pigs report last Friday was seen as slightly bearish, with total number of hogs up as well as breeding inventory. The number of pigs per litter also went up 1%, which when coupled with farrowing intentions up 2.3%, would imply an overall increase of +3% slaughter in the Sep-Nov period. This would all but assure record supplies next fall, according to the Daily Livestock Report.

 

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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