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Closing Comments

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Closing Comments

 

Corn was able to rebound for a small gain after testing support on the chart, + ½ (Dec). The EIA Ethanol weekly report is a closely watched barometer of corn usage, and today it reported that ethanol production was up 0.09% over last week, and 5.49% over last year. Ethanol stocks were down slightly from last week by 0.060% but up 11% over last year same time. Corn used for ethanol continues to exceed the weekly average of 104.539 million bushels needed to reach the USDA total yearly estimate of 5.475 billion bushels, as this week it tallied 109.99 million bushels. Unleaded gasoline and crude stocks are down 5% and 6% respectively from last year. The trade is expecting a boost in the national yield from the USDA’s 171.8 bpa in October to 172.4 bpa. All eyes are on the USDA at 11am tomorrow.

 

Soybeans found support on a surge in soyoil and pre-report positioning by traders, +2 ½ (Jan). Additionally, the Chinese have indicated that they plan to sign for more U.S. soybeans, in conjunction with Trump’s visit this week. While it is more a symbolic gesture than a binding agreement, nonetheless it is an important show of future trade intentions. Regarding the important USDA report tomorrow, the trade is looking for a reduction in yield from 49.5 bpa to 49.3 bpa, U.S. ending stocks to decline by 10 mb to 420 mb and world stocks to drop to 95.5 MMT (reduction of 550K MT). Look to see if soybeans can break through and close above solid resistance in the $10 January area.

 

Wheat All the wheat rebounded into the close led by a “spring break” to the topside, Minneapolis HRS +6 ¼ (Dec). Wheat does not have much fresh news to latch onto, with corn and beans not providing impetus for rallies with their sideways movement.  It was reported that Egypt’s GASC purchased 120K MT of Russian wheat today, as the strong Dollar is hampering the U.S. from vying competitively for this highly sought after business. Winter wheat finished: Chicago SRW – ¼ and Kansas City HRW +1.

 

Live Cattle closed sharply lower for the third consecutive day, -1.700 (Dec). It is the same storyline as yesterday featuring more long liquidation and profit taking, with the market overbought. Last year saw retailers book beef features for the holidays in large numbers due to low prices – it remains to be seen how higher beef prices will impact this year. Next up to the downside is a technical gap left on the chart from last week – will futures continue the descent tomorrow and fill the gap?

 

Hogs followed cattle’s lead lower, losing ground for the 6th consecutive day, -.375 (Dec). The deferred months showed even larger losses, with Feb -1.125. Like cattle, the market is overbought and speculators have taken some profits and liquidated long positions on concerns of large supplies and record slaughters ahead. Exports are the key to the demand side, with a large percentage of U.S. production sold abroad. 

 

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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