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Water Street Solutions

Water Street Solutions Daily Report 2017.4.28
2017-04-28T02:26

Corn dropped today as the 6-10 day and the 8-14 day forecasts have improved, -2 ¾ at 3.66 ½ (July) and –1 ¾ at 3.85 (Dec). Futures experienced a volatile week, dealing with weather concerns, NAFTA rumors and speculation, chatter about an ethanol mandate, and an improved outlook to Brazil’s safrinha crop. Related to NAFTA, Mexico is the top importer of U.S. corn and barley and number two for DDGs and sorghum – so, there is a lot at stake. Even a 10-15% drop in purchases will have a big effect. It will be interesting to see the next USDA planting report, as many farmers in the south and east had a great chance to get seed in the ground, while much of the north and northwest band of the corn belt is behind due to cool and wet (snow in some cases) conditions. Other market factors to consider include managed money still short about 175K contracts, solid weekly export sales, declining ethanol profitability (about 10 cents over the last couple of weeks) and weekly production/stocks report were near unchanged. Look for new crop fundamentals to drive old crop pricing after May 10th. There is still a lot of old crop in bins to be sold, which may limit some of the rally potential, when funds seek to cover some of their short positions. The mid-May timeframe will be critical for direction.

Soybeans and corn were in the same boat today, trading an improved weather outlook, -1 at 9.56 ¼ (July) and –1 ¼ at 9.53 ¼ (Nov). It is the last trading day of the month, so the next couple of sessions next week could gain from improved money flows. Not to mention changes in weather forecasts and global politics always add a wildcard to the mix. Soybeans don’t have a reason to move too far in either direction, as the upside offers little fundamental reason to go long other than covering of some shorts, while much of the bearish factors have already been baked in to the downside with large stocks and big production numbers out of South America. Offsetting the downside is strong demand and the U.S. planting and growing season ahead. What actually happens this weekend regarding rain and cold weather will be important to trade early next week.

Wheat was up across the complex, with Chicago SRW +1, Kansas City HRW +3 ½, and Minneapolis HRS + ¾. Wheat has been the most influenced by weather in the short-term, with continued concerns regarding frost/freeze this weekend across the Plains. Chicago has the large shorts, with the CFTC report this afternoon expected to sport close to 200K contracts. Could there be a rally around the corner next week? If so, this should help boost other grains, especially considering their short positions. In Europe, France saw a decline in soft wheat condition, with AgriMer decreasing the good/excellent from 85% to 78% this week. This is due to the dry conditions France is experiencing. Monday is the start of the Wheat Quality Tour by NASS, so watch for chatter and pictures on social media.

Live cattle experienced a volatile session, starting off in the red and then breaking out to another big gain, +2.500 at 124.025 (June). Volatility was expected today, as traders adjusted positions on the last trading day of the month. CME live cattle was trading with expanded limits today, up to 4.500 cents. Positive factors for futures this week included tighter supplies at lighter weights and good logistics with movement of animals. Demand is growing as grilling season is in full swing and Mother’s Day is fast approaching.

Hogsnot to be outdone by cattle’s run up the charts, had another strong day, as June finished +1.175 at 74.000. Traders attributed the spike to a recent cash price uptrend and month end short-covering, according to Reuters. Seasonal meat demand trends are also supporting hogs, as grocers and restaurants are preparing to satisfy hungry grilling appetites and Mother’s Day celebrants.


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 2017.4.27
2017-04-27T03:13

Corn received support from a short-term rainy forecast, robust export sales, and a positive tone from President Trump on NAFTA, +2 ½ at 3.69 ¼ (July). USDA export sales announced this morning showed corn at 987,900 MT, a three week high. It was expected for the number to fall between, 750K-1.1 MMT, so another good weekly output. Weather remains an issue with wet and cold in the short-term forecast for a majority of the growing area. Long term models show warmer and drier, but it is a bit early to put too much faith in forecasts out beyond May 10th.

Soybeans got a boost today from weekly export sales and a short-term wet forecast + ¾ at 9.57 ¼ (July). There is some speculation that weather delays in corn planting could switch even more acres to beans. USDA soybean export sales were above expectations of 300-750K MT, coming in at 808,100 MT, achieving a one-month peak. Related to Mexico and the potential impact of NAFTA negotiations, Mexico buys 26% of U.S. soyoil exports, 20% of soybean meal and 6.3% of soybeans. Any positive stories related to NAFTA will be well received. Also, keep an eye on a bio-diesel tax credit bill that was re-introduced by Senator Grassley. The purpose of the bill is to reinstate the $1/gal tax credit for producers instead of blenders, which will help level the playing field with competition from imports (that were given tax credits for imported biodiesel).

Wheat was led by Kansas City HRW today with deepening concerns over possible freeze/frost damage, +8 ½ (July). Chicago SRW and Minneapolis HRS were +4 ¾ and +2 ½ respectively. Wheat export sales were light this week, with an announced 61,700 MT compared to estimates of 350-750K MT. In Ukraine, wheat stocks are headed to the lowest level in ten years, so this will affect their export participation next year. Russia and Turkey appear close to resolving their differences that led to a ban on Russian wheat to Turkey. Turkey is Russia’s second largest buyer, so this has had a significant effect on their recent export numbers. This coming Monday is the start of the Wheat Quality Tour by NASS, so look for social media comments and pictures to be front and center.

