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Closing Comments

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Closing Comments

 

Corn was able to keep yesterday’s momentum going after technicals from Friday were pointing lower, +2 ¼ (Dec). The University of Illinois took a look back to the 1980’s and found farmers are capable of planting their entire corn crop within an average of two weeks. This study included the three “I” states of IL, IN, and IA. At this point, there is not a big planting problem to worry about even though the crop is only 5% planted compared to the 15% average. However, if we get to May 7-10 and are not 50% planted, more concern will be warranted. Corn planted after May 15th is known to show declining yields. In Brazil, mounting worries are surrounding the most recent forecast, as nearly the entire safrinha second crop growing area is not expected to receive any rain in the next 10 days. If this materializes and yields are downgraded, expect to see a rising demand for U.S. exported corn.

 

Soybeans were able to rebound on strength realized from an important export sale, + ½ (Nov). The rising Dollar of late has been putting pressure on the market. But, the streak of eight consecutive days without an export announcement was broken this morning with Argentina stepping up and purchasing 130K MT. The quiet spell from China is not to be ignored though, and U.S. trade representatives are reported to be considering a trip to the PRC to discuss face-to-face. All eyes are squarely focused on demand and the U.S. crop. Look for more sideways trade leading up to the May WASDE Report.

 

Wheat gained traction from unimpressive winter wheat conditions were announced yesterday, Chicago SRW +9 ¾, Kansas City HRW +9 ¼ (July). Winter wheat rated good/excellent is unchanged from the week before at 31%, but this is well below the average of 54%, with 37% poor/very poor. World wheat prices continue to appreciate in value, with Australian wheat into new seasonal highs. Russian wheat has also risen in price. However, the stronger Dollar is negating some of this price opportunity. Wheat is a more global product than corn and beans, and supplies are plentiful. Russia’s record crops and improved logistics are neutralizing any notions of tightening balance sheets and weather elsewhere. Minneapolis HRS +3 (Sept).

 

Live Cattle had a weak finish after sporting positive numbers most of the session, +.175 (June). Feeders and the cattle deferred months all finished in the red. Although the Cattle on Feed Report was not considered bearish, the number of animals On Feed is up 7.4% over last year, which equates to 810,000 head. Front-end cattle supply is projected to reach a record high by August. On a positive note, rising employment and wages equal growing beef demand.

 

Hogs are trending lower under the weight of overbought technicals and a wide cash basis, -1.550 (June). The premium of June futures to cash is a big hill for cash to climb, considering the spread is over $18, more than double the average for this time of year. As a result, sellers came out in force, driving the market lower.  

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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