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Closing Comments

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Closing Comments

 

Corn rode the strength of wheat and a somewhat friendly crop progress report, +4 ¼ (Dec). As of the end of Sunday, farmers have planted just 17% of the crop, compared to the average of 27%. This may not end up being a big deal, with favorable conditions allowing for major catch-up the first half of this week. However, this coupled with South American weather being dry in Parana, Brazil, with declining safrinha crop yields, gave an optimistic flavor to trade. After today, it is likely that managed funds will have extended their net long position back over 200,000 contracts. Technically, corn option volatility continues to grow. Not much selling is occurring from producers, as they are out planting in earnest.

 

Soybeans traded both sides of unchanged before a solid finish, +5 ¾ (Nov). Volatility is rising as uncertainty is dominating the thoughts of traders. Next week’s WASDE Report is shaping up to be impactful, with world supplies tightening. Most of the world is celebrating May Day, and will return to work tomorrow. Export sales have been seasonally slow, but some unexpected purchases by Argentina have helped fill the gap. In the bigger financial picture, Goldman Sachs reported commodities to be the top performer in 2018. It would be logical to think this will lure more investment into the sector.

 

Wheat led today’s May Day rally with world weather the lead story. Chicago SRW +18 ¾, Kansas City HRW +15 ½ (July) and Minneapolis HRS +8 ¼ (Sept). Chicago eclipsed the high achieved on March 1st (July contract). Dryness in Australia and the Black Sea Region are a concern for soft wheat while the U.S. Plains’ drought has impacted hard red. Many countries in Europe and other parts of the world are on holiday today, which likely has had some effect on trade. Wheat conditions announced yesterday afternoon showed small improvement, with winter wheat trending from 31% to 33% good/excellent. The hard red winter variety improved by 2% and hard red spring by 1%. Spring wheat planting is well behind the long term average of 36% complete, pegged at 10%.

 

Live Cattle showed weakness as trade cannot get past the idea of large supplies ahead, -.275 (June). Selling liquidation was seen across all contract months. However, the cash market and packer margins are being well supported by strong gains in the beef market according to Hightower. Will the short-term trend remain up?

 

Hogs were mixed with strong gains in May and June, +1.200 (June). The CME cash index has continued to rally, coming closer into alignment with June futures, reducing the large premium. Pork values are at the highest level since April 4th. Positive news from NAFTA this week would go a long way to aiding recovery off lows.

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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