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Water Street Solutions

Water Street Solutions Daily Report 2017.2.17
2017-02-17T01:48

May Corn continued yesterday’s afternoon session break to the downside, finishing 3.75’4, –5 ½ and 3.94’2 Dec, -4 ¾. The focus seems to be on profit taking – will we see any follow through next week? From a technical standpoint, the hook reversal with continued selling in the overnight to confirm a high is not a positive sign. Corn entered today overbought, with a net long position estimated at 31K contracts, and with a big supply to absorb. In export news, Japan continued to rebuild its low corn inventories today, as the USDA reported a private sale to them of 194,112 MT of corn, with about a third for 2016/17 and the rest for 2017/18. Look for resistance at 3.83’2 and nearby support at 3.72’6 and 3.68’2 in the May.

May Soybeans continued to shed recent length down to 10.43’2, -11 ½. Soybeans have been battling the bears in broad range trade, and it looks like they may be starting to succumb to weakness from positive South American weather and yield reports, rumors of significantly planted acres this spring, and overnight bird flu demand issues in China, etc. Will long liquidation selling continue into next week? Keep an eye on key support levels in the 10.30’4 and 10.12’6 areas in the May contract.

March Wheat could not build positive momentum today, with Chicago’s soft red winter coming in at 4.41’0, down -6 ¾. KC and Minneapolis also posted losses on the board. Wheat is overbought, showing signs of a short-term peak in place. Wheat has seen positive export numbers, record low acres of winter wheat plantings, as well as reports of winterkill in some areas of the US and Russia. However, the burgeoning supplies and stiff competition for global business with an overall strong Dollar, have kept things in check. Today, traders said that Egypt’s GASC bought 360K MT of Russian, Ukraine and Romanian wheat. Look for a possible technical correction in the short-term. Close in support for March wheat is in the areas of 4.38’4 and 4.32’4.

April Live Cattle experienced sideways action finding support in short-covering and futures’ discounts to expected cash prices this week, before finishing -.250 (April). The Fed Cattle Exchange yesterday produced prices in the $118.50-119.25 ranged, which was up from last week’s $117.50. Putting a damper on the FCE sales was the lack of sales from Nebraska, where prices were lower last week due to animals carrying mud. It was reported that some processors cut their production due to poor margins and uninspiring beef demand. The USDA Slaughter data today will help provide some clarity.

Hogs were also able to regain some of yesterday’s losses on short-covering, +.950 (April). The cash market needs news to feed its advances, i.e. continued climbing pork belly prices or positive export opportunities. It appears that there is a potential shift of US exports to China from Mexico, as China continues to exhibit an insatiable appetite for pork (as well as beans). Once again, it is worth mentioning, that trade policies and agreements from the new Presidential Administration will be key. As the new Cabinet members are confirmed and firmly in place, hopefully uncertainty will be less of a market influencer.

In other news, the Senate confirmed Scott Pruitt to head the EPA, with the vote aligning mostly along party lines. Stay tuned for future direction, as concerns voiced by the ag industry center around ethanol policy and how the new administration will balance its loyalties to oil and agriculture.

The markets will be closed Monday, in observance of President’s Day.


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

Water Street Solutions Daily Report 2017.2.16
2017-02-16T03:32

Corn has been trading bullish based on fund buying, more so than changes in fundamentals, as open interest is up 53K contracts after yesterday’s rally. However, this did not continue today as weakness in the market from beans and wheat were the trend of the day, as March corn finished -5 ¼. The USDA released its weekly export sales report, and corn came in under expectations, at 784 MT compared to the expected 900K-1.1 MMT.  Japan sales made up the lion’s share, while Mexico disappointed with only 69 tonnes. Of greater concern in the bigger picture, is Mexico looking to Argentina as a possible source for corn, due to concerns over NAFTA re-negotiations and the ongoing trade war with the Trump Administration. China is also getting in on Japanese corn demand, as they had their first sale in ten years of 25-50K MT. Delayed corn shipments from the US have pushed Japan to consider their emergency stockpiles, as corn inventories are at very low levels.

Soybeans have little fundamental reason to extend gains, succumbing to bearish forces today,  -17 ½,   (Mar).  Open interest leading into the session was at a respectable level at 9K, but not anywhere near corn (53K).  Soybeans appeared to have a breakout export report, with 890 MT announced, well above market expectations of 500-750 MT. However, that number does not take into account any readjustment from the USDA’s revised sales last week from 537 MT initially to 384 MT. If the revision is figured in, sales this week were still the highest in the last four weeks. Sales to China are experiencing seasonal decline, as they only accounted for 99K MT, which included the cancellation of 81K MT previously reported. Helping the export cause is the strong Brazilian real, which has been trading at new highs. However, this was not enough to overcome favorable South American weather and yield reports. Will beans be able to test resistance at 10.80 before the end of the month?

Wheat was down significantly across the complex today, led by a deep break by MN, with Chicago -7, Kansas City -11 ¼, and Minneapolis -18. The Chicago contract failed to hold support above the high of its 20-day Bollinger range and also fell below the 200 day moving average, as traders focused on profit-taking. Wheat exports provided some positive news today, as the USDA announced weekly export sales above expectations at 569K MT compared to estimates of 300-500K MT, the 2nd highest in seven weeks.

Live cattle experienced sideways action finding support in short-covering and futures’ discounts to expected cash prices this week, before finishing -.250 (April). The Fed Cattle Exchange yesterday produced prices in the $118.50-119.25 ranged, which was up from last week’s $117.50. Putting a damper on the FCE sales was the lack of sales from Nebraska, where prices were lower last week due to animals carrying mud. It was reported that some processors cut their production due to poor margins and uninspiring beef demand. The USDA Slaughter data today will help provide some clarity.

April hog futures peaked mid-morning before heading lower, -.950 (April).  Cash and wholesale pork prices have been trending up. Packers have been motivated to raise cash bids due to short supplies and solid overall pork demand. It does not appear that the protests for “Day Without Immigrants” has resulted in plants reducing hours or shifts. Will futures finally roll over to the downside as has been expected from the near term top?

In other news, China is reporting that their government will shell out almost $250B to boost land quality. They expect to add 66 million acres of farmland by 2020. In US news, President Trump announced the appointment of former NLRB member, R. Alexander Acosta, as his new Labor Secretary nominee.

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

Water Street Solutions Daily Report 2017.2.15
2017-02-15T02:52

Corn recovered from the weakness in the overnight session reaching its highest price since June 30 and closing (+X). The Energy Information Administration (EIA) released the weekly ethanol update. As expected, production declined from 1.055 million barrels/day to 1.040; however, it continues to be much stronger than USDA corn demand estimates. The report also identified that despite the production decline stocks continued to rise reaching the highest since March 2016.

Soybeans opened the day slightly below yesterday’s close and gained some momentum throughout the day closing near the session high at (+X). Recent price strength is technical and influenced by investment fund money flows rather than substantial changes to fundamental factors. The National Oilseed Processors released reports on soybean crush, soymeal exports and soyoil stocks. Its members crushed 160.621 million bushels during January, up from 160.176 million bushels in December. They exported 891,143 tons of soymeal down from 949,615 tons during December, and reported soyoil stocks of 1.629 billion lbs as of January 31, up from 1.434 billion lbs at the end of December.

Wheat made a comeback today closing near the high at (+X). Hard red winter wheat spot basis bids were unchanged in the southern U.S. Plains as futures hovering near their highest levels since June enticed some farmers to sell. In world news, Russian farmers have large quantities of wheat available to sell however; the strength of the Russian ruble is slowing export sales. Euronext wheat futures rose to fresh six-month highs on Wednesday, supported by hopes that a weakening euro will boost exports.

Live cattle traded above the open briefly, but ended the session near today’s low closing (-X). The USDA Daily Slaughter Report shows that this week’s 111,000 cattle is considerably higher than this week last year at 101,000.

Hogs posted positive gains today closing (+X). The April contract is currently benefitting from additional buying stirred by Tuesday's firmer cash and wholesale pork values. The USDA reported Tuesday afternoon's average cash hog price in Iowa/Minnesota at $72.38 per cwt, $1.00 higher than on Monday. Both good pork demand and profitable margins offer incentives for packers to put as many pigs through plants as possible.


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

Water Street Solutions Daily Report 2017.2.14
2017-02-14T02:54

Corn and the rest of the grains are continuing to trade South American weather (which has continued to offer favorable outlooks) with March futures finishing, -1 ¼ (374’2) . Managed money is long corn contracts, as open interest has surged over the past week, and the overbought condition is playing a factor in addition to weather. The acreage battle between corn and soybeans is the next big market mover, and the question begs – Will this play out as a big swing to beans as some are predicting? Doane’s Ag Report came out with their acreage estimates for the coming season with corn plantings pegged at 90.6M acres (94.0M last year) and soybean plantings at 86.7M acres (83.4M last year). If this proved true and corn experiences any yield challenges, we could be looking at a different market in 2017. In exports, the USDA reported a private sale of 229K MT of corn to Japan for delivery in 2017/18. NAFTA negotiations will also be worth following, as Mexico has been a major importer of US corn. Keep a watch on March corn to see if it can move into the $3.75-$3.90 range, with an eye on $3.87.

