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Closing Comments

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Closing Comments

 

Corn fought resistance, finding strength in the soy complex, but still finished off a tick, – ¼ (Mar). While soybeans are focused on Argentine weather, it also affects corn to a lesser extent, as some early planted corn may be past the point of receiving the necessary rains. The well-known crop scout, Cordonnier, reduced his Argentina corn production estimate by 1 MMT. February is price setting month for crop insurance, and so far corn is right in line with last year at this juncture at an average of $3.94.

 

Soybeans were able to overcome red numbers in the overnight, finding strength in soymeal, as concerns are mounting over Argentina’s production prospects with the lack of meaningful rains in the right areas, +10 (Mar). While Brazil is expecting a great crop, it is thought Argentina’s losses will now outpace Brazil’s gains, giving the market a bullish tilt. The U.S. Dollar weakness compared to the Brazilian Real also played a positive role in propelling soybean futures. Thursday will feature the NOPA Crush Report, which will show a robust December crush rate and great crush margins. End users are under bought and will be forced to chase the rally to get their needs met.

 

Wheat of the Chicago variety put in a new short-term high before selling and profit-taking seemed to win the day, -3 ¼ (Mar). Several factors have given the wheat complex momentum this week including a lack of moisture across the Plains, rising Russian prices opening the door for European competition and managed funds still holding a fairly significant net short position. Long term, look for HRW wheat to lead if there is to be a sustained CBOT rally.  Kansas City HRW –3 and Minneapolis HRS -8.

 

Live Cattle was mixed, with front months showing modest losses while the deferreds had gains, -.225 (April). As AgResource opined, the cattle market is struggling with a strong tendency for the beef market to find new lows this week and then strengthen into the 2nd quarter. On the other hand, 2nd quarter beef production is expected to increase by a record amount this year which will work to neutralize rallies.

 

Hogs resumed their descent today after yesterday’s reversal, -1.100 (April). From a technical perspective, there are a couple of factors providing support including an extreme oversold condition and futures trading at a 500 point discount to cash compared to the 5-year average of 92 points. Fundamentally, the market is still dealing with burdensome supplies.

 

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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