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Closing Comments

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Closing Comments

 

Corn continued to chop sideways to lower, -1 ¼ (Dec). The two main topics being watched closely by traders include Central U.S. weather and trade banter with China. U.S. corn export sales will begin to decline as the seasonal window is closing. The South American crop is taking a good piece of the market, as South American corn is now $.20 is below the U.S. Gulf. Corn progress reported from last week to this week was minimal, with only 3% of the crop in the ground compared to 6% on average. The next three weeks will be pivotal to bringing more clarity as to possible adjustments to corn acreage in the June 29th Report. While weather has been an impediment and the coldest April since 1907 in the Central part of the country, the future forecast is looking brighter, taking the edge off bullish enthusiasm. And, farmers have proven they can plant 40-45% of the crop in one week.

 

Soybeans made a late rally to finish +5 (Nov). While fundamentals are positive, anxiety abounds as traders await fresh news to propel the market into new highs. The spread between Brazil and U.S. has tightened, with Brazil now at a $.40 premium. This is not enough to move Chinese buyers away from Brazil. Also, now that Brazilian prices have fallen from $1.95 to $1.32, European buyers have stopped switching sales from Brazil over to the U.S. Soybean sales were quiet this morning and have been slow the last several days. However, the American farmer is very forward sold on soybeans, leaving room to the topside. Important resistance lies ahead at 10.60, the high achieved on April 2nd. If this level is breached, look for higher, with corn along for the ride.

 

Wheat showed mixed results early but all varieties ended in positive territory. U.S. weather is improving for the Plains and this has made it hard for wheat to stop the selling and attract new buyers. The winter wheats finished: Chicago +2 ½ and KC +2 ½ (July). Minneapolis spring wheat ended +2 (Sept). The crop condition reports showed HRW deteriorating in all but one state. However, the HRW crop prospects are looking better with rain in the forecast, which will likely cap attempts at rallies. Some of the HRW acres may be beyond repair, which could result in them being torn up and replanted with soybeans or another crop. Overall winter wheat conditions were at 31% good/excellent, with 37% poor/very poor. The ten year average is 48% good/excellent at this point in the season. The Wheat Quality Tour is set to kick off later this month.

 

Live Cattle saw solid gains, with June +.725. Recently, chatter has been that large supplies will overwhelm the market. But, one must not forget that demand has been very strong, with positive factors such as low unemployment, tight housing markets, and consumer confidence all playing a role. Forward beef sales are up, with end users taking advantage of low futures prices to cover future needs. The four week average exports sales are running 31% ahead of last year.

 

Hogs forged out more gains in the deferred months, as worries regarding Chinese pork tariffs appear to be offset by demand from other sources. June traded both sides before finishing slightly under, -.050. Non-NAFTA buyers are taking advantage of low pork prices, as export sales to them were 36% higher than last year. Large slaughter numbers are feeding the export pipeline. Look for significant resistance in June around 78.05, where short-term highs were achieved this week.

 

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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