March Soybeans continued their slide following a day in the red yesterday, -9 ¼ (1045’0). Time is running out for the bulls, as South American weather is boding well for harvest and the accompanying exports, as China is ramping up sales from Brazil. Fund buying alone is probably not going to be enough to push the boulder up the hill, as the rally this month has not had the same urgency as January’s. One factor working in bean’s favor is the strength of the Brazilian Real and the recent weakness of the Dollar, which appears to be helping support the solid US export reports. The USDA reported a private sale of 142,500 MT of soybeans to Mexico for delivery in 2016/17. Look for results from the NOPA crush report tomorrow as a direction indicator.

March Wheat experienced a modest setback today following yesterday’s positive action, -2 ¾ Chicago, -1 ½ KC, -2 ½ Minneapolis. There are a variety of factors playing into wheat’s behavior, as it looks to model its grain siblings’ actions. Australia is only adding to the burgeoning world stocks, with reports yesterday confirming record level production and exports. The weather in the US looks to be above normal temps and precipitation over the next several days, which should help development but at the same time could threaten to break dormancy too early in some areas. India’s drought and Russian winterkill are two influential factors that have yet to be quantified. And, of course, the US winter wheat acreage plantings dipping to a low level not seen since 1908, has raised a few eyebrows. The chart action has been constructive – look for $4.66 (Chicago) as a next target area.

Live cattle bounced back today, as the April contract was up, + 1.475. Feeder Cattle also received a nice bump, +2.175 (April). Wednesday’s Fed Cattle Exchange of 4,800 head will help give price direction for the week. Cash prices are receiving pressure from more animals on the sale block compared to last week, which could be limiting market advances. The market is susceptible to more selling pressure, as speculators hold a large net long position. Look for more technical selling and bearish pressure from weather in the days ahead.

While hogs look to be forming a top, with some key supportive factors going negative, it was not yet reflected today, with April futures +1.600. Tighter pork supplies, particularly pork bellies levels reaching record lows, are helping to support packer margins.


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

Water Street Solutions Daily Report 2017.2.13
2017-02-13T03:06

Corn found good support during daylight trade thanks to continued fund buying compensating for the farmer hedging. March closed +1. Growing open interest is indicating good outside interest in owning corn as spring/summer approaches. Friday’s CFTC report showed Managed Money net long 29k of corn – not a huge number but the largest net long since July 5th. Today’s inspections reinforced the demand story, coming in above trade expectations at 49.4 mln bu.; the largest weekly inspection since October. This puts cumulative weekly exports 77% above last year’s pace but there is still work to do to hit the USDA projection. March corn is now solidly into a zone (3.74-3.78) where it will continue find farmer selling of old crop supplies. Upside extension targets in the March contract include 3.89 and 3.98.  

Soybeans recovered early session weakness on support from soy meal but couldn’t stay green into the close. Soybeans closed -4 ¾ (Mar). Weekly inspections were close to the lower end of expectations as Brazil’s early harvest works its way into the export stream. Current export pace is 15.5% above last year at this time. Brazil’s ABIOVE bumped their soy crop expectation to 104.6 mln mt which is above the USDA 104 mln estimate. Currency trade has held Brazilian farmers back from being big sellers despite the large incoming crop while the first round of selling of new crop by US farmers is already off the table. March soybeans are still in a mode of ‘higher highs’ and would eye the 10.90-11.10 area if buying can continue.

Wheat found support today with Chicago +3 ¼ (Mar) and KC +5 ¾ (Mar). Export inspections were disappointing at 11.3 mln bu but the pace is still 51% ahead of last year. ABARES noted the Australian wheat crop will come in easily at a new record of 35.1 mln mt. The previous record was 29.2 mln. Last week’s USDA report seems to be continuing to be supportive thanks to the pace of hard wheat exports while US winter wheats are monitoring the threat of breaking dormancy too early.

Live Cattle were lower -0.475 (Feb). Cattle prices continue to struggle on signs of weak domestic demand and abundant supplies. The larger than expected Cattle on Feed report Placements continues to weigh most heavily on deferred month contracts.

Hogs expired February +0.200 today as deferred months lose ground -1.375(Apr). Tighter pork supplies – specifically plunging pork belly supplies – continue to support packer margins. Pork bellies supplies are currently at the lowest level since records began in 1957.

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
Water Street Solutions Daily Report 2017.2.9
2017-02-09T02:18

Corn reached a seven month high this morning (372’6); however, the high was not sustainable, as corn finished negative on the day, -1 ¼ (Mar). Report day is always influential, as corn did not see a reason to be bullish just yet, with world stocks cut by 3.4 MMT, but still up 7 MMT from last year and with stocks to use at almost 21%, the 2nd highest in 15 years. US corn stocks saw a small reduction of 35 million bushels with a 15.8% corn stocks/use ratio, the largest since September 2006. Upside is limited until more definitive information is forthcoming regarding the South American crop. See report numbers below.

Soybeans traded lower today with March futures closing at (1050’4), down -8 ¼. The USDA report kept its U.S. soy supply forecast steady with ending stocks unchanged at 420 million bushels. Argentina’s soy crop was reduced only 1.5 MMT, which was less than expected, based on the reports of loss from flooded areas, etc. The USDA left Chinese soy imports unchanged, but they are up 2.7 MMT from last year. All said, it was not enough to move the needle in a positive direction. South American weather will continue to be the short-term story until we know different.

Wheat was the all-star grain today, as it traded positively across the complex today, gaining 2 percent to a seven-month high, with Chicago +11, KC +9 ¼, and Minneapolis +11. The U.S. Department of Agriculture increased its export forecast by 50 million bushels which resulted in a reduction in ending stocks to 1.139 billion bushels, compared to analyst expectations for 1.186 billion. World wheat stocks also were pared down by 4.7 MMT based on increase in use and a big production cut in India and Kazakhstan. See report numbers below.

Live cattle traded in a small range today closing, +.075 (April) . The U.S. Department of Agriculture’s export sales report for the week ended 2/2/17 showed U.S. beef sales at 16,000 tonnes, mostly to South Korea, compared to 19,100 tonnes in the previous week. Monthly USDA meat export data on Wednesday put total December U.S. beef at 254.4 million pounds, up .6 percent from November and up 29.7 percent from a year ago.

April hog futures experienced a decline today, -.950. Hogs experienced higher cash prices today and expect a Saturday slaughter around 150,000 head. The U.S. government export report showed U.S. pork sales at 13,600 tonnes, mostly for Mexico, compared to 24,800 the week before. Wednesday’s USDA monthly export data showed December U.S. pork exports totaled 493.1 million pounds, down 3.3 percent from November and up 15 percent from a year ago.


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

Water Street Solutions Daily Report 2017.2.8
2017-02-08T02:18

Corn closed on its session highs, just below 3.71 resistance +2 ¼ (Mar). The EIA released a report reflecting that ethanol production for the week ending 2/3/17 declined slightly (from 1.061 million bpd to 1.055 million bpd) but continues to run stronger than the USDA’s 2016/17 corn for ethanol demand estimate implies. Corn for ethanol usage for just the first 5 months of the marketing year already fully accounts for the USDA's current estimate of increased usage for the entire year. Due to an anti-dumping move on distiller’s grain, China’s corn consumption forecast rose by 500,000 tonnes from January’s estimate, and there are reports that the funds bought 2,400 contracts of corn. USDA report estimation for 2016/17 800,000 – 1,100,000 for tomorrow’s exports. USDA supply/demand report out tomorrow has the trade expecting a down-tick in ending stocks from 2.355 bln in Jan to 2.342 this month. Still plentiful supplies, but an indication that demand is strong. Technically the March contract is bumping against the 3.71 resistance level again – but was able to close for the second time above the 200 day moving average – the first closes above that moving average in the March contract since June 29. If March can find follow through strength, look for upside targets of 3.74, 3.78 and 3.89.

Soybeans traded at a 12-day high throughout the session closing +16 (Mar). Support of the positive gains is the expectation of continued demand for U.S. supplies before South America’s new crop arrives on the global markets. In purchasing news, the funds have bought 7,000 contracts of soybeans, 4,000 contracts of soy oil and 2,700 contracts of soymeal. USDA report estimation for 2016/17 500,000 – 800,000 for tomorrow’s export sales. Trade expects another drop in ending stocks for soybeans in tomorrow’s USDA report from January’s 420 mln to an average estimate of 409 mln.

