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Closing Comments

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Closing Comments

 

Corn responded to a “neutral” USDA Report in an indecisive manner, equaling yesterday’s high before faltering, – ¾ (Dec). Ending U.S. stocks were 2.182 bbu compared to 2.127 bbu last report, but below expectations of 2.196 bbu. Feed and residual was docked 50 mbu, which contributed to the increase over the last stocks’ projection. Argentina and Brazil both saw yield reductions, with Argentina now behind last year’s 41 MMT to an estimated 33 MMT. World corn stocks were also down from last month’s 199.2 MMT to 197.8, and compared to last year’s 230.9. Look for the market to add weather premium in the near-term with wet and cool in the U.S. planting forecast, coupled with declining world stocks.

 

Soybeans could not hold onto early big gains off a “bullish” Report, ending +4 ¾ (Nov). The first bit of good news came in the form of U.S. ending stocks, as they were estimated at 550 mbu compared to the last USDA thought of 555 mbu and average estimates of 575 mbu. The crush got a boost of 10 mbu while exports were left unchanged despite trade war talk with China. As expected, Argentina got a downgrade with their yield now estimated at 40 MMT compared to last month’s projection of 47 MMT and last year’s 57.8. Brazil was bumped up 2 MMT to 115 MMT. World soybean ending stocks were also reduced, as they were pegged at 90.8 MMT compared to last month’s 94.4 and last year’s 96.7.

 

Wheat showed mixed results, on the heels of a “bearish” Report. The winter wheats were on both sides of unchanged with Chicago SRW +2 ½ and Kansas City HRW -1 ¼ (July). Spring wheat had the largest gains early but faltered, -1 ¼ (Sept). U.S. ending wheat stocks were penciled in at 1.064 bbu, lower than last year’s 1.181 but higher than the average estimate of 1.037. World wheat stocks were up to 271.2 MMT compared to ideas of 268.9 and last year’s 254.6. However, the weather in the U.S. Plains has not been cooperating, and looks to have more snow and cold in store for the Northern Plains. The declining Dollar was also a supportive factor to trade today, as the U.S. needs all the help it can get to compete with less expensive Russian wheat, which continues to dominate exports.

 

Live Cattle was mixed, with June showing the highest trading volumes, -.400. Cattle hit a new low last Wednesday, but has struggled to be able to leverage that into a sustained rally. Factors causing weakness include large supplies, poor demand and weather, as well as long liquidation by traders.

 

Hogs, like cattle, had the largest trading volumes in the June contract, and also finished in the red, -.825. Today was a departure from yesterday, which featured a huge positive bar on the chart as seasonal buyers were out in force. June hog futures are currently at over a $20 premium to the cash market, which is much higher than the five-year average premium of $7.40.

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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