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Closing Comments

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Closing Comments

 

Corn traded sideways as traders adjusted positions pre-Report, EVEN (Dec). NAFTA negotiations have stalled with the U.S. taking a firm stance, making it less likely that an agreement will be reached by mid-May. This would make it difficult for Congress to ratify the treaty before mid-term elections. This coupled with a Mexican Presidential election in July, could also complicate the process. Ethanol is also a hot topic, as an agreement was reached in principle between lawmakers, Big Corn and Big Oil that would involve adding RINS to exports in exchange for E-15 blending year around and further scrutiny of the “hardship waivers” (that had been generously approved by the current EPA Administration). The EIA weekly report was released today showing ethanol production up 0.78% over last week and 3.38% over last year. Stocks were down 0.80% vs last week and down 4.73% from last year. Corn used for ethanol was a solid 108.37 mbu, which is well over the 103.148 mbu average needed to hit the USDA annual target.

 

Soybean traders took a risk-off approach today, by liquidating length ahead of the USDA Report tomorrow, as trade tensions with China loom in the background, -1 (Nov). The May Report is one of the more important releases of the year, as WASDE will give a glimpse into their view of updates to the U.S. crop balance sheets as well as a first look at 2018/18 world stocks. It will help to establish a trading range into summer, where beans will need to see a story develop affecting U.S. crop potential. Look for more volatility tomorrow and into the end of the week.

 

Wheat fell on weakness from the Dollar and news of moisture over the next two weeks for Russia and the Black Sea Region. Additionally, it is expected that WASDE may ratchet down the export estimate, which would increase ending stocks. World wheat supplies are plenteous, and it will take some kind of a world issue to instigate a longer-term rally. Adding weight to the market, is the rising U.S. Dollar, which is making it even harder for the U.S. to compete on the global stage. According to AgResource, the premium of U.S. Gulf HRW to Russian equivalent wheat is $1.40/bu. Results from today: Chicago SRW -4, Kansas City HRW -6 ¾ (July) and Minneapolis HRS -3 ¾ (Sept).

 

Live Cattle saw red across the board today, with June -.625. Cattle futures have followed a gentle up-sloping trend the last month, as short-term demand factors have been strong. Will the market be able to absorb the surge in beef production in the 2nd quarter?

 

Hogs were mixed across the months, with on June trading in the green, +.275. News that NAFTA may not meet the U.S. self-imposed deadline of mid-May to reach an agreement did not help matters. And, China export inspections are slowing down the flow of pork, according to Hightower.

 

USDA Report tomorrow at 11am CDT – industry expectations are bullish corn, neutral soybeans and bearish wheat.

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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