Wheat, like other grains, had a positive day with Chicago closing +1 ¾ (Mar). This morning, the funds bought 1,200 contracts of wheat and Tunisia purchased around 10,000 tonnes of durum wheat that can be sourced from optional origins. In other world news, India has bought more than 5 million tonnes of wheat since mid-2016, which is their largest in over a decade. Buying is expected to continue; however, it will not be more than 200,000 to 300,000 tonnes. USDA report estimation for 2016/17 300,000 – 500,000 for tomorrow’s export sales. Estimates are for a small drop in the large wheat ending stocks tomorrow. From 1.186 bln in Jan to 1.178 this month.

Live cattle futures sagged a bit today closing -1.750 (Apr). The cash price expectations for this week lent downside market support to the February contract. The March feeder cattle contract closed down -1.925 (Mar). Profit taking and CME live cattle selling are the expected causes of the loss.

Hogs continued to climb higher for a third consecutive day in the Feb contract but lost ground in April closing -0.450 (Apr). Feb marked a new contract high for the month at 73.450. The continued positive gains are supported by Tuesday’s firmer cash price and whole pork prices.


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

Water Street Solutions Daily Report 2017.2.7
2017-02-07T03:09

Corn traded higher today closing near the session high at 3.68 ½. This morning, the FAS announced that U.S. exporters sold two cargoes (128k tonnes) of corn to Japan. South American corn cash prices have drifted lower this week. Argentine corn is now offered at parity with U.S. corn for March. Ag Resource fully expects solid weekly corn sales throughout February, but at its conclusion, world trade and price direction will hinge upon South American crop size. EIA’s weekly energy report is expected to include another slight reduction in U.S. ethanol production which is more seasonal than anything else. Crude, gasoline and ethanol inventories continue to rise.

Soybeans also traded slightly higher today closing at 10.42 ¾. No bean sales were included in the FAS announcement this morning. The Brazilian cash soybean offers were firmer this morning as near-record exports look to easily absorb early harvested supply. U.S. Gulf beans are still the world’s low cost origin through April, and until there are signs of declining basis in brazil, we doubt breaks will be lasting in the soy complex.

Wheat followed the positive trend for grains today closing higher also. In the short term, strength in the Black Sea cash markets offers support to the rest of the world. While wheat prices remain pressured by ample global supplies, CBOT March soft red winter wheat WH7 was up 2-1/2 cents at $4.25 a bushel. MGEX spring wheat for March delivery 1MWEH7 was down 2-3/4 cents at $5.52-1/2 a bushel while March K.C. hard red winter wheat futures KWH7 dropped 1-3/4 cents to $4.34 a bushel.

Live cattle futures on the Chicago Mercantile Exchange closed steady to narrowly mixed after investors adjusted positions while waiting for cash cattle to change hands this week. February live cattle closed -0.475 cent per pound lower at 116.425, April was unchanged at 115.625 and June closed +0.175 cent to 105.825 cents per pound.

Hogs surged to a new seven month high on the Chicago Mercantile Exchange today (71.425 cents), and closed +1.025 cents per pound at 71.350. The new high is thought to be fueled by firmer cash and wholesale pork values.


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

Water Street Solutions Daily Report 2017.2.6
2017-02-06T02:38

Corn took off to a positive start early this morning, but turned back lower after failing to sustain support above the 200-day moving average, closing at -1 ½ (Mar). Crude’s weakness today provided a damper over all the grains. USDA corn inspections were strong once again, coming in above the expected 875K MT with a robust 1.113 MMT. In Brazil, the second safrinha corn crop is ahead of planting schedule, following the quick soybean harvest due to their ideal conditions. President Trump’s America First agenda, is continuing to cause concerns in the Ag industry, as the US is heavily dependent on exports to key players, i.e. China and Mexico.  Hopefully, there will be more clarity in the next few weeks with the confirmation of the new Ag Secretary, Sonny Perdue, and further developments with trade policies. Keep an eye on whether corn can get through the 3.69 area for higher.

Soybeans gave us a Ross hook reversal for higher today but finished the session timidly, +9 (Mar). Soybeans found support in a bullish USDA inspection announcement (1.635 MMT vs estimate of 1.05 MMT). The onus continues to be on the weather story, and dryness in Brazil is needed to really spark a big change. There is still room for this to occur, as we will not really know for sure until the end of the month and into mid-March if the yield is as good as promised. As of last week, Informa, AgRural and Safras Mercado all raised their estimates for Brazilian soybean production. And, this Thursday the USDA and Brazil will come out with monthly crop reports. Soybeans continue to have a way to confound fundamentalists, as prices theoretically should be below $10 based on traditional metrics.

March wheat found weakness today in the stronger Dollar and the decline in crude, with Chicago -7 ¾, KC -4 ¾, and Minneapolis -2. Additionally, rallies have been limited by ample old crop supply. Wheat had another strong showing on the USDA inspection log, with a healthy 618,235 MT announced vs. expectations of 300K. The export demand coupled with the lowest wheat acres planted since 1908, are providing a good story for wheat from the US side of the equation. Will Russia see a meaningful impact from winterkill? At this point, there is not enough evidence to have a big market impact, but it is definitely a story that will be watched closely. Brazil recently implemented a government subsidy on wheat increasing their competitive edge in the international wheat market. Expect wheat to look to corn’s leadership for direction.

Live cattle traded on both sides of unchanged, on buy stops and technical buying, attempting to fill the chart gap from the last weekend of January, settling “flat” (April). Weather is providing a component of weakness in the short-term along with a large net long position. Looking at the trend last week, cattle were down 132 points for the week and cash cattle traded $3 lower than the week before. Supplies are sufficient, and both packer profits and wholesale beef values are down. Watch to see if live cattle can close the gap on the chart up to 116.75 that resulted from the end of January sessions.

April hogs have continued to find support from strong pork belly prices and a positive cash trend, +.975(April). It appears to be too early to succumb to the bears, as futures posted a new high not seen since early July of last year. The market needs to see a slowdown in export demand or drop in belly prices to reverse for lower. Last week the market was up 195 points after a solid finish on Friday.


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

Water Street Solutions Daily Report 2017.2.3
2017-02-03T02:43

Corn futures showed indifference today, trading in a range and holding below the 200 day moving average, -2 ¼ (Mar). This sideways pattern will likely continue without some sort of weather issue or other major development. The technicals need help from fund short covering or a rally in soybeans, to build on last week’s high of 3.71 (Mar). Positive factors in corn’s favor include solid export sales reports, a positive ethanol story, and an impending acreage war with soybeans. In South America, Argentina’s Buenos Aires Grain Exchange estimated their crop to be 99.3% planted, while production is estimated by Informa to be 35.2 MMT, down from the 36.0 MMT forecasted previously. Brazil is pegged at 89.0 MMT. Look for front month corn to fight resistance in the 3.70-3.75 area.

Soybeans had a rough close after reaching seven cents positive early, down -10 ¼ (Mar). Soybeansare in need of a steady diet of positive news to offset the positive weather premium for South America. Fundamentally, the market is still too long and looking to lighten up. Without any weather issues for the next month, Brazil’s bumper/record setting crop will likely offset any production decline from Argentina, leaving the market with record supply. According to traders, Informa has Brazil soybean production forecast at 106.5 MMT, while Argentina is predicted to be 55.0 MMT. The Brazilian Real is positioned for its highest weekly close in 18 months, but does not seem to be affecting the seasonal Chinese buying shift to our Southern neighbors. Look for an initial support target at 10.09 (March) and close-in resistance at 10.40 ½.

Wheat was not able to build on its positive day yesterday and closed lower across the complex, with Chicago -4 ¼, KC -3, and Minneapolis -2 ¾. However, both the Chicago and KC markets settled higher for the week. Managed money in Chicago continues to hold a significant short position – the question being - what will need to happen to cause a shift in this position? Positive factors for wheat include reduced winter wheat acres, dry extended forecast for the Plains, and the reduction of spring wheat acres by as much as 1.5 million acres (according to the University of North Dakota). Stats Canada reported all wheat stocks above estimates, 25.0 MMT vs 24.2 MMT, adding to the burgeoning global stockpiles. It was also announced that Japan bought 108,442 MT of wheat (23 TMT Canada, 64 TMT U.S., 21 TMT Australia).

Live cattle futures were able to build on yesterday’s gain based on technical buying and short covering, +.150(April). The rally yesterday was driven by higher cash prices in the North in conjunction with lower carcass weights and technical support. Thursday featured the report on carcass weights and it showed a decrease of 9 lbs. on average. National cattle inventory numbers released at the end of January showed increases in almost every category with the standout being beef heifers held for breeding at 101% when most estimates pointed to a sub-100 level. The USDA reported exports to be down slightly from last week, with about half of the sales headed to Japan.

April Hog futures were up today propelled by support from increasing pork belly prices, +.675 (April), while front month was down slightly. Pork bellies have seen a meteoric rise in prices the last few months, to the consternation of bacon lovers across the country, with August - $80, Dec. 30th - $114.52, and currently $174.86. However, with pork production up 3-5%, there seems to be plenty of supply. Packer margins declined from $32.80 last week to $26.15 this week. One of the unknowns, that also ties to trade negotiations, is whether Mexican imports will be affected, as they account for 30% of all US pork exports. If exports were to slow, this would be a burdensome weight on the market.