Live cattle had another break-out day, registering a new high at 121.525, +3.000 (June). All market categories seemed to receive a bump from a more optimistic tone on NAFTA. Futures also gained support from discounts to cash prices. Supplies are tighter and beef demand is seasonally strong with grilling and Mother’s Day on the menu. Export sales were up to 21,300 tonnes compared to 19,700 tonnes last week (mostly to Japan).

Hogs seemed to be aligned with cattle today, along with fund buying and short covering, as the June contract jumped out to a big gain, +2.075 at 72.825 (June). Exports were down to 23,000 tonnes from 36,100 last week, but once again the new tone on NAFTA was a huge influence on trade. Mexico is number two and Canada number four on the list of the U.S.’ largest markets for pork, and a lot is on the line for producers with any hints of trade wars.

In other newsPresident Trump’s change in tone on NAFTA, and possibly re-negotiating in the future rather than just scrapping the whole deal immediately, gave major market support today. Mexico has been shopping South American corn, and they and Canada are big customers of grains and meats, so any positive trade news goes a long way right now. In weather, it is a mixed bag of short-term rain and cold temps across the mid-section growing area of the U.S. while the deferred forecast is tending drier and milder temps.

First notice on May futures is Friday, April 28.

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 2017.4.26
2017-04-26T03:19

Corn experienced vigorous corn buying yesterday, with funds buying over 20K contracts. Today was more of the same early on. All eyes are on the weather map, with systems developing that could bring major precipitation across the growing regions in the next several days. The forecast was adjusted a little about midday today with the end of next week looking drier than previously expected. This sent the corn market into a tail spin taking back most of what weather premium was added yesterday. This is a weather market right now and if the end of next week is drier the trade will assume that most of the corn crop will have a better chance to get planted before the middle of May. Which is looked at as a crucial point. 
In other news EIA ethanol reported production down -6K bbl to .987 million bbl. Ethanol stocks increased by 235K to 23.27 million bbl. Taiwan bought a cargo of Brazilian corn overnight. Ukraine reported exports of 3.1 MMT in March. Global exports are becoming competitive, with multiple options on the menu for buyers.

Soybeans are the follower at this point and with Corn and Wheat turning lower soybeans had no problem following suit. Not a lot of positive information for beans aside from good demand. A late spring will not be perceived to be a good thing for a crop that is already expecting a large amount of acres. Soybeans have shown the ability to be planted later without a huge yield drop. Brazil is wrapping up a large harvest and most of that should already have been absorbed by the market. Demand will be the crutch for this market while it tries to fight all the negative current information. China’s soybean imports are expected to reach 8.5-8.6 mmt in April, 9.0-9.5 mmt in May and 8.0 mmt in June. Soybean crush and soymeal demand are both expected to rise as well.

Wheat prices held in better today with the main concern there being cold weather over the weekend. That did not change in the midday run today. Frost advisories will be closely watched to see if there is any chance for potential wheat damage on an already reduced amount of acres. Europe is not expected to get any rain relief in any of drought areas and the current forecast will also keep spring wheat planting behind pace. With all of this current info it would be hard for the funds to maintain their record short position. You would think impossible but they seem to have a strong hold on this market so we will have to see how nervous they get and if the forecast holds together.

Live cattle and Feeder markets triggered a lot of short covering in contracts today after swing highs from Friday were taken out and it was clear that prices would stay that way into the close. Nearby Feeder Cattle closed at or near limit up, while the Live markets were only close to their limits. New support would now be at yesterday’s resistance level of 117.50 and resistance would now be at 122.75 in the June contract.

Hogs gave back some of yesterday’s gains and the recent downward trend since mid-March remains intact for now. Technically, the charts resisted right where they needed to but are pushing the top end.

In other news, the White is planning to announce a massive tax cut plan, “biggest in history,” for both corporate and personal taxes. This will be a bullish development for stocks and other markets.

First notice on May futures is Friday, April 28.

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 2017.4.25
2017-04-25T02:49

Corn traded higher in a very active day at the CBOT, featuring funds as huge buyers of corn futures. Thought of short-term weather concerns were a driving force as corn finished, +5 ¾ at 3.65 (May) and +5 ½ at 3.89 (Dec). The next 10 days will feature an active pattern of storms with accompanying lower temperatures across the U.S., slowing planting. The USDA reported corn planting progress at 17% yesterday, exceeding trade expectations of 15%. Last year’s progress was at 28%, while the average year-to-date is 18%. Illinois came in at 34%, while Iowa was at 8%. Todd Hubbs, Ag Economist at the University of Illinois, says that the Midwest will need to wait a few weeks before starting to panic about planting progress – around May 20th for corn and May 30th for beans. Nevertheless, perceptions sometimes trump reality in the markets, and large short positions are tending to amplify anxieties. Look for a possible return to previous highs over $4/Dec if current weather forecasts materialize.

