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Closing Comments

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Closing Comments

The US dollar index slid to its lowest level in three months with US economic headwinds creating doubt in many who had placed long bets on the strong dollar. The earlier position by the Fed for a series of rising rates in 2016 is looking less likely as unemployment in January was greater than anticipated.

Corn

Corn can’t hold early gains on anticipation of relief rains reaching Argentina growing regions.

Corn was the export standout on the weekly USDA sales reporting at 44.452 mln bushels. The US recent competitiveness has supported export sales but competition from wheat and upcoming South American supplies will likely provide some challenge in maintaining the pace.

Technically corn has continued to support trade above the 50 day moving average but has been unable to break through the 3.73 wall in the March contract. The daily contract is overbought in the stochastics and has now crossed for lower. The trade will watch how sellers react to the 3.66-3.67 area.

Soybeans

Soybeans lower on poor export sales and cooperative South American weather.

USDA export sales for the 15/16 came in at a negative -1.601 mln bu thanks to the recent Chinese sales cancellations. This is worse than the market was anticipating. Soymeal and soy oil export sales came in line with expectations.

The soy oil continues to gain on meal with the global demand for cooking oil strong and the funds still committed to the long soy oil / short meal position.

Brazil’s Conab lowered its forecast for the country’s soy harvest to 100.9 mln tonnes, off from their previous estimate of 102.1 but a record nonetheless.

Stats Canada canola stocks as of Dec 31 were reported down 3 percent from last year but above the trade estimate.

Wheat

The falling dollar couldn’t overcome the reminder of poor wheat demand.

USDA reported disappointing weekly sales of 2.432 mln bushels of old crop wheat, a marketing year low and a quarter of what the trade was anticipating.

Stats Canada reported Canadian all-wheat stocks as of Dec 31 at 20.7 mln tonnes, down 12 percent from a year earlier and below the trade estimate of 21.8 mln.

Algeria’s state grain agency bought 840,000 tonnes of milling wheat earlier this week for an estimated $178 a tonne – one of the lowest prices paid by the agency in years.

The trade is anticipating an increase in the USDA’s monthly supply/demand report on Feb 9.

The hope for the wheat market is for a return of weather premium as the northern hemisphere crop emerges from dormancy into a spring with the possibility of cold front threats.

Livestock

Cattle give back early gains while hogs find support.

The cash market news of late last week seems to have had a delayed reaction as buyers were more active yesterday. A shift in the outside markets as well as this week’s snowstorm limiting supply may have also contributed to heavier buying midweek. Although the demand tone remains negative beef demand may be helped by crude oil turning as well as a higher stock market. Lower energy prices may be sparking better consumer demand with a bounce in disposable income. The futures market has been supported with the discount to cash as well as a better tone for overall demand.

Although the hog market is vulnerable to a near term pull back due to an overbought condition as well as an expanding hog herd, so far we are still holding near the most recent highs. The February futures are still holding about a $2.50 cent premium to cash with one week left until expiration. Slaughter was down 173,000 from last week’s pace but so far has not contributed to pork values improving. Weights are slowly coming down but are still slightly above last year’s levels.

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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