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Closing Comments


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Closing Comments


Corn was pulled lower by soybeans, as South American weather forecasts are non-threatening, -1 ¾ (Mar). The next 60 days will be critical to trade in this regard. The other underlying tone of concern relates to NAFTA and trade relations in general. Cargill, for one, is mounting a pro-NAFTA campaign to help bring pressure to bear and tout the benefits of the trade agreement. Trump will get to hear from farmers in person on this issue when he visits the American Farm Bureau Convention in Nashville on Jan 8th.  EIA Ethanol reporting showed another strong week for ethanol production, with the week ending Dec 22nd up 1.21% over last week and 6.03% over last year. Ethanol stocks were down slightly by 1.29% vs. last week, but still well over last year by 17.92%. Corn used for ethanol was a solid 113.46 mbu, well over the 104.397 mbu needed to meet the USDA annual estimate of 5.525 bbu.


Soybeans hit a new low as they filled the gap left from Tuesday’s post-Christmas open, -10 ¾ (Mar). South American weather is currently leaning negative, with most parts of Brazil and Argentina on track to receive adequate moisture in the short and longer-term forecasts. Managed funds have continued to press the short side, adding more positions to satisfy bearish mindsets. Related to China, next week should bring more clarity to enforcement of a recent deal struck between the USDA and China. The deal involves Foreign Matter restrictions on U.S. soybean shipments to meet a level of 1% FM and below. Beijing is demanding higher standards due to complaints of higher weed seeds in the mix. They gave the U.S. until January to remedy the situation. The U.S. has decided to label all shipments with the amount of FM, but this has farmers concerned that China will be now able to get higher quality without paying the difference.


Wheat provided mixed results: Chicago – ¼, Kansas City +1 ¼ and Minneapolis –2 (Mar). KC hard red winter wheat is most affected by current weather concerns, due to an expanding Drought Monitor in the Northern Plains and W Midwest combined with sub-zero temps and dry soil. However, it is a bit early for this to seriously challenge the market, but will continue to get attention and chatter among the trade. Weather rallies have traditionally been hard to maintain in Dec and Jan for wheat.


Live Cattle found support in cold weather and strong consumer demand, +1.250 (Feb). Cash cattle  offers are up over last week. Open interest was up yesterday but volumes are lower this week. Boxed beef cut-outs are also showing positive gains. There is a large supply of cattle on the horizon, so it is crucial that slaughter numbers do not slow down. The December cattle contract expires Friday at noon.


Hogs traded choppy on both sides, with an “inside” trading day on the charts, +.525 (Feb). The recent rally has shown an increase in open interest, and technically the market is now slightly overbought. Short-term supplies are leaning bearish, but frigid temps across the mid-section of the country are providing support. Will yesterday’s high be a short-term peak?


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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