Soybeans did not experience the same buying enthusiasm as corn and wheat, as they fell to 9.54 ½ in the May contract (-6 ¾) and 9.61 ¾ in Nov (-5 ¾). Soybean planting is just getting started, but is ahead of schedule, as the USDA reported plantings at 6% compared to 3% last year at this time and 3% average (trade was expecting 2%). All was quiet on the export sales front, and it is reported that China is wanting offers for U.S. soybean offers off the PNW. Chinese customs data released today indicated March soybean imports were up 3.7% over March last year, and total January-March imports were up 20.2% over same months in 2016. Safras Mercado’s analysts said Brazil is 93% harvested on beans, which is 2.6% above average.

Wheatlike corn, experienced an active day of trading, finding some short covering with a smattering of positive news (including a declining Dollar), +6 ¼ Chicago, +10 ¼ KC and +12 ¼ MN (May). Wheat growing regions will see the effects of cold weather this weekend, as frost/freeze will spread temps in the 20’s and 30’s across the Plains . How this will affect reproducing HRW remains to be seen, but anything below 32 degrees puts it at risk. Funds are sitting on record large short positions and not situated for a bullish surprise. Spring wheat is significantly behind last year, as the USDA reported current planting at 22% complete vs. 40% last year and 34% average year-to-date. Winter wheat received a good/excellent rating for 54% of the crop compared to 59% last year and 48% average year over year. Hopefully the reduction in acres this year will help the picture for wheat, with overall numbers expected to be down in the U.S., Australia, the Black Sea, etc. Demand should increase again with production down worldwide. Light may be at the end of the tunnel after a long, bleak stretch.

Live cattle rebounded from losses on Monday, receiving support from higher wholesale beef values and futures’ discounts to expected cash prices this week, +.975 (June). Monday’s average wholesale beef cut-outs and select cuts were up $1.51 per cwt and up 40 cents respectively. As with pork, the rise in outdoor grilling and impending Mother’s Day preparations are helping to drive supermarket demand. Tomorrow’s Fed Cattle Exchange is always a barometer for cash direction for the rest of the week. And, with tight cattle supplies and positive packer margins ($6.85/head), one would think cash will receive a boost. Look for short-term support at 113.60 and resistance at 117.50 in the June contract.

Hogs took off on a blistering pace today, +2.300 at 71.825 (June). Up until this week, it appeared that hogs may produce a counter seasonal trend, but made a strong reversal today. The USDA Cold Storage report yesterday afternoon, showed March total pork stocks up to 555.052 million lbs. from estimates by analysts of 546.1 million lbs. Cash hogs and carcass values are weak while packer margins are strong. Have downward cash prices now stabilized with the usual tightening of seasonal supplies?

In other newsSonny Perdue was finally confirmed by the Senate (87 votes for and 11 votes opposed) and sworn in as Ag Secretary.

First notice on May futures is Friday, April 28.

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 2017.4.24
2017-04-24T02:53

Corn could not seem to find much to rally on today in spite of wet forecasts and below normal temps to come, +2 ½ at 3.59 ½ (May) and +1 ¼ at 3.83 ¼ (Dec). Crop progress will be announced at 3pm today, at it is expected that corn will show 15% completed, compared to 30% last year. USDA weekly inspections did not disappoint, with corn leading the way at 1.453 MMT for the week ending April 20th, compared to expectations of 1.150 MMT. Corn and all the grains are trading weather, and the next ten days looks wet. So, watch for a potential bump of up to 20 cents in the near-term. But long-term, the markets need a major North American weather event to change the overall neutral to bearish fundamentals. However, based on history, spring and summer highs always top prices in early April with the median change in price from April to July being around 9%. This being the case, it is likely Dec corn will achieve an area in the $4.05-4.10 area (even if briefly) within the next 2-3 months.

Soybeans received a boost from wet weather forecasts and the declining Dollar, with May ending the session +8 ¾ at 9.59 ¾ and Nov +5 ¾ at 9.65 ¼. Weekly inspections for beans were over expectations at 634,877 MT compared to thoughts of 500K MT. Like corn, based on the history of spring and summer rallies, it is likely soybeans will test an area of $9.85-10.00 in the next 2-3 months. Much of the fundamental bearishness has been baked into the cake and managed money is short (they are trend followers), which could create the fuel for a short term rally if the funds flinch in their positions. The Commitment of Traders report on Friday afternoon showed managed money to be short soybeans by 45,828 up by 16,095 from the week before. In comparison to last year, beans were long 100,000 contracts. The crop progress report this afternoon is expected to show soybeans at 2% planted.

Wheat was down across the board, combining weak technical indicators and a very large short position among large managed fund traders: Chicago SRW -3, Kansas City HRW -2 ¾, and Minneapolis HRS -5. Not to be outdone by its grain siblings, wheat USDA weekly inspections were over expectations, showing 612,536 MT compared to projections of 500K MT. Wheat is also swayed by weather, and there is talk of possible frost and freeze across the Plains later in the week. In Europe, analysts are predicting the soft wheat yield to be up 8.2% over 2016. Look for wheat to continue to follow corn and beans, and may be susceptible to a near-term bounce due to short-covering.