In Other news, the stock market is on a torrid pace today, well up over the vaunted 20,000 mark, on news that President Trump plans to roll back financial regulations affecting Wall Street. The Executive Order he plans to sign repealing Dodd-Frank is largely ceremonial, as only Congress can re-write the legislation. But, Trump views regulations on multiple fronts as being harmful to the economy, and he aims to set a new mood and direction.


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
Water Street Solutions Daily Report 2017.2.2
2017-02-02T03:22

March Corn poked its head up through the 200-day moving average after a turnaround yesterday, but was unable to sustain momentum, finishing – ¾. Additionally, corn has found difficulty pushing through the $4 level for new crop. This is due in large part to farmers still owning the lion’s share of the crop. What will cause corn to move from the farmer to market? There are a couple of factors to consider. The first is dictated by cash needs. But, more importantly, is basis – if basis gets hot for a period of time, corn will start to move. Warmer weather will also help the cause, as hauling will be less demanding. There were two significant sales announced this morning, 140k MT to unknown and 110k MT to Japan. This is the third week in a row that U.S. export sales have exceeded 1 MMT, as the USDA announced weekly export sales at the upper end of expectations. From a global perspective, Brazil exported just 1.5 MMT of corn in January, down sharply from 4.4 MMT this time last year. Look for front month corn to fight resistance in the $3.70-$3.75 area, as the stochastics are preparing to cross over.

Soybeans, similar to corn, traded both positive and negative before settling + ½ (Mar). Soybeans are in need of a steady diet of positive news to offset the positive weather premium for South America. Most of the 2016 soybean crop has changed ownership from the farmer to the end-user/consumer, while a good portion of corn is still in the bin. The former being a driving reason behind why soybeans have been able to maintain prices over $10. The USDA Crush report showed December lower than expected and below November levels, while oil and meal stocks increased. In export sales, the USDA announced 624K tonnes, right in line with market estimates of 500-800K tonnes. Worldwide, Brazil’s 2017 soybean exports of 912k MT are up considerably from last year’s 394k MT. Look for front month support around 10.17 and upside resistance in the $10.40-$10.50 area.

Wheat lead the grains today with March futures + ¾ Chicago, +3 KC, and +5 ½ Minneapolis. Minneapolis was coming off a seven cent gain overnight, as the higher quality wheat has been the leader of late. The USDA announced export sales were just above expectations at 451K tonnes compared to the expected 250-450K tonnes, and noticeably higher than last year’s same week. The funds hold a considerable large short position in Chicago; the big question is if they will continue to add to it as they have over the last two trading sessions. If trade can sustain the gains over the balance of this week, Chicago wheat could attain its highest weekly close since May 2016.

April live cattle futures were able to reverse direction, seeking to fill the gap on the chart created over the weekend, +1.775. April Feeders also expressed optimism, +1.875. The 2017 Cattle Industry Convention is taking place in Nashville, TN, this week, with trade and Washington policies taking center stage. Much of the talk will also center around prices, according to industry analysts. The good news is that prices are much better this year than last, with the late October rebound in calf prices and the fed cattle market. Economists are predicting a better year in 2017. It is estimated feed yards are making $250/head this week. The Fed Cattle Report showed an increase of 2-3% in current herd size, so supplies are ample to support demand at this time. The USDA reported exports to be down slightly from last week, with about half of the sales headed to Japan.

Hog futures were up in the front month boosted by favorable prices in the Midwest cash markets, as well as up modestly in the deferred, with April +.475. The deferred months have been feeling pressure from expectations of lower prices later in the year. Bacon lovers are somewhat concerned as Cold Storage showed the lowest levels of frozen pork bellies since 1957, and bacon prices have increased about $.50/lb in the last couple of months. Hog inventory overall is growing, and weekly export sales were down significantly from last week – the main destinations being Mexico, Japan and South Korea.


In Other news, President Trump’s cabinet pick for Agriculture Secretary, Sonny Perdue, is scheduled for Senate confirmation hearings in mid to late February. He has secured the support of his predecessor from the Obama Administration, Former Secretary Vilsack, who feels he is well-equipped to do the job..

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
Water Street Solutions Daily Report 2017.2.1
2017-02-01T02:49

Corn opened above yesterdays close and continued to rise eventually finishing at +8 ½ (Mar). With diminishing concerns over South America’s summer crop, the corn market is in search of a new story. The stories competing for attention are demand, acreage, and, of course, continued weather changes. Now that we are into a new month, will fund flows increase or will they pull back from newly acquired length? The Semi-Annual Cattle Inventory report confirmed an increase in quantity that should boost feeding expectations, and for the week ending 1/27/17, and the Energy Information Administration (EIA) reported another all-time record production of 1.061 million barrels/day, up 10K for the week. That is a 10.6% increase over the same week in 2016. And, ethanol margins are back into break-even territory after falling into the red last week. Overall, corn demand continues to be better than expected and has helped provide a counter-balance to burdensome supplies. Look for corn to continue to seek direction from beans.

Soybeans fought back again today +12 ¼ (Mar), supported by confirmation that private exporters sold 236,700 tonnes of U.S. soybeans to unknown destinations; however, they were still unable to make up the significant losses experienced on Monday. South American weather is being closely monitored and will have a large effect on volatility this month. While intermittent showers in Brazil will continue to put short-term stops on harvest, they are not expected to have a negative effect on overall production just yet. In fact, there are rumblings that Brazil is currently harvesting its largest soybean crop to date. New sales to China have already begun to transition to Brazil, and concerns of cancellations are always relevant this time of year. Later this afternoon will feature the USDA crush report which is expected to show December right in line with November.

Wheat took the cue from corn and soybeans, posting a large positive reversal. March futures were as follows: +13 Chicago, +11 KC, and +7 ¼ Minneapolis. The increase is primarily technical due to funds holding large net short positions, and the market is vulnerable to intermittent short covering. After issuing a tender to buy 50,000 tonnes of wheat yesterday, Algeria is back to the buying table seeking two individual 25,000 tonnes of barley shipments between March 1-31. Russia’s IKAR released their 2017 harvest projection, and it shows a decline of 5 MMT less than the 2016 harvest for wheat. Overall, the 2017 crop is expected to be strong until further confirmation of the extent of winterkill is tallied. And, Russia has raised its export projection for 2016/17, indicating they have plenty of stocks to cover higher demand as required.

April live cattle gapped lower on open and traded both sides of unchanged (forming a doji on the charts), -.475 (Apr). Bargain buying provided some recovery, as futures fell to three-week lows earlier in the session. The Online Fed Cattle Exchange, held every Wednesday, is looked to as a barometer for cash prices, with 5,131 on the sale block today. Last week’s Cattle on Feed report showed larger than expected cattle supplies, which has continued to apply pressure this week. April Feeder Cattle were also down, -.700. Developing trade policies by the new Administration will also continue to be a major market influencer.

April hogs also traded both sides of unchanged today, finishing -.150. The front month trended positive while most back months retreated modestly. The impetus behind February bull-spreading and short covering were the gains in Midwest cash markets. Helping the cause from the demand side was sharply higher wholesale pork prices, which gave rise to a rash of hog buying. However, there is downside potential with the market overbought and increasing focus on trade issues with Mexico. Be watching for a test of support at $65.00 (Apr).

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.

Water Street Solutions Daily Report 2017.1.31
2017-01-31T02:30

Corn observed “Turnaround Tuesday” with a modest reversal, following soybeans’ lead, +2 (Mar). There is not much news today to move the needle in a meaningful way. Positive factors include a weaker Dollar, a positive weekly inspection report and the acreage discussion vs. soybeans, which will become clearer into the spring. South American weather forecasts continue to be favorable. Farmers have lost interest in selling, as many took advantage of the rally to button up old crop. On the world stage, US corn is overall the most affordable on a FOB basis, but some low-price alternatives, i.e. Black Sea feed wheat, are providing competition. Look for continued pressure on corn for now until a new story develops.

Soybeans experienced a serious decline yesterday, with longs exiting their positions. Today proved relatively uneventful with March futures +1 ¾. Once again, there were no new export sales announcements on the books this morning. The USDA Crush Report tomorrow for December is expected to show a slight decline from November, with estimates of 170 mb compared to 170.7 mb. Giving some support to the market is the weak Dollar, which has dipped below the vaunted “100” mark. But, serving as a counter balance is continued uncertainty regarding trade policies with China and others. Speaking of China, their markets are closed through Thursday for the Lunar New Year holiday. In South American news, Cordonniere upped his Argentine crop estimate to 52 MMT, compared to 56 last year; he has Brazil pegged at 103 MMT, compared to 95.5 last year. Even though soybeans experienced a free fall yesterday, March futures are still positive by double digits.

