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Closing Comments

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Closing Comments

 

Corn continued its gentle trend of higher highs and higher lows, +1 (Mar). Managed funds were viewed about 240K contracts short in futures and options heading into today’s trade, and there are too many unknowns for traders to hang their necks out much farther. Near-term, South American weather conditions for corn appear slightly bearish, as Argentina’s recent rains should help enable planting of the final 1/3 of the crop. And, Brazil conditions are still looking favorable. Weekly EIA Ethanol reporting was delayed until tomorrow, due to Christmas. Livestock markets have continued in a growth mode, which bodes well for feed consumption and influential to grain stocks reporting.

 

Soybeans traded weather forecasts again today, as the 12-15 day GFS model turned wetter, -3 (Mar). However, confidence in the GFS model is low as it has shown a wetter bias for weeks that has not all come to fruition. Soybeans received a boost this morning from another Chinese order for 110K MT of soybeans for 2017/18. The U.S. remains the lowest cost option to Asian markets through February and needs to close the export deficit gap. Additionally, the USDA has been able to assure the PRC that they are receiving beans with Foreign Matter at 1% or below, which is in line with their newly enforced requirement. The USDA weekly export sales report will be delayed until Friday this week due to the Christmas holiday on Monday.

 

Wheat benefited from short-covering ahead of the New Year, +5 ¾ (Chicago March). Kansas City HRW and Minneapolis finished +5 ½ and +10 ¼ respectively. The frigid cold temps across the U.S. Plains that have been getting some press, finally showed up in futures results, as Managed Funds are extremely net short and wanting to level out some of their positions heading into 2018. It will be hard for the CBOT to sustain a large break, due to the already heavily sold grain condition. Russia cashed in on another order from Egypt’s GASC for early February shipment, as the Egyptians purchased 180K MT at today’s tender. Russia has been fortunate to have warm weather, conducive to ramped up logistics and exports in December. Their prices have remained steady for the past six weeks.

 

Live Cattle’s momentum was checked today, as February futures finished -.475. However, feeders were up and cattle have not seen the negative results that might be expected from the bearish Cattle on Feed report numbers. According to Hightower, beef production is expected to trend sharply lower in the 1st quarter, which may be keeping the market from pressing the short side. The Cold Storage report has helped to neutralize bearish vibes, as it showed November beef stocks at the lowest level in three months and 92% of a year ago.

 

Hogs had another volatile day, reaching a high not seen since Nov 29th, before turning lower and ending, -.500 (Feb). The CME Lean Hog Index fell 24 cents as of December 21st and the near-term outlook is weak for pork relative to beef, due to New Year’s beef consumption traditions. The Cold Storage report is helping to keep the market in check, as frozen pork stocks fell 16% for the month of November.

 

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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