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Closing Comments

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Closing Comments

 

Corn rebounded off early lows, as traders initially took a risk-off approach due to the trade rumblings regarding Chinese retaliation, but were able to finish +1 ¼ (May) and +1 ¼  (Dec). Trade was volatile, spanning 8 ¼ cents. USDA weekly export sales showed corn just under the range of expectations, coming in at around 1.45 MMT vs. the estimated range of 1.5-2.3 MMT. This was 33% off the four week average. On the acreage front, Informa raised their 2018 U.S. corn planted acres estimate to 88.9 million acres from 89.18, while Farm Futures’ survey indicated corn acres of 90.0 million down from 90.2 last year. Ethanol blending margins are up by around $.03/gallon since mid-February. This afternoon’s COT report is expected to show managed funds to have cut back their net long position to around 175K contracts (as of this past Tuesday).

 

Soybeans had a tumultuous day, sporting large losses early, with China and trade wars dominating the headlines. However, they were able to recover, ending -1 ½ (May) and – ¼ (Nov). Beans were not named in China’s response as a targeted product, but it is only logical to think that they will be at some point. One must not forget that even with Brazil’s big crop and a weakening Real currency, China cannot source all their needs from Brazil and needs the U.S. in a big way for bean imports. Weekly export sales were in the lower end of the range of estimates of 750K-1.5 MMT, right at about 800 MMT. Soyoil took a hit, as a measure to extend the $1/gallon biodiesel blender credit did not make it into the Omnibus bill. On the other hand soymeal finished strong, likely due to continued Argentine crop revisions lower.

 

Wheat felt the least impact of the grains, as fears of Chinese retaliation will not affect wheat in any significant way. July winter wheats finished, +4 ½ (Chicago) and +8 ¼ (KC). The forecast has not changed much, but thoughts of rain on the way for U.S. growing areas kept the rally in check. USDA weekly export sales were pegged at a robust 428,600 MMT vs. thoughts of 100K-500K MT. Customers included the Philippines, Japan, Venezuela and others. No business went to China or Algeria this week. Spring wheat was a large piece of the export sales pie, which supported Minneapolis, +7 ¾ (July).

 

Live Cattle resumed its steep descent after taking pause yesterday, -2.100 (April). This may have been nothing more than a “dead cat bounce”, as there is not a technical reason for cattle to have rebounded. Cash markets may finally be showing a little chink in the armor, taking a dip toward the large discounts of spring and summer futures. Look for Cattle on Feed Report results later this afternoon.

 

Hogs also felt the effects of China’s threatened retaliation to President Trump’s tariffs, as pork was specifically mentioned in the PRC response. April was down –2.900 and June -1.325. Weekly export sales announced this morning showed pork down 38% from last week  and down 31% from the prior 4-week average. The growing supplies of slaughter-ready hogs are neutralizing current demand levels. Also, the USDA reported that frozen pork stocks grew by 6% from last month and 8% over last year, while frozen bellies were up 188% compared to same time last year.

 

In Other News, President Trump signed the Omnibus bill after threatening to veto. This will keep the Federal government funded and includes a provision to “fix” Section 199A, which would have had major implications on how producers market grain.

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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