Wheat also gave an uninspiring performance today with a lack of impactful news, as Chicago and KC March futures trended positive at +6 ¾ and +3 ½ respectively, while MN was down -2 ¼. Wheat crop conditions have been improving recently, but are still below average for this time of year. In global news, Algeria is looking to buy 50K tonnes of soft wheat and 50K tonnes of barley for April shipment. In Europe, the extreme cold weather predictions for last weekend did not manifest in many areas, which did not help provide market support. Wheat is still positive for the month but has lost much of the recent gains. Technical indicators are showing weakness and it is likely wheat will test lower levels. However, managed funds are still almost 90K contracts short, so balancing could come into play. Look for support in the 4.10 neighborhood and initial resistance at 4.17 ¼.

April live cattle futures gapped to a new three week low on follow-through liquidation and short selling, -.650. Applying pressure to the market is a growing US herd and ample cattle supplies. Cash cattle started the week with futures narrowly avoiding a limit down close after a bearish Cattle on Feed report. April Cattle Feeders were also down today, -1.125. The USDA will release its bi-yearly Cattle Inventory report this afternoon.

April hogs had nice bounce back today after the large reversal last week, reaching up over 70 before settling back modestly, +1.025. The market has demonstrated volatility over the last few sessions as it seeks direction. Demand for pork has remained strong in the midst of near record large hog/pork production, and cash prices have continued to trend positive. However, in an overbought market with an increasing focus on trade war with Mexico, there is potential for a significant amount of pork to return to the US market. Keep an eye out this week for a possible test of support at 65.00 (Apr).

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.

Water Street Solutions Daily Report 2017.1.30
2017-01-30T01:50

Corn was not able to keep its head above water today, with the strong undertow of soybeans applying downward pressure, -4 ¾ (Mar). USDA weekly inspections were favorable, as they were announced at 1.061 MMT for the week ending Jan. 26th, compared to expectations of 850K MT. Additionally, the USDA reported a private sale of 105K MT of corn sold to Colombia for 2016/17. But, it was not enough to overcome South American weather and trade policy concerns. Friday’s Cattle on Feed report could be viewed mildly bullish corn, with extra mouths to feed – Cattle placements were 10 points over expectations and cattle on feed was slightly over. The Commitment of Traders report wielded the biggest clout, providing surprising numbers. Large spec traders bought 61,591 contracts for the week, more than 45,000 higher than estimated. This is the first time they are long corn since last summer. There was a big transfer of ownership from the farmer to the elevator who in turn immediately hedged to spec buyers. In spite of this, corn futures still put up a timid seven cent loss for the week. Look for support from $3.52-$3.55.

Soybeans entered today’s trade with a classic bull flag on the charts, seeking direction for its overbought condition. And, direction they received, displaying a sharp move to the downside, -26 ½ (Mar). The market appears to be eliminating some of the excessive length that accumulated (as spec buyers had sharply increased their holdings according to the COT report). South American weather is now much more favorable, with Central and Southern Argentina forecast to receive rains in the next 48 hours. Central Argentina in particular has not seen rain in the past two weeks, with temps yesterday in the mid-90’s across a widespread area, and even up to 100F in the South. Brazil also will continue to receive rains over the next 10 days with some of the heaviest downpours blanketing the drought stricken areas of the NE. In addition, there is continued concern and uncertainty caused by the new US Administration’s trade policies, particularly with Mexico and China. Stay tuned for further developments to this delicate situation. Soybean inspections announced by the USDA were positive, with a reported 1.630 MMT for the week ending Jan. 26th, compared to the expected 1.05 MMT.

March wheat futures gapped lower today with Chicago –6 ½, KC -8 ½, and Minneapolis –8 ½. The complex was not positively influenced by supportive weather news in Europe or the USDA export report, as soybeans dominated the headlines, pulling down the rest of the grains. Weekly wheat inspections had another good showing, with the USDA announcing 321,479 MT for the week ending Jan. 26th, compared to the expected 300K MT. This following on the heels of an unexpectedly strong export report last Thursday. Around the globe, Russia is still concerned that the increasingly frigid temps they have been experiencing in areas without sufficient snow cover could result in crop damage. Central Europe is also anxious about their crop for the same reasons. Russian wheat prices have increased for three weeks in a row. Countries that are currently looking for wheat include: Ethiopia, Yemen, Algeria, Iraq and Jordan. Look for wheat to seek direction from corn and beans this week.

Live cattle began trading sharply lower today with April futures gapping to a new low, -2.500. April Feeders were also down significantly, -3.200. However, due to a sizeable discount to the cash market, the downside is expected to remain somewhat limited. The relatively sharp decline was likely triggered by the results of the bearish Cattle on Feed report, which showed larger than expected numbers of cattle placed in feedlots at the end of 2016. Placements of light feeders were up 60,000 head while placements of cattle between 600 and 700 pounds were 95,000 head. That’s an increase of 16% and 27% respectively from 2016. Front month February futures fell to the lowest levels since January 9, and opened below Friday’s session low.

Hogs were able to minimize losses in the face of the large negative move in cattle, signifying that the demand side of the equation is strong, -.075 (Apr). The February contract is on pace to test its roughly seven-month high of $68.00. However, in an overbought market with an increasing focus on trade war with Mexico leaves the potential for a significant amount of pork to return to the US market. Keep an eye out this week for a possible test of support at 65.00 (Apr).

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.

Water Street Solutions Daily Report 2017.1.27
2017-01-27T01:51

Corn felt the effects of the favorable South American weather outlook along with trade uncertainty with Mexico and Asia, declining slightly – 1 ¼. Corn traded over $.07 lower for the week after experiencing a key reversal on Tuesday. Open interest is way up, suggesting producer selling. Today did not feature any new export announcements for corn. In South America, Brazil is ahead of schedule for soy harvest, which will help get the Safrinha corn (2nd crop) off to a solid start. Mexico accounts for about 25% of US corn exports, and the recent spat between Presidents is not helping ease concerns. Look for March corn support around $3.60.

Soybeans are sporting a classic bull flag on the charts, finishing basically unchanged after the big rally a couple of weeks ago, - ¼ (Mar). Meal is also exhibiting a similar chart pattern, and it will be critical for there to be substantial damage to the Argentine crop in order to maintain the high cost of meal, as distiller grains prices are near the lowest levels since July of 2010 and inexpensive feed grain substitutes are abundant. To further expand on Argentina, the Buenos Aires Grains Exchange put forth their first estimate of the soybean crop at 53.5 MMT, down from 56 last year but not as low as some of the hype insinuated. Also, about 1.9 million acres were impacted by the flooding, with an estimated 1.1 million acres suffering total losses out of a total 19.5-20 million planted acres. Which way will beans go? If we can get to $10.63, look for breakout to the topside, otherwise a purge may be coming with managed money overbought.

Wheat, coming off a big export report yesterday, could not keep up the momentum today, with Chicago -6 ½ (Mar), KC -6 (Mar), and MN -7 ¼ (Mar). Analysts will be keeping an eye on Russian weather this weekend, as the stronger upper air cooling system could be damaging to a large area that does not have adequate snow cover (up to 2 million acres). Russia, and the Black Sea Region, is the world’s largest wheat exporter. The EU was knocked off last year’s perch at the top due to a decline in French production. It is important that the US is able to stay competitive and not lose key business in the Gulf area and South Africa, in addition to bidding for opportunities in North Africa and the Middle East. Keep a watch on support at 422 ¾ and resistance hovering above at 431 ¼.

Live cattle continued its show of weakness today with more consolidation of its overbought condition, as the fear of trade wars looming in the background are continuing to cause uncertainty, -.250(Apr). The market is showing signs of vulnerability with high open interest and an overbought condition, in addition to the trade tenor with Canada and Mexico. The Cattle of Feed Report will be released this afternoon and is sure to set the tone for next week.

Hogs saw a correction after a key reversal to the downside yesterday, driven by short covering and technical buying, +1.075 (April). The pork cut-out value is at its highest since July 26th of last year. Packers are still experiencing good margins resulting in steady hog flow, according to merchants. The daily slaughter was estimated at 433,000 hogs and Saturday’s slaughter is estimated at 200,000. Support is around $65 for the April contract.

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.

Water Street Solutions Daily Report 2017.1.26
2017-01-26T02:38

Corn needs to hear a more ominous South American weather forecast in order to make a serious change in direction at this point. March futures settled -2 ½. The big reversal on the charts two days ago, continues to influence trade. The recent positive action in the last week could have been due primarily to speculators covering their short positions. Concerns in the market include the impending large South American crop and weakness in ethanol, with China’s new import tariff increase on US ethanol and the uncertainty of the new Presidential Administration’s stance on ethanol and biofuels. On a positive note, USDA announced corn exports for the week ending Jan. 19th at 1.370 MMT compared to the expected range of 750K-1.0 MMT. Look for March corn support around $3.60.