Live cattle responded in kind to the Cattle on Feed report last Friday afternoon, -1.425 at 115.275 (June). Large placements had the biggest effect on the charts, as they were predicted to be 106.5%, but instead were reported to be 111% by the USDA. Marketings were basically on par with expectations and On Feed were slightly above. The beef market is living up to seasonal trends and cash last week was up $4-6. Open interest has reached an all-time highs this month with big specs buyers, and hedgers sellers - shorts are at record levels.

Hogs have not had the seasonal bounce in the June contract to-date, but were able to get things turned in a positive direction to start the week, +1.150 at 69.475. Short-covering and bargain buying in the technically oversold market, was the fare of the day for traders. There is a very large supply of hogs that packers are in the midst of processing, which once pared down should bring some relief to declining cash prices. Demand should continue to be solid with grilling season and Mother’s Day festivities around the corner.

First notice on May futures is Friday, April 28.

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 2017.4.21
2017-04-21T02:23

Corn traded both sides of unchanged today, - ¾ at 3.57 (May) and – ½ at 3.82 (Dec). Corn and the other grains are trading weather, and short-term includes a planting window that will allow progress to firm up. However, precipitation in the next 6-10 days is expected to be up for the entire country. Stats Canada’s acreage intention report today was over expectations almost across the board. Corn was projected at 3.75 million acres vs. the expected 3.2 million acres and last year’s 3.32. South America continues to position itself as an alternative to U.S. corn. In addition to Argentina courting Mexico with tariff-free imports, the Brazilian government is stepping in and subsidizing the shipping industry to help corn exports. However, demand is good and U.S. exports are still up convincingly over last year-to-date, at 50.1 MMT vs. 34.9 MMT.

Soybeans were able to round out the week with a nice gain, fueled in part by Chinese interest for U.S. soybeans off the PNW, +4 ¼ at 9.51 (May) and +5 ¾ at 9.59 ½ (Nov). Soybean sales announcements have been scarce of late, but today brought an upbeat tone to end the week, with a private sale of 146K MT to “unknown” (rumored to be China) for 2016/17. China is also reportedly interested in more for August. Demand from China is strong, causing some to up their forecasts of Chinese bean imports to 91 MMT from the USDA’s 88MMT for 2016/17. Stats Canada acreage intentions were reported to be 6.96 million acres vs. expectations of 5.9 million acres (up 27%) and 5.46 million acres last year. Argentina is dealing with a nagging issue with port workers at Rosario, as they are acting out civil disobedience by blocking the entrance in hopes of higher pay. As far as Argentine weather, the outlook is trending favorable for soybean harvest.

Wheat trade was mixed today, with Chicago SRW -1 ¼, Kansas City HRW +1 ¾, and Minneapolis HRS -1 ½ (May). Stats Canada reported wheat acreage intentions overall at 22.4 million acres vs. previous estimates of 21.3 million acres and compared to last year’s 23.2. A couple notable developments, the USDA is estimating Australia’s wheat crop to be down from 35 MMT last year to 24 MMT this year. Also, there is growing concern in Europe that dryness may damage the wheat crop if needed rains do not arrive soon. In that vein, France’s soft wheat crop conditions deteriorated from 89% to 85%, good/excellent. And in Russia, May and June weather is always the major determining success factor, as dryness and heat can play a big role in turning the tables on what can appear to be a bumper crop in late April.

Live cattle added to their gains of the last two weeks, +.225 at 116.700 (June). Packer margins are positive, boxes are firmer, and choice and select cuts are up. The Cattle on Feed report will be released this afternoon. Estimates are as follows: Cattle on Feed 99.7%, Placements 106.5%, and Marketings 109.4%. Look for results in Monday’s comments.

June Hogs have not been able to board the seasonal rally train, as futures closed down today at 68.325, -.350. This was their fifth consecutive day in the red. The silver lining could be that export demand is much stronger than expected, as pork prices have held firm in the midst of falling futures. Last week’s sales of 36,100 tonnes was the highest since January 19th, and cumulative 2017 sales are up 18% over last year. Keep an out for a nice seasonal bounce, as the recent sharp break is bound to attract demand from China and others.


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 2017.4.20
2017-04-20T03:14

Corn futures for May matched their April 7th low after losing 4 cents and closed at 3.57 ¾. Export sales came in at 848,200 tonnes, near the low end of expectations. As China lifts the curb on expanding industrial corn usage, the longer-term fundamentals have bit of a brighter tune. Capacity from refineries could increase by as much as 15-20million tonnes in the 2017/18 season. Funds were sellers again in corn, defending their current large short position and spilling over from today’s weakness in wheat. May corn options will expire tomorrow.

