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Closing Comments

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Closing Comments

 

Corn drafted off beans with buying on large volumes, achieving its 2nd highest close of the year +3 ¼ (Dec). Volatility rates were also up, as funds were active buyers of out of the money options in all the grains. The market seems to have put positive planting weather in the Central U.S. aside, as more focus is on Parana safrinha corn that will not see rain for 11-15 days. In the U.S. the Drought Monitor is showing normal to above normal soil moisture across most of the Midwest. Funds are quite net long corn contracts, and it appears they are intending to hold the risk of weather premium for now. Stats Canada reporting came in above expectations, showing estimated corn acres planted in 2018 at 3.758 million acres vs expectations of 3.5 and last year’s 3.57. Look for weather and talks with China to drive price direction next week.

 

Soybeans were up significantly with a positive geo-political atmosphere, less Stats Canada acres and a logistics issue in South America +13 ¾ (Nov). North and South Korea announced that they will plan to denuclearize with the help of China and the United States. This coupled with a U.S. delegation on the way to China for meetings early next week to begin to resolve the trade dispute boosted optimism. Soymeal led the rally today as large South American meal premiums will likely shift demand to the U.S. The news of the disabled Argentina dock at a port in Rosario (that exported 22% of the country’s soymeal) is starting to sink in. Not to mention that Argentina is already short on supplies with the severely reduced crop this year. The PRC will be celebrating May Day through next Tuesday, so this may be reflected in the daily export log. Stats Canada 2018 soybean acres are estimated to be 6.452 million acres, less than expectations of 7.1 and last year’s 7.28.

 

Wheat saw buying of the winter varieties, with Chicago +9 and Kansas City +9 ½ (July). The Drought Monitor is showing 37% of winter wheat growing areas in some stage of drought (poor/very poor). Hard red winter wheat conditions have continued to trend slightly worse. Spring wheat reacted negatively to the Stats Canada acreage report before a strong finish, +5 ½ (Sept). Last year’s acres totaled 15.801 million acres, while this year spring wheat acres are estimated to be 18.241 million acres. Durum wheat acres are also expected to rise to 5.777 million acres, over expectations of 5.4 and last year’s 5.21.

 

Live Cattle was able to post large gains into new short-term highs, as choice and select cuts are both up on solid demand, +2.650 (June). Seasonally, cattle typically makes it highs in April, as grilling season is coming in to full swing. Also, providing support is the premium cash is holding to the futures market. On the flip side, the beef market has a plethora of supplies, with steer carcass weights an average of 19 lbs over last year and 7 lbs over the five-year average, combined with elevated slaughter rates.

 

Hogs saw more liquidation selling, as cash is trailing futures by a large gap, -1.375 (June). Packers have been slaughtering at a brisk clip, but hogs are still running 1.3 lbs heavier than last year. The pork trade has also slowed and the pork cut-out is down. It is imperative that NAFTA and Chinese trade issues come to a swift and positive conclusion, as this could be the bullish impetus needed to get things going back in a positive direction.

 

Closing Market Snapshot  

 

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