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Closing Comments

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Closing Comments

 

Corn ended the week in a defensive posture, -5 ½ (Dec). Today marked Option Expiration for the May contract. December corn closed at its lowest level since the day prior to the March 29th Acreage Report. Favorable forecasts in the Midwest are getting all the attention, but longer term fundamentals have a more optimistic outlook. In trade news, NAFTA negotiators are hoping to find agreement “in principle” in the next few weeks. There are signs that there could be a deal in the works – auto production and agriculture are the two biggest areas that need to find common ground among the North American trading partners.

 

Soybeans broke lower, filling the gap on the chart left from two weekends ago, -7 ½ (Nov). In addition to negative chart action, looming uncertainty over trade wars and the possible shift of spring wheat acres in the Northern Plains to beans due to weather delays, is having an effect. From a demand standpoint, it is hard to see how the tariff situation has much impact overall. If China shifts more buying to Brazil, the U.S. will likely see a transition of European buying to the States. Also, Chinese crushers are squawking just as much as the American farmers about tariffs, as they need beans and do not want to see the flow interrupted. Is it possible that the Chinese could actually use soybeans as a concession to negotiations because of how important they are to their national appetite? No new export sales were announced this morning, as the PRC pitched a shut-out this week.

 

Wheat took the biggest hit today with all three complexes in the red: Chicago SRW -13 ½, Kansas City HRW –12 ½ (July) and Minneapolis HRS –12 ¼ (Sept). The positive condition reports for HRW earlier in the week combined with more friendly forecasts have the market in a risk-off mood. Spring wheat seems to be suffering from a poor export sales report yesterday morning which included 61K MT in cancellations. Europe’s exports are also hurting in large part to Russia’s dominance, as Strategie Grains lowered their export estimate by 900K MT for EU wheat exports in 2017/18 to 20.3 MMT. The Plains Crop Quality Tour will commence on the 30th, so look for results to be influential.

 

Live Cattle closed strong after early weakness, with the Cattle on Feed Report on tap this afternoon, +.725 (June). USDA boxed beef values ($211.54) have contributed to the beef market achieving its lowest level since February 2016. Cattle on Feed data will be released at 2pm CDT.

 

Hogs tailed off after reaching a high yesterday not seen since March 16th, -.525 (June). Technically the market is overbought, and carrying a large premium to cash. The cash market will need positive news to stimulate buying interest.

 

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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