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Closing Comments


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Closing Comments


Corn took beans’ cue with a downside correction, -3 (May) and –2 (Dec). EIA Ethanol reporting today showed production down, compared to last week (-3.03%) and last year (-1.91%). Ethanol stocks were up 4.91% vs last week and 6.65% vs last year. Corn used in ethanol production was estimated at 106.6 mbu, which is still easily above the weekly average of 104.69 mbu needed to hit the USDA annual projection of 5.575 bbu. Ethanol is a hot topic, being the huge consumer of corn that it is, with continued talks about the RFS on Capitol Hill taking center stage. The EPA is trying to approve a waiver for a Philadelphia refiner to allow them to cut their RIN debt in half as a form of a “bail out”. This is not a positive development for ethanol, and could set a dangerous precedent, although it must be approved by legislators.


Soybeans had a substantial correction today, with May –16 ½ and Nov -15 ¼. The American Soybean Association sent an urgent letter to President Trump regarding modifying or reversing steel tariffs on China to avoid a trade war. Retaliation could send shock waves through the Ag economy, as China purchases about 52% of the U.S. total soybean production. The other factor playing into the relationship with China is the ouster of Secretary of State, Rex Tillerson, who is being replaced by Mike Pompeo. How will this affect the relationship with the PRC? Tillerson had taken a “softer” approach toward trade deficits, and now that he is gone it is likely a more hardline stance may be the modus operandi. China usually makes announcements over the weekend, so likely traders will be tentative heading into the weekend. Look for USDA weekly export sales tomorrow morning, as they are expected to be fairly sizeable.


Wheat traded counter to corn and beans, with the winter varieties both showing gains: Chicago SRW +1 ¾ and Kansas City HRW +4 ½ (July). The market seems to have stabilized in the short-term after dropping around thirty cents from highs at the beginning of the month. The U.S. Dollar has been in recovery on the heels of solid economic data, which is not supportive to exports. The GFS weather forecast is looking much wetter for parts of the Plains, which if that materializes will affect price direction. Minneapolis spring wheat finished –3 ¾ (July).


Live Cattle had large gains in the front month, +1.100 (April), while the deferred months were unchanged to up modestly. The market may be signaling a short-term low, with sellers harder to find as cattle seems to be losing downside momentum in its oversold condition. Even though supply is burdensome, demand, strong packer margins and a firm cash market are providing support.


Hogs lost ground in April (-.850), while the summer months showed solid gains. Like cattle the market is technically oversold and showing a loss of downside momentum, with pork prices showing strength and fears abating over the trade war hysteria. NAFTA negotiations will continue this month so will be important to watch the results.

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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