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Closing Comments


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Closing Comments


Corn battled off its lows after spending time on both sides of mid-court, with the sellers getting the edge by stifling the late session rebound, -2 (May) and –1 ½ (Dec). Allendale, an Illinois commodity broker, released their findings from a 27-state survey regarding U.S. acreage intentions. The results were counter to the USDA Ag Outlook numbers offered by economists, but more in line with general sentiments as they see corn acres declining to 88.5 million from last year’s 90.2 million and for beans to increase by 2.0 million acres to 92.1. Wheat acres are expected to increase by close to a million with ND adding more spring wheat. USDA weekly export sales were giant, the largest weekly sales since December 1994. The record was set in 1990 when Russia would occasionally buy very large quantities of U.S. corn in a single swoop. If strong demand for corn can continue, the market will be very solidly supported.


Soybeans had a reversal today based on solid export sales and a positive NOPA crush report, +8 ½ (May) and +4 ¾ (Nov). NOPA members reported a month of February record soybean crush of 153.7 mbu, eclipsing the 2010 February mark of 148.4 mbu and last year’s 142.8 mbu. This was also well above trade expectations of 149.4 mbu. The soybean oil yield among NOPA members is behind last year’s 11.62 lbs/bu at 11.51 lbs/bu. Soyoil stocks also grew to the highest February level in four years. Soymeal production was pegged at 3.643 million tons vs. 3.356 last year. In exports, USDA soybean weekly sales were a solid 1.35 MMT, in the upper half of the estimated range of 900K-1.5 MMT. This is an unseasonably strong level, with China the usual leading buyer. Total commitments are still running 8% behind last year, with a corresponding decline of 8% in exports.


Wheat showed weakness across all three complexes: Chicago SRW -10 ¼, Kansas City HRW –11 ¼ and Minneapolis HRS –5 ¼ (July). Wheat underperformed on the weekly export sales log, as higher domestic wheat prices of late coupled with a gaining Dollar are hard to overcome on the world market. Sales were announced at around 220K MT compared to the range of estimates of 250K-600K MT. Egypt’s GASC inked another large transaction of 240K MT of wheat, opting for Russia and Romania as their origin of choice. It has been very difficult for any other global competitors to break into the Egyptian market, as Russia has a stranglehold.


Live Cattle was down across all months, liquidating all of yesterday’s gains, with April -1.150. As huge production lies ahead, rallies could be muted and short-lived. On the other hand, the market is technically oversold, which should help bring stability and possibly consolidation in the resistance zone.


Hogs showed losses in the front month April (-1.150) but gains in the deferreds, June +.825. In the near-term, plenteous supplies and weak pork and cash markets are holding the market in check. April hogs are in oversold territory, so will the selling be able to continue?


In Other News lawmakers have an agreement on the table to revise the 199A portion of the Tax Code with a provision to provide a balance between coops and other buyers. The flaw in the new Tax Plan favoring coops has caused an uproar, and now it is up to lawmakers to figure out how to get a revision passed. The proposed change adds language that was similar to pre-Bill, but also includes a deduction of up to 20% of net income. The deduction is anticipated to equate to 1% of gross sales plus 11-20% of net farm income from those sales. It is hoped by proponents to be attached  to the Omnibus Spending Bill set to pass on March 23rd.

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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