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Closing Comments

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Closing Comments

 

Corn did not have much fodder to feed the bulls today as it could not resist the negative pull of wheat and beans, -3 ½ (Dec). Weather remains squarely in focus, and while it is cold, wet and miserable across much of the growing area, there appears to be a decent chance of a window of warm and moderate weather coming up after the 25th. Export shipments on the weekly USDA log were solid again this week, at 1.505 MMT, on the high end of market expectations. Corn needs a strong pace for the remainder of the year in order to catch up and reach the USDA projection of 2.225 bbu to be met. The USDA is estimating exports to be down 3% on the year. Brazil’s first crop corn is 72% harvested and safrinha second crop is seen to be mostly in good condition. Look for U.S. crop progress later this afternoon.

 

Soybeans took a dive in the latter half of the session, with profit-taking and liquidation of long positions, -9 ¼ (Nov). The NOPA Crush report was above expectations and record large, as members reported 171.9 mbu, well above the average estimate of 168.2 mbu. This compares with 153.1 mbu last year. Soybean oil stocks were in line with expectations. The USDA reported soybean weekly inspections within the range of market expectations at 445K MT. This is up a bit over last week but still below the weekly average needed to hit the USDA annual estimate. The USDA sees soy exports down 5% on the year. Globally, soybean stocks are tightening, and until U.S. planting gets underway, they will likely find support. Will more soybean acres get planted than estimated in March, due to a favorable bean to corn price ratio?

 

Wheat played a role in dragging down the entire CBOT grain complex today, with the following closes: Chicago SRW -10 ¼, Kansas City HRW -18 (July) and Minneapolis HRS -9 ¾ (Sept). Much needed rains for the Plains over the weekend and in the forecast is dampening the market. Weekly export inspections were pegged at 483K MT, which was at the top end of the range of expectations. Wheat is also running behind last year and the USDA’s number for this year. Likely, the USDA will pencil in a downward revision, as the end of the 2017/18 marketing year is less than two months away. Overall, cumulative wheat exports are down 10% from last year. Will condition reports this afternoon (which are expected to trend slightly negative) help to stop the hemorrhaging?

 

Live Cattle gapped higher out of the gates, with June leading +.525. The deferred months showed moderate losses. Recent news of cold temps and large accumulation of snow in SD, NE and MN boosted the market, as the weather is making life stressful for feedlots, young cows and calves. The seasonal trend for cattle is for higher for the next month and a half, but large supply numbers will be a reality check to rallies.

 

Hogs went the opposite direction as beef today, with June -.850. The cash market is weak, sporting a large discount to June futures. This could play a role in limiting upside for hogs, in the short-term. Pork also has a seasonal trend to gain over the next several weeks. And, this coupled with President’s Trump sudden new interest in rejoining TPP, could bode well for the complex.

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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