Soybeans saw little action today closing down 3 ½ in May at 9.46 ¾. This morning, the USDA weekly export report showed sales of soybeans fell to 225,000 tonnes (old-crop and new-crop combined), below trade forecasts for 400,000 to 800,000 tonnes. Soon, the record South American crop should move on the world market to add more pressure. However US prices are now competitive with Brazil and Brazilian farmers have been slow sellers. Chinese demand is strong and expected to support demand into summer.

Chicago Wheat futures dropped 1.2 percent to their lowest in nearly four months losing .12 ¾ in May, trading back to the contract lows from December. Investors were quick to beat back an overnight rally attempt amid a heavy global balance. The weather forecasts for the U.S. Plains and Midwest called for little pressure on winter wheat crops as they near maturity. Dry weather concerns out of Europe have yet to produce lasting price support in Chicago. Funds continue to maintain and defend their large net short wheat position. Export sales of wheat were 551,100 tonnes.

Live cattle buying on Wednesday carried over into today’s trading session, with deferred contracts posting fresh highs, led by this week's stronger-than-expected cash prices. Market-ready, or cash, cattle in the U.S. Plains sold from $130 to $133 per cwt, $2 to $5 higher than last week. The Cattle on Feed report will be released tomorrow. Estimates are as follows: on feed 99.7%, placed 106.5% and marketed 109.4.

Hogs' most actively-traded June contract closed off 1.275 at $68.675. Amid ample supplies, downward spiraling cash prices and Wednesday's wholesale pork cutout weakness the CME lean hogs contract was unable to make any gains. Today’s USDA export report showed U.S. pork sales at 36,200 tonnes, mostly for China, compared to 24,500 the week before. Technical support tomorrow in the June contract at 68.250.


May options expire this Friday, April 21.

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 2017.4.19
2017-04-19T02:41

Corn traded both sides of positive, finishing even at 3.61 ¾ (May) and + ¼ at 3.86 ½ (Dec). Planting is getting off to a slow start, with only NE achieving the 5-year average. Spring showers are keeping some farmers out of the fields temporarily. However, modern farm equipment removes some of the anxiety from the mix, as lost time can be made up relatively quickly. On the weather front, it looks like a several-day planting window may open up for a good portion of the northern, central and eastern Midwest. This should help bring early planting progress more into alignment with expectations. EIA Ethanol numbers released today for the week ending April 14th showed ethanol production up .71% vs last week and up 5.75% vs. last year. Ethanol stock were also up by .57% over last week and 4.48% vs. last year. Cumulative corn used for ethanol is estimated to be 3.46 billion bushels, with a target of 5.45 billion bushels for the crop year. Tendering for optional origin corn are South Korea and Turkey, looking to buy 60K MT and 118K MT respectively. Managed funds continue to hold a large short position in corn.

Soybeans were able to reverse course today, +4 ¼ at 9.50 ¼ (May) and +1 ½ at 9.58 ¼ (Nov). Yesterday saw steep losses early in the session, but futures were able to bounce back into the close on strong meal buying. The supply base is the biggest concern among investors. Part of the pressure on markets earlier in the week, resulted from a broader pessimistic mindset in overall commodities. Crude oil also dropped, as the macro issues of turmoil with North Korea and uncertainties surrounding relationships with key trading partners are on traders’ minds. Buyers seem content to wait for the South American crop, as Argentine forecasts look good over the next 10 days and DERAL estimates harvest in Parana, Brazil, at 97% complete. It is interesting to note however, that a well-known South American crop scout lowered the Argentine production by 1 MMT due to heavy rains that damaged crops. Managed funds continue to hold a modest short position in beans.

Wheat was down today, with Chicago SRW -3 ½, Kansas City HRW -2 ½, and Minneapolis HRS -4 ¾. Spring wheat has rallied over 21 cents from its April low, due to strength garnered from a wet and cold start to planting in the North and South Dakota farmers opting more for soybeans over wheat due to lender pressure over insurance economics. According to a seed salesman, he has sold the least amount of wheat seed ever this year. On the global scene, Russia and Turkey have reportedly come to an understanding regarding their trade issues, as Turkey had banned Russian grain imports the last several weeks. This was a significant problem for Russia as Turkey is a major customer. Stats Canada will release their 2017 acreage estimates on Friday, and wheat is expected to decrease from 57.3 million acres to 55.3 million acres. Look for wheat to continue sideways trade as sellers are starting to dwindle, but there is not much incentive to buy either. Managed funds continue to hold a large short position in wheat.

Live cattle were able to build on recent gains while technically overbought, +.300 at 115.950 (June). A few factors that have helped fuel cattle’s rise are a significant futures’ discount to cash, declining average weights, strong packer margins and rising beef values. Today, over 4,200 cattle will be offered on the Fed Cattle Exchange, and this will be closely monitored for cash direction later in the week. The Cattle on Feed report will be released this Friday. Estimates are as follows: on feed 99.7%, placed 106.5% and marketed 109.4.

Hogsexpecting a seasonal recovery bounce, instead continued to see falling prices today into lows not seen since October, -1.550 at 69.950 (June). Strong packer margins and rising pork values should provide impetus for a turnaround soon. It is thought the backlog of hogs across the country due to the holiday and weakness in the cash market, has kept the market in check. Supplies should start to whittle down over the next few weeks as farmers direct their attention to field work and planting.