Soybeans traded lower highs and lower lows for five days in a row coming into today and kept the trend alive with March futures -5 ¾. Traders from the bullish and bearish trains of thought have set their positions and are waiting for more confirmation on the Argentina crop, etc. The weather concerns in Argentina center around dry vs. wet, which tends bearish for now. The USDA export report today showed exports in line with expectations at 539,400 compared to the expected 400K-700K MT. Soybean meal exports also were above estimates. However, there were no new sales announcements this morning. The Chinese New Year begins Saturday, so look for a slowdown into next week as they celebrate Golden Week. The bull flag on the charts could trend for higher if we get to $10.63.

Wheat found support today in predictions of possible Russian wheat winterkill and a bullish export announcement. March futures included Chicago +2 ½, KC +2 ½, and MN +9 ¼. There is stronger upper air cooling over Southern Russia this weekend that could, in a worst case scenario, damage up to 20% of Russian winter wheat acres. Wheat was the lead story for the USDA report, almost doubling expectations with export sales for the week ending Jan. 19that 853,400 MT compared to estimates ranging from 200K-400K MT. This is the largest report since early in the 2013/14 marketing year. Will the US be able to join the competitive mix in the global market in 2017? A case in point, Egypt tendered for 410K MT wheat after the close yesterday, and it was Russia once again with the lowest bid, with US freight cost proving to be cost prohibitive for serious consideration. Adding to the burgeoning global supply is the probability of production increases in Argentina and Australia, according to reports.

Live cattle showed weakness today pressured by bear spreading and technical selling, finishing -1.100 (April). Look for more consolidation with correction of the overbought condition. The daily slaughter was reported to be 113,000 head. Tomorrow afternoon the USDA will release the Cattle on Feed Report at 2pm.

Hogsafter gapping higher yesterday, made a large move to the downside, -2.925 (April). Influencing the trade today was lower cash prices and technical selling after falling through the moving averages. There has been the expectation for some time that hogs were primed to form a top and trend lower, considering the large supplies. Support is around 65 for the April contract.

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.

Water Street Solutions Daily Report 2017.1.25
2017-01-25T01:49

Corn showed weakness early today but made a strong push across the finish line (following a key reversal on the charts yesterday) +3 (Mar). Corn received support from the announcement of a private sale of 141,224 MT to an “unknown” destination (likely Mexico ahead of the meeting with President Trump). The EIA report today showed ethanol production slightly down from last week (1.054 to 1.051 mbd), but to put it in perspective, is still 9.4% above last year’s same week production. What this means is that the USDA’s 5.325 billion bushel ethanol usage estimate through August will need to be bumped up. On the other hand, ethanol stocks have seen a meteoric rise the last three weeks, with 128 million gallons added to stocks, pushing stocks above last year for the first time in 11 weeks. This will provide a buffer if production continues its slowdown. EIA reported gasoline demand is near 5-year low levels, which is causing some consternation. It will be key for ethanol exports to show continued strength in 2017, which will be influenced by China and their recent tariff increase on imports from 5% to 30%. Look for March corn support to be around $3.60.

Soybeans did not have much news today to offset its overbought condition, ending up –3 ¼ (Mar). It is expected that soybean exports will continue to slow as South America takes center stage, with impending harvest a few weeks away.  The USDA did not offer any new sales announcements this morning. Not much has changed on the South American weather front, as concerns still hover over Argentina and the loss of planted acres due to heavy flooding and the dry, hot ridge that is now preventing rains short term. Soybeans are always subject to more volatility though, so keep an eye on the US acreage war with corn in addition to weather. It is likely beans will continue to go higher, with support coming in to play in the $10.50 area, with possible upside over $11.00.

Wheat has started to take on more of a bearish posture technically, failing to break through resistance in the 4.34 area yesterday. Today was red across the complex, with Chicago -2 ¼ , KC -4 and MN -3 ¼. There was just not a lot of bullish news today to sway trade, as exports are light and stocks are abundant. The US Dollar has given back some of the gains realized earlier in the month, but has somewhat stabilized and is not moving the export needle. Japan is sourcing 61 TMT of US wheat as part of its weekly tender. Ethiopia and Iraq are also in for optional origin wheat this week. Look for trade to continue somewhat sideways, with support for Chicago March wheat around $4.20.

Cattle futures were able to pick up some momentum from hogs in spite of higher inventories of cattle for sale this week, +.275 (Apr). All eyes are focused on the Fed Cattle Exchange held every Wednesday as a dependable barometer for future direction. Additionally, carcass weights will be considered as they are an indicator for the position of cattle in the nation’s feedlots. The last report on Jan. 7th showed steer weights were up 5#, which is considerably higher than last year. Also, the winter weather will play a part in changes seen between now and spring. The USDA announced cold storage showed record high stocks of beef for December at 567 million lbs. Look for support for the April contract in the $115-$116 area.

Hogs look to be positioned for a move to the downside, with ample supplies, but rallied today, supported by a bounce in pork values and significant decline in cold storage, +2.525 (Apr). Exports will be key again this year and will be influenced by the Dollar and the new Administration’s evolving trade policies, particularly with Mexico and China. Support is around 65 for the April contract.

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.

Water Street Solutions Daily Report 2017.1.24
2017-01-24T02:09

Corn failed to hold on at the 200-day moving average and closed down 6. New sale announcements did not help carry the momentum higher from the overnight despite it being the 9th announcement in the last 2 weeks. 4.9M bushels were sold to “unknown” destination this morning. Informa had increased their 2017 US corn planted acreage forecast from 90.15 to 90.489M acres. Corn is still maintaining a recent up trend, but futures have come back into the range it has been in since October.

Soybeans ended up closing a little higher after an overall indecision type of day and considering it traded in a $0.17 range from last night to the close. In the news, Informa had decreased their forecast from 88.86M acres to 88.647M. The return of export business has been nice to see and there were a few new announcements this morning also.

4.4M bushels of soybeans were sold to Mexico and another 6.4M sold to “unknown” destination. The Argentina weather scare has seemed to pass for the time being, but future forecasts will be watched closely.

Winter wheat reversed the last couple of trading sessions and closed lower. Momentum looks neutral to this point and should maintain until either a new closing high is spike in Chicago or Kansas markets or a close below the lows of last Friday happen first to change that. No significant weather concerns in the near term for the US growing areas.

Live cattle and feeder markets continue hanging around the high end of the charts, keeping technicals positive, but also wondering “will this breakout again”. Livestock in general have been holding on to prices and cattle so far seem to be doing the better for now. Certainly some profit taking in these areas are keeping some pressure on, but the arrow is still pointing up.

Hogs closed mostly higher today even as a very large kill number was announced Monday at 440K head, an increase of 2.33% from a year ago. Margins have been slipping and top may be in place until season spring demand picks back up.

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.

Water Street Solutions Daily Report 2017.1.20
2017-01-20T02:31

Corn moved into a recent new high today, and climbed above the 200 day moving averages for the first time since last June/July in many of the contract months. These two points will help to keep the trend positive in the short term. Farm Futures Survey results, released yesterday, had shown a decline of around 4 million acres from the previous year and would produce a little over 14 billion bushels with a yield at 170. Demand last year settled out at 14.5 billion bushels and could remain the same or more if prices stay here or go lower. Export sales this morning for corn showed some good business with 53.8 million bushels sold, while the expected range was between 39.3 and 59.0 million. Also, another private export sale of close to 5 million bushels to an unknown destination was announced today.

Soybeans have, at least for now, taken a short pause to take in to account the Argentina Heat wave may only last a week and then rains begin moving into the area after. Also, Farm Futures Survey was showing an increase of close to 7 million more acres for beans in the coming year. On a 50 bushel national average yield, would push a new crop soybean crop to 4.45 billion bushels. Demand last year stood at 4.1 billion bushels. Soybean sales were back to business also with 36.0 million bushels announced and the expected range was between 14.7 million and 27.5 million bushels.

Chicago and Kansas City wheat try to catch up to Minneapolis this week, with Chicago putting forth the best effort this week. Export sales for wheat were a little below the expected range and were seen at 8.9 million bushels, while the range was seen at 9.2 million and 20.2 million bushels. Overall health looks good for crops and weather pretty benign for now.

Live cattle were down a little bit today in the front months and up in the later. Cattle contracts continue to keep a positive trend in daily and weekly charts. The USDA reported that the average weight of steer carcasses was at 905 lbs. That would be a 6 lbs. increase from the previous report.

Hogs rounded out the week with an overall sideways driven trade. The overall and trend remains on the up along with cattle, until proven otherwise. The USDA reported weights of barrows and gilts at 211 lbs, which would be about pound heavier than the previous week. Seasonally, hog weights tend to drift lower into the end of January and early February before the firm up again in April. Export data released this morning and continued to show strong demand.

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.

