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Closing Comments

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Closing Comments

 

Corn managed a modest gain on lower volume trade, +2 ½ (Dec). The market seems less concerned with U.S. planting delays, while keeping an eye on emerging dryness issues for Brazil’s safrinha crop. EIA Ethanol weekly reporting today was expected to show production down and stocks up. Production was down 2.42% compared to last week and up 1.61% over last year. This is the lowest production in 14 weeks. However, stocks continued their impressive drawdown by declining 2.30% compared to last week and 7.34% compared to last year. Corn used in ethanol consumption was 105.13 mbu, well ahead of the 103.601 mbu weekly pace needed to hit the USDA annual projection of 5.575 bbu. It is thought this will level will not be difficult to maintain with summer driving season ahead and ethanol margins profitable. Look for key resistance at 4.16 and support at 3.96 December.

 

Soybeans struggled in sideways trading, with a lack of new export sales news to boost sentiments, + ½ (Nov). U.S. weather looks to be more moderate and warming in the upcoming days, which may create enough of a window for planting corn, which will lessen the chance of acres shifting to beans. There were no new export sales announcements for the fourth day in a row, as U.S. exports have been somewhat constrained recently with Brazil’s basis improving, a weaker Real currency and cheaper South American meal. The recent rash of sales directed to the U.S. had given some hope of a counter-seasonal rally, but there has not been follow through. Brazil announced that it has harvested 90.5% of its soy crop. The CBOT is sitting on a large amount of open interest in contracts, and with First Notice Day eight days away more liquidation is likely ahead of option expiration on Friday. Look for key resistance at 10.60 and support at 9.97 ¾ November.

 

Wheat took the lead today based on constantly shifting weather prospects. As of now, it is trending drier across the Central Plains, with Kansas seeing limited coverage. The market always reacts to weather news, irrespective of any net effect on the yield at this point. Almost every HRW state showed decline in condition ratings earlier this week, so it almost seems like a delayed reaction. Chicago SRW +7 ¾, Kansas City HRW +8 ¼ (July) and Minneapolis HRS +3 ¾ (Sept). U.S. and world wheat stocks are growing, so we will need a weather problem in another part of the globe to get a longer term rally.

 

Live Cattle sported more gains as the market has had a firm tone due to a positive seasonal outlook for beef and strong packer margins. Two important USDA reports will weigh in later this week, with Livestock Slaughter on Thursday followed by Cattle on Feed this Friday. April Cattle on Feed is predicted to be at the highest level since 2006. June +.375.

 

Hogs broke out to a new high, well above a 50% retracement from the late February high to the April 4th low. June finished +1.775. The June contract is at about a $25 premium to the cash market compared to the average of $7.40. Will cash experience a strong seasonal rally to come into alignment, or is this level an important selling opportunity? The concern expressed by some analysts is that June has rallied too far too fast. 

Closing Market Snapshot  

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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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