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Closing Comments


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Closing Comments


Corn followed wheat and broke out to a new high bolstered by short-covering, +2 ¾ (Mar). South American weather in Argentina is just too dry for bearish mindsets. The movement of cash corn has been brisk, acting as somewhat of a check to rallies. It is likely there is still plenty of room for funds to cover as they are seen to be 175K+ net short. Corn demand got another boost, as the USDA reported a private sale of 132K MT to Spain for 2017/18. According to AgResource, this is an indicator that Latin America has run out of corn and the U.S. will have the market to itself in the coming months. U.S. ethanol has been steadily improving over the last 7-10 days – Look for the EIA weekly report tomorrow.


Soybeans are building in more weather premium due to a hot and dry Argentina in the near-term, +8 ¾ (Mar). China is due for some significant purchases as crushers are likely getting low on inventory due to large cash meal trade. Are they waiting for a market correction? If so, the Chinese are probably hoping for improved South American weather forecasts, but if this does not materialize their hand may be forced. PRC crushers are not as forward bought this year as the rising yuan has made purchasing less attractive. At this rate, it is hard to imagine that beans will not add significant U.S. acres, so producers should carefully consider the benefits of being hedged.  


Wheat is on a “tare” (no pun intended) as poor winter wheat conditions announced yesterday have funds busily covering their shorts. The winter wheats led the way with Kansas City HRW out in front with another big breakout, +16 ¾ (Mar). Chicago SRW followed suit (+8), and the MN spring variety also jumped on the bandwagon, +2 ¾. This may not be a long-lived rally, as there is still plenty of world wheat stocks to sell and the Black Sea region is a formidable force, without some new weather adversity. Nonetheless, with U.S. wheat conditions down across several states, with Kansas and Oklahoma at 14% and 4% good/excellent respectively, traders are feeling exposed with large net short positions.


Live Cattle filled the gap from yesterday’s spike up, -.875 (Feb). Strong demand from improved consumer confidence is providing support. Economists expect January consumer confidence to go up over December’s 122.1 level, but are mixed as to how strong.


Hogs traded in a sideways range in the front month, while the deferreds experienced more volatility. February closed +.050. There is a large short-term supply that is putting a damper on the market, but like in cattle, the meat complex in general should benefit from increasing consumer confidence and a solid economy. Belly prices continue to stay firm.


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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