Water Street Solutions Daily Report 2017.1.19
2017-01-19T03:43

Corn chopped sideways to a small gain, +1 ¼ (Mar). The EIA ethanol report today was announced and it was impressive in more ways than one. Production was a very strong 7.2% above last year’s same week and set another new record. On the other hand, it is thought that production will likely slow, as stocks were up to the 2ndhighest level recorded in mid-January. Add to that the seasonality of declining ethanol margins in the Feb-Apr time frame. There is chatter about the Chinese announcement of import tariffs on U.S. DDGs and ethanol, which they say are being dumped in their market and affecting domestic prices. The proposed tariffs will increase from 5% to 30%, and will stall U.S. export growth, as already seven cargoes have been canceled. It is estimated ethanol shipments to China were up in 2016 by 50% over 2015. China has also been posturing the incoming Trump Administration, with a Chief Economist at the Center for International Economic Exchange stating that they do not want a trade war but will fight to the end if there is one. It will be interesting to monitor this situation, and hopefully more clarity will be brought to bear after the Inauguration. In other export news, the USDA reported a private sale of 110,400 MT of corn sold to “unknown."

Soybeans could not generate positive momentum, with Argentina weather concerns unable to outweigh Brazil crop expectations, -4 ¾. According to Ag Resource, the weather models are confirming the strength of the high pressure ridge over Chile, Argentina and Southern Brazil this week. The concern is centered on shallow rooted crops that require more consistent rains, with temperatures reaching the 90’s and low 100’s. It is likely that precipitation will be blocked from making it through for 7-8 days, before a more normal upper air flow will resume. The question that begs answering - what will be the final impact on Argentina’s soybeans? It is almost certain now that they will lose 3-4 MMT’s at a minimum. And, as much as China is posturing regarding trade wars, they are very dependent on U.S. soybeans, as South America alone cannot satisfy their appetite. In other Asian news, South Korea bought 140 MT of U.S. soybeans for 2018 shipment. Recent longs will be looking to capitalize on profits if beans and meal are unable to continue their ascent.

Winter wheat had a correction today, with Chicago and KC -7 ½ and -10 respectively (Mar). However, Minneapolis gained back some ground lost earlier in the week, +3 (Mar). Wheat has been the albatross of the grain complex for months, but is taking more of a leading role, partly in response to last week’s USDA announced reduction of planted acres in the U.S. Look for wheat and corn to get back closer to the “normal” $1 price differencial and for possible breakout to the upside, as wheat has pushed through key resistance, according to an analyst from the floor of the CME in Chicago. In exports, Japan bought 117.6K MT of US/Canada sourced wheat in a weekly tender, while Jordan opted for 60K MT of Russian wheat.

Live cattle continued their steep climb higher, finding support in higher cash values and yesterday’s improved wholesale beef values, +.750 (Feb). The closely watched weekly Wednesday Fed Cattle Exchange average rose to $120.50 from last week’s $119. Choice wholesale beef was up $1.60 per cwt compared to Tuesday, according to the USDA. The reduced supplies from the holiday shortened week helped to drive the action. The USDA beef and pork export report will be released tomorrow, due to the Monday holiday.

Hogs also found support today from higher cash prices and tight supplies, +.225 (Feb). According to Reuters, it is thought packers are still in need of pigs to complete the week’s production, with a Saturday slaughter estimated at 280K head.

In Other news, the ag community is cautiously optimistic about PEOTUS Trump’s choice for the Head of the EPA, Scott Pruitt. He was grilled by Congress yesterday about his previous stands against the EPA’s positions, as he prefers to give states the power to make their environmental policies and to receive support from the Federal level. PEOTUS Trump also finally selected his Ag Secretary nominee, Sonny Perdue, former Governor of Georgia. Mr. Perdue has a reputation for being pro-business while focusing on government efficiency. Rural America flexed its muscle in this year’s election, and is looking to wield influence with the incoming Administration.

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.

Water Street Solutions Daily Report 2017.1.18
2017-01-18T02:08

Corn traded both sides of positive today, but failed at the finish, - ½ (Mar). Yesterday’s breakout to the highest level since Oct. 28th was driven in part by the waves of rain that have flooded both soybean and corn areas of Argentina. It was estimated by a major crop advisor in South America that corn could be down as much as 2.5 million tonnes. Additionally, managed funds bought 19,805 contracts and they are still short 76,564. Once their positions are re-balanced, who will be willing to buy corn? Will the market run out of gas, considering the huge ending stocks pegged at 2.355 billion bushels by the USDA? If exports have their say, the answer will be a negative, as U.S. corn shipments year-to-date are at a lofty 18.83 MMT compared to last year at this time of 10.64 MMT. And, ethanol is in good shape with production strong and estimates of profitability at $.05-.10/gallon net of costs. Any reductions in corn planted acreage, crop issues, etc., could tighten things up later in the year.

Soybeans built on yesterday’s large gains, reaching a new high before settling down to +5 ¾ (Mar). The Argentina weather situation is gaining traction, even though it does not seem as severe as years past. But, headlines and pictures rule the day in this social media news environment. Soymeal has also played a central role in leading the rally, up over $35 in the last three days. For all the talk about Argentina, it is easy to forget that the rest of South America is doing well enough to still push production to an estimated 2-3 MMT above last year, as Brazil has seen near ideal conditions and Uruguay and Paraguay are right with them. What direction will we go from here?

Wheat was mixed today, as Minneapolis regained a good chunk of what was lost yesterday, +6 ¼ (Mar). Chicago was down -2 ½ while KC had a small gain, + ¼ (Mar). Wheat is facing a similar scenario to corn, as managed money has been buying to balance their large short position. When will it be at a manageable level and buying will hit a speed bump? As was demonstrated by Minneapolis March wheat recently, futures shed 25 cents after getting as high as 5.90. On the world stage, Russia’s large crop will have an effect on the world market. And, they continue to dominate the conversation in northern Africa, with Egypt purchasing 235K tonnes of wheat, three cargos from Russia and one from Romania. Egypt is the world’s largest wheat importer, and it will be important this year for the U.S. to be included in the discussion for some of these tenders. Egypt has imported 3.41 million tonnes for the year, which is up 7.1% over last year. The market is still digesting the news of the significant reduction of U.S. planted acres, and the impact in 2017.

April live cattle is coming off its highest close since March 18th, and futures gained again today in the front month, +.700 (Feb). Traders are expecting favorable cash prices this week, as indicated by the follow through buying. Analysts are looking for 20K less cattle for sale and tighter supplies ahead. The Wednesday Fed Cattle Exchange continues to be the barometer, with last week prices at $119 per cwt. The market appears to be continuing its steady, although volatile uptrend for now.

April hogs had their highest close since July yesterday, as the market has remained in a positive trend, despite plenteous supplies. Today, the Dollar was back to its winning ways, which provided some weakness to futures, -.600 (Feb). A large slaughter is predicted for Saturday of 280K head, helping to make up for the holiday shortened week.

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.

Water Street Solutions Daily Report 2017.1.17
2017-01-17T02:15

Corn looks primed to follow soybeans higher, with high volume action as funds and end users expand their market length – CBOT brokers reported 30,000 contracts sold. March futures were able to forge out a new high and importantly, finally break out of the trading range where they have been floundering, finishing +7. In China, sources have indicated that up to seven cargos of U.S. ethanol imports have been canceled due to the hike in import tariffs from 5-30%. How will this play out with future demand? The focus is now on the new Presidential Administration for direction and clarity regarding trade relations with China. Additionally, the Chinese Ag Ministry is predicting 2017 corn production will be 4.1% lower compared to last year. Regarding export inspections for the week of Jan. 13th, the USDA announced corn at 35 million bushels, which is in line with expectations. For the crop year to date, the U.S. has exported a phenomenal 741.2 million bushels, which is up 77%.

Soybeans gapped higher overnight breaking through resistance and to another large gain +23 (Mar). Meal is the key driver, also reaching a new high and breaking through key resistance at 343.70. The Argentina weather issues are really gaining traction, in spite of long term supply issues. NOPA announced their crush report today and it showed the December crush lower than expected (first time in six years lower than November) and December soybean oil stocks much larger than estimated. China’s crush continues strong and at this rate they will surpass the USDA estimate. China is expecting 2017 soybean production to increase by 7% over last year. In that vein, the Malaysian Palm Oil Board is also predicting increases over 2016, with production up 12% and exports up 11.2%. Brazil has their combines rolling already, with AgRural estimating the soybean crop 1.1% harvested, and the Mato Grosso harvest pace is putting up the largest numbers in the last 10 years. Regarding USDA inspections for the week of Jan. 13th, it was reported that 51.8 million bushels of soybeans were tallied, at the top end of expectations. Year-to-date the U.S. has exported 17% more soybeans than last year.