In other newsVice President Pence headed for Japan yesterday to further economic ties and negotiate a bilateral trade agreement. Despite the U.S. withdrawal from TPP, Pence indicated that our two economies are intertwined. Japan, on the other hand, is trying to revive the TPP without the U.S. TPP was estimated to be worth over $4B to Agriculture. Switching gears and looking at the 2018 Farm Bill, with the budget situation and political challenges, it will be a tall order to accomplish. Crop insurance as well as other traditional farm programs will be up for a vigorous debate, as funding will be an issue this time around, according to Pat Westhoff, an Economist at the University of Missouri.

May options expire this Friday, April 21.

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 2017.4.18
2017-04-18T02:06

Corn is trading weather, and short-term this is not enough of a story to stave off the bears, -4 ¾ at 3.61 ¾ (May) and –4 at 3.86 ¼ (Dec). The corn crop is only 6% planted so far this season, compared to 9% on average historically. All the “I” states are started planting but running behind. If planting progress continues to lag, this will build strength for corn with each passing week. Export sales have been great (1.328 MMT vs 1.100 last year same week), but it is imperative for this trend to continue in order to cut into the large stockpiles on hand. While futures did not reflect positive sentiment today, it is worth the reminder that speculators are holding shorts for both corn and other grains, at a level that is not typical for this time of the year. If we are to have a spring and/or summer rally, this positon could add fuel to the fire. Hedge funds and other money managers are bearish based on the fundamentals of big stockpiles and production estimates. They seem unimpressed by the thought of potential weather delays at this point.

Soybeans made a larger than expected move to the downside, but rallied at the finish to end -7 ¼ at 9.46 (May) and –5 ½ at 9.56 ¾ (Nov). Factors on the minds of traders include the big South American crop, large stocks, normal weather patterns, talk of China increasing their domestic production and a less than bullish NOPA report yesterday. Not to mention USDA inspections yesterday were on the low end of estimates. Will large crop expectations force sideways trade instead of the usual seasonal rally? As with corn, it is interesting to follow the specs short position, as only in 2015 did they hold a short position going into a June rally. There is still room for a South American problem, as Argentina is only 9% harvested on their beans. Stay tuned, as last year saw a rally with record size grain and oilseed supplies.

Winter wheat succeeded in climbing into positive territory, battling the negative pull of corn and beans, while spring wheat got a good boost from lagging planting progress: Chicago SRW +1 ½, Kansas City HRW +3, and Minneapolis HRS +8 ¾. Winter wheat is 19% headed, which is 6% above the five year average and 54% of the crop is rated good/excellent. Spring wheat is running behind the average planting pace of 21%, at 13%. One would think U.S. wheat would be competitively priced for export trade, with the recent setback in futures and a lower dollar.

Live cattle continue to show gains, +.075 at 115.650 (June). Early grilling season and higher international demand have been partly responsible for the recent rally. It is likely prices will retreat at some point, as supplies are abundant. Brazil’s meat scandal did not have a measurable positive effect on U.S. beef sales, as most of the countries affected by Brazil’s exports were not customers of the U.S., and they have now begun to reopen the doors to Brazilian imports. If this situation were to broaden, it could potentially be beneficial stateside. And, China’s announcement that they will lift a ban on U.S. beef has been helpful to optimism, but has not resulted in trade to this point. U.S. plants need to be certified first, which takes time. But, the idea of a new market with 1.3 billion appetites is a delicious thought. Look for the Cattle on Feed report this Friday afternoon at 2pm.

Hogs continued to slump today as they are trying to find a bottom as we move into grilling and summer BLT season, -.850 at 71.500 (June). Saturday’s slaughter is expected to be exceptionally large, as packers are working to get caught up on the backlog resulting from the holiday. Supplies should start to whittle down over the next few weeks as farmers direct their attention to field work and planting.

In weather newsthe U.S. is at its lowest level of drought in seven years. In the lower forty-eight states, 73% of the entire area is drought-free. August of 2010 was the last time a better level was recorded - one point higher at 74%. In the 1-5 day outlook, KS, MO and IL should see more precipitation, while the 6-10 day is looking drier for the Midwest.

.17All 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 2017.4.17
2017-04-17T03:14

Corn was weakened by profit taking, as futures reached a five week high coming into the session.  Thoughts of weather delays kept losses reasonable, with May –4 ½ at 3.66 ½ and Dec –4 ¼ at 3.90 ¼.  USDA weekly corn inspections for the week ending April 13th tallied 1.328 MMT compared to expectations of 1.250 MMT.  In the near term, traders are likely to see choppy market action, with farmer selling keeping gains in check and wet weather in the Midwest/Delta supporting breaks.  There is still a fairly good supply of on-farm corn that will be looking for a home on rallies. Also, keep an eye on managed money’s large short position, as the Commitment of Traders report showed them selling 8K corn, taking their position to 158K short.  Regarding the much promoted corn vs beans acreage battle, it is still not a “done deal” as most farmers will not make a decision on swapping corn acres to beans until May 15-20.  So, there is still a fair amount of speculation and uncertainty that will surface over the course of the next few weeks. In China, the government plans to decrease corn plantings by 4%, in an effort to whittle down the enormous domestic stockpiles, as they have reserves equivalent to one full year of consumption.

