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Closing Comments


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Closing Comments


Corn was able to come back and forge out a gain, likely in response to strength in soybeans and chatter centered around outside markets, +2 (Mar). After the report and heading into last weekend, it was thought that managed funds were holding a record net short position of 265K contracts. And, while yield was ratcheted up, the lack of any big surprises and with so much of the growing season ahead both here and South America leaves one to wonder how much downside is still at risk? USDA weekly inspections were a disappointment this week, as they were announced at a mere 548,389 MT vs. estimates of 850K MT.


Soybeans gapped higher at open, and were able to sustain another positive gain, +7 ½ (Mar). It is thought soybeans may be adding back some weather risk premium, as Argentine rains did not give complete coverage to all areas. Managed funds net short positions had swelled to over 100K contracts, leaving some investors feeling vulnerable after a non-bearish report for beans. USDA weekly inspections were slightly over expectations, coming in at 1,231,037 MT compared to projections of 1,150,000 MT. The NOPA December Report today was mixed, with soybean crush at an all-time record high, but oil stocks sharply higher than expected.


Wheat is still laboring under the weight of a heavy USDA report last Friday: Chicago SRW -4, Kansas City HRW –4 ¼ and Minneapolis HRS -1 ¼. However, with the Australian crop reduced another 5 MMT, and on-farm wheat stocks at low levels here in the U.S., the recipe is in place for a back-loaded export season.  The cash wheat market is signaling a possible story down the road, with basis levels that have not been seen in years. Today, the USDA announced weekly wheat loadings at 368,651 MT for the week ending January 11th, vs. estimates of 300K MT. In global news, Russia continues to dominate the headlines, snagging another Egyptian sale of 295K MT.


Live Cattle got a boost from short-term demand, as futures are significantly discounted to the cash market, +.725 (Feb). Supply is high, but with the U.S. economy purring along, demand for beef features should provide support. The Commitment of Traders Report last Friday showed all categories of traders to be in significant net long positions, although down slightly from the week before.


Hogs made a strong push, eclipsing new highs achieved on Jan 10th, +2.325 (Feb). However, big supplies loom ahead, and may be difficult to work through without lower prices. The CME Lean Hog Index has extended its climb to 68.46, which is markedly higher than last week’s 63.63. Hog slaughter continues to come in with strong numbers, up 2.9% over last year.


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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