Chicago and Kansas City wheat jumped on the soybean bandwagon, driving to gains of +7 ½ and +3 (Mar) respectively. However, Minneapolis had a volatile day that did not end well, -16 ¼ (Mar). To this point the higher quality MN wheat has led the complex, but ran out of buyers today in the front month.  Fund traders hold the largest net short position of any ag market at 92K+ contracts and look for liquidation this week. In Russia, they are reporting that their winter grain crops are in excellent condition, with only 3% being poor vs. 9% last year. They have experienced good snow cover and are hoping for another record crop this year with over 2.7 million more acres planted. On Saturday, Egypt purchased 235K tonnes of Russian/Romanian wheat. It will be important for the U.S. to become more competitive in this export space in 2017. Wheat exports were much better than last week’s anemic level, but were at the bottom end of expectations and off pace to meet the USDA projection for the year. It will take a very strong finish and 30% gain over last year to catch up by the end of May.

Live cattle futures gapped up to a nice gain, +1.050 (Feb). Feeders found support from live cattle buying, +.750 (Mar). The cash market seems to continue to lead the futures market, and Monday’s better wholesale values helped to boost trade. Weather continues to influence this time of year, as rain and poor conditions across the Midwest and Plains have created mud in feedlots, making the logistics of loading and transporting cattle more difficult. The U.S. Dairy Council named Tom Vilsack, former U.S. Agriculture Secretary veteran, as its president and CEO, the group announced today.

Hogs have been predicted to form a short-term top for some time now, but were able to eke out a small gain today, +.200 (Feb). Traders reported that investors were simultaneously selling February and buying the deferred months, concerned that cash prices may peak soon. Pork production for 2017 is predicted by the USDA to be an all-time record, at 26 billion lbs. It will be critical for export demand and strong cash market prices to continue in order to keep moving in a positive direction on the charts.

In weatheraccording to Ag Resource, the US and EU models are in agreement that a strong ridge of high pressure will form in the eastern Pacific that will block storms from moving across Argentina, while Brazilian rains will be unaffected. The 10-day forecast is calling for heat and dryness through the end of January. The heat could pose a problem for stressed crops in the flooded areas of Argentina that need cooler weather for their shallow roots.


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.

Water Street Solutions Daily Report 2017.1.16
2017-01-16T02:11

Grain markets were closed today to celebrate Martin Luther King, Jr. Day. 

The topic of discussion this week will focus in a large part on Argentine weather, now that the January Report is behind us. Over the holiday weekend, Santa Fe and Corrientes in the north were hit with another round of heavier than expected storms, which will likely increase flooding across the area. Up to 30% of the soybean acres this year are under “Red Alert” according to the Rosario Grain Exchange. The southern third of the country missed the moisture and ironically is suffering from extreme dryness and heat, with more to come over the next 10-14 days. High temps could reach 110-112 degrees, which historically is not common. 

What effect will China have on ethanol by the end of March?  Officials are floating the idea to raise ethanol import tariffs from 5% to 30%. Unfortunately, this will put seven U.S. cargos in jeopardy of cancellation, as U.S. ethanol will no longer be competitive at that level. CBOT corn futures will feel the pressure, as China is viewed as a potential area of demand growth.

Tomorrow will feature the markets back in action, with the USDA announcing export inspections at 10am CST and the NOPA Crush report coming out at 11am CST.

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.
Water Street Solutions Daily Report 2017.1.13
2017-01-13T02:08

Corn had an indecisive trading day before closing a quarter of a cent higher. Corn continued the pattern of this week with lower most of the session, rally midday, before an unspectacular close near unchanged. Argentina continues to inch toward completion of their planting with the Buenos Aires Grain Exchange showing planting progress at 90.7% complete, up 8% on the week. Bird flu continues to break in Taiwan, where overnight the fourth confirmed case was found resulting in the culling of over 17k birds. It is discouraging to see corn unable to sustain strength as beans pull away in value, but for now tight range seems to indicate that buyers and sellers are satisfied with corn prices where they are.

Soybeans followed through yesterday’s explosive action with more short-covering and fund buying to close 6 cents higher on the day. Next week’s CFTC release will give more detail, but pre-report managed money had amassed shorts to the tune of 114k contracts; the explosive 2-day rally could mean that many of those shorts have been liquidated. A flash sale of 132k mt was announced this morning to unknown destinations (China), encouraging given the surge in price that we have had. Early this morning it was reported that China imported yet another y-o-y record 83.9 mmt of soybeans in 2016, with December marking their 3rd largest import month on record.

Both Kansas City and Minneapolis wheat backed up yesterday’s positive move with another one today. Chicago wheat continues to trade weaker than other wheat classes with Minneapolis still the best looking market due to continued lack of quality protein wheat. Factors currently at play are the US dollar falling over the last couple of weeks, a decline in expectations for Russian export business, and of course the reduced acres from the January crop report. Yesterday’s acreage number marked the lowest number of winter wheat acres in the US since 1901. Over the weekend, the freezing rain could impact the crop but is not currently expected to with some snow cover in place already and the warmer temperatures arriving after the weekend.

Cattle managed to keep the momentum going to the upside this week on the charts, albeit in a more up and down fashion. Factors involved were the weather forecasts and how that might affect the herds and strong sales of U.S. meats. Feeder cattle charts look very similar to the live markets, and current trend remains higher for now. Both markets are overdue for a significant break at any time, but the trend remains higher, though both markets are currently acting a little toppy.

Are hogs building energy for the next wave higher or showing signs of a top? The front months look stronger and look to be building for the next wave, in fact, June and July did close at new recent highs today. The back months like August and October are more in question and carry more of the topping action that one should look out for.



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.

Water Street Solutions Daily Report 2017.1.12
2017-01-12T02:22

In corn, the all-important January USDA report released today was favorable, but not in a big enough way to sway futures, +1 (Mar).  Looking at the numbers, the USDA trimmed back yield to 174.6 bu/acre from 175.3, stocks were reduced from 2.403 bln bushels to 2.355 bln bushels, and production came in at 15.148 bln bushels vs. the last estimate of 15.226.  Ethanol production has also been a big driver in stocks usage.  World corn stocks were not affected, other than changes to the U.S. numbers.  Without adverse South American weather the CBOT will likely continue to trade sideways.  Not to be forgotten amidst all of the report excitement, were two corn sales announced this morning, as the USDA reported a private sale to an “unknown” destination of 253,488 MT and a second private sale of 110K MT to Japan.  However, it is expected that the rate of U.S. corn exports will slow significantly when South America begins its harvest.  Look for corn to continue trading in the present range for the near term

In soybeans, the USDA report provided a friendly surprise and the fuel to power a huge gain, +28 ¾   (Mar).  The report estimates included a soybean yield down from last report to 52.1 bu/acre from 52.5 bu/acre, soybean stocks reduced from .48 to .42 bln bushels, and soybean production trimmed to 4.307 bln bushels from 4.361.  In South America, Brazil soybean production is expected to increase 2 MMT compared to the last report and Argentina is neutral.  Some would argue that Argentina is still 2-5 MMT too high considering acres lost to flooding, but we will have to wait for more definitive numbers to confirm this theory.  Soybeans are always a day away from a 20 point break up or down depending on South American weather.   Keep an eye on the risk for future Chinese cancellations, with strong currency levels being an influencing factor.  Initial resistance for beans is around 10.37

Wheat also rallied on the heels of a favorable USDA report, led by KC (+13) and MN (+12 ¼), with Chicago not far behind, +7 ½ (Mar).  The USDA cut winter wheat acreage to a 108-year low, as the report showed estimated planted acres for 2017 down significantly to 32.4 million acres from the estimated 34.14.  Supplies rose to a 29-year high, with wheat carryout up slightly to 1.186 bln bushels vs expected 1.15, and world wheat carryout increased to 253.3 MMT vs. expected 252.0 MMT.  The year ahead will feature a battle of shrinking U.S. supplies with larger foreign wheat stocks.  On the weather front, maps are showing almost 100% moisture coverage across the southern plains and including NE, helping to erase dryness concerns.

Live Cattle finished limit up yesterday with a big spike to the upside. Today we saw a correction with declining beef wholesale prices and profit-taking by traders, -.400 (Feb). Fund re-balancing is the topic of discussion this week, and is likely the impetus behind some of the volatility that has been experienced. Packers are expected to offer less for slaughter-ready cattle this week with lower demand and tighter margins. Investors will be closely monitoring the Fed Cattle Exchange today with 5,800 animals on the sale block. Look for continued higher in the coming days, preceded by a possible correction.

Hogs gapped lower in a sharp move to the downside, before regaining some of what was lost, -1.650 (Feb).  The cattle market has seen extreme volatility the last 18 months and a growing number of cattlemen feel the system is broken.   Algorithm traders are seen as part of the problem, according to Craig Uden, NCBA Working Group Chair.  There is also perceived to be a lack of cash transparency with packer contracts.  The online cattle exchange is helping bring change, but solutions need to happen soon for many producers who are on the ropes from losses they have incurred. Cattle feeder profits are in the green for the seventh week in a row.  Weather has been detrimental to weight gain and has slowed transportation to market.  Some farmers prefer not to open the doors to the barn with frigid temperatures.  Retail beef prices have fallen about 10% since last July.  Economists are predicting an increase in production of 3-4% which will increase consumption.  The large supplies will continue to weigh on prices.



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.