Soybeans could not resist the negative pull of the grains today, as the front month fell at the close, May –2 ¼ at 9.53 ¼ and Nov + ½ at 9.62 ¼. Weekly export inspections announced by the USDA this morning were lower than expectations, at 430,879 MT vs. 525K MT. NOPA also released their monthly report this morning, and it revealed the following: soybean crush 153.06 million bushels vs expectations of 156.7 and last month’s 142.79, soyoil stocks at 1.815 billion lbs vs. expectations of 18.1 and last month’s 1.770, and soymeal exports of 1.056 million tons vs last month’s 738,825. China is expected to increase soybean planted acres this year by 8.1%, as part of their re-allocation of corn acres plan. This is in-line with analysts’ expectations. Chinese demand is solid, with imports up 20% over last year and a relatively stable economy.

Wheat received pressure from a crop friendly weather forecast and a third consecutive week of improving conditions. All three complexes were down, with the winter variety impacted most significantly: Chicago SRW -8 ¾, Kansas City HRW -11, and Minneapolis Spring -2. Weekly export inspections came in over estimates at 671,868 MT vs. expectations of 500K MT. Like corn, wheat finds itself in a largely oversold position, with managed funds -134,459, as the shorts increased by 4,375 according to Friday afternoon’s COT report. The export cupboard has been bare, which is not a big surprise early in the week.

Live cattle continued their meteoric rise, building on last week’s gains, +1.050 at 126.425 (April) and +.875 at 115.575 (June). Grilling demand should provide a good boost now that the Easter Holiday is past, as retailers are stepping up to the plate to order. Lighter cattle weights (7 lbs lighter than last week and 11 lbs lighter than last year) have also tightened supply, which is forcing packers to ante up to higher prices. Average wholesale beef prices and select cuts were up $1.41 per cwt and $.72 respectively.

April Hogs expired today, as they showed a final tally of 61.975, -.475. The June contract also registered a small loss at 72.350, -.150. A variety of factors influenced trade including deferred months’ premiums to current cash and Friday’s fallen cash and wholesale prices, according to traders. Lower pork bellies were mostly responsible for the fall in average wholesale prices as they were down $2.67. The seasonal shift from Easter hams to summer BLT’s is now on...stay tuned.

.17All 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 2017.4.13
2017-04-13T03:43

Corn seems to have run out of selling with short-covering coming into play, as bearish news seems to be behind us for the near-term, +2 at 3.71 (May) and +2 at 3.94 ½ (June). What will planting season bring? It appears that corn and wheat are off to a slower than normal start. Weather forecasts have been wet, although it is a little early in the U.S. for this to be a big story. But any perception by the market that there are potential planting delays, will tend to provide strength until proven otherwise. The markets are also feeling some relief related to exports to Mexico, as there has not been much negative rhetoric directed south recently. Mexico has been shopping South America as alternative source to U.S. corn, which has caused concerns stateside. On the weekly export rolls, corn was less than impressive, sporting a 730K MT tally compared to expectations of 900K-1.4 MMT.

Soybeans have also reacted positively post-report, as it is thought many of the big numbers posted for stockpiles and South American production were already “priced in” to a large extent. The May contract was +7 ¾ at 9.55 ½, while the November contract was +6 ¼ to 9.61 ¾. Futures also received support from Chinese meal trade and a temporary slowing of South American harvest. Additionally, the meeting between Presidents last week has allayed fears and tension around trade policies that were building between super powers. China announced that soybean imports are 20% higher year-to-date than last year. The demand under the market has become a worthy story. Weekly export sales announced today were not so inspiring, as they were announced at 402,300 MT vs. estimates of 600-950K MT. But, soybean sales are up 25% over last year and the costs are down 40% in the last eight months, which puts them on par with South American supplies. Where do we go from here? All eyes are now turned to weather and planting delays, as it comes down to perception more than reality sometimes.

Wheat had mixed results today with winter losing and spring winning. Chicago came in at –3 ½ (May), Kansas City at -2 ¾, while Minneapolis was +1 ¼. The Dollar is down and may provide some help for wheat and other exports, as President Trump has made it clear that he feels the Dollar may be too strong and he is in favor of lower interest rates. Export sales reported this morning showed a solid 421,600 MT compared to expectations of 300-750K MT. As a counter balance to all the talk of enormous stockpiles, it is interesting to note that Europe is expecting to end the season with the smallest wheat stockpiles in 13 years, falling up to 37%. What will cause this? According to Tallage SAS, it is a combination of a poor harvest, strong consumption and larger than expected exports.

Live cattle continued solid gains, buoyed by news of China planning to drop bans on U.S. beef imports, +1.175 at 125.375 (April) and +.350 at 114.700 (June). However, there is no timetable on when the ban is to be lifted, so at this time perception is driving the market. Regarding the highly watched Fed Cattle Exchange yesterday, only 120 head of cattle were sold of the 5,125 offered, as buyers and sellers could not come to terms. Packers are making a big dent in the captive supply, as they butchered 115K head Wednesday. Keep an eye on short-term support at 113.25 and resistance at 116.10 in the June contract.

Hogs were able to squeak out a small gain, +.225 at 62.450 (April) and +.225 at 72.500 (June). It is surprising that the lean hogs cash index is still over $64, with the April expiration looming next week. The pork cut-out was down $.44, and pork should be priced attractively for grilling season. Look for June hogs short-term resistance at 74.50 and support around the 69.85 level.

In other newsPresident Trump is having a significant impact on the markets with his back-and-forth rhetoric. Not long ago, he expounded that the Russians were someone that he could work with and China was the worst currency manipulator in history. The past few days has seen a reversal, as U.S.- Russian relations are at an “all-time” low and the Chinese are “not currency manipulators” after his recent meeting with President Xi. And now, China is opening the doors to U.S. beef. The markets have definitely responded to his sound bites, whether it’s the Dollar, gold, interest rates, or grains for that matter. Stay tuned for further developments.

The CME will be closed tomorrow in observance of Good 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 2017.4.12
2017-04-12T03:23

Corn went higher today, pulled along by soybeans, and also wet weather in South America and in US forecasts, +2 ½ at 3.69 (May) and +2 at 3.92 ½ (Nov). Heavy rains this year in Argentina are responsible for the loss of up to 1.7 million acres of prime corn and soybean areas. EIA Ethanol numbers today showed production is down 3.24% vs last week and 5.12% vs last year. Ethanol stocks are down 3.38% vs last week and up 2.63% vs. last year. To summarize, ethanol production is down seasonally as plants do maintenance, but still above normal pace. Margins are still positive. Stocks are high but will hopefully follow their seasonal decline. With the entire growing season in front of us, where do we go from here? Keep an eye on managed money, where traders are short 150K+ contracts (as of April 4th), and susceptible to any kind of a bullish development. Support levels to monitor include 3.63 ¼ and 3.59 ½ with resistance at 3.69 ¾ and 3.72 ¾ (May).

Soybeansdespite bearish projections from the USDA report yesterday, continued the recovery bounce from yesterday’s session, +8 ½ at 9.47 ¾ (May) and +7 at 9.55 ½ (Nov). Fundamentals alone would indicate beans should be on a downward trajectory, but in typical soybean fashion they continue to confound the experts. Helping support beans is wet Argentine weather, and also the idea that the big supply numbers and South American production were already “baked in” to the formula. It leaves one to think, what other bearish news is out there for beans before we move into the growing season? Indicators would suggest the market is very oversold. Look for a shift for higher if near term resistance is taken out (9.46 ¾ and 9.53 ½).

Wheat found some strength today in the corn and beans rally , as well as FranceAgriMer’s revised forecast for soft wheat stocks to decline to 2.6 MMT from 3.0 MMT (below the average of the past five years). The decline was influenced by farmers selling aggressively at the start of the season, and them using more of the crop on farm (by 20%). Incidentally, France is Europe’s largest wheat producer. All three exchanges ended above water, with Chicago SRW even at 4.33 ¼ (May), Kansas City HRW + ¼ at 4.30, and Minneapolis spring variety +1 at 5.28 ¾. U.S. on farm wheat price is pegged at $3.85 vs. $3.85 last month and $4.89 last year. As with corn, watch managed money’s large short position, as this could amplify a break-out from moving averages.

Live cattle continued their ascent higher, with deferred contracts reaching new highs on the heels of yesterday’s boost in wholesale beef values, +.950 at 124.200 (April) and +.650 at 114.350 (June). Traders also indicated that futures’ discounts to expected cash later this week provided support. Grocers are buying beef to prepare for post-Easter grilling demand. Keep an eye on the Fed Cattle Exchange results from today for future price direction, as 5,200 animals are up for sale.

Hogs fell sharply within the range they have been trading the last couple of weeks, -1.725 at 72.275 (June). It seems to be a combination of technical and fundamental factors, with sell stops and fund liquidation on the one hand, and slumping cash prices along with seasonally growing supplies on the other. Average wholesale pork price fell $1.53 per cwt while pork bellies were down $11.94 per cwt.


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 2017.4.11
2017-04-11T02:11

Corn followed beans on a volatile, post-report ride, ending the day – ½ at 3.66 ½ (May) and - ½ at 3.90 ½ (June). With this month’s report behind us, attention will turn to new crop and potential premium that may be built in by weather, planting, etc. To summarize the USDA report today, corn ending stocks were estimated to be unchanged in the U.S. compared to last month’s report and higher globally by 2.3 MMT. South American crop production got a boost as Brazil was upped to 93.5 MMT vs. last month’s 91.5 MMT. Argentina was also estimated higher at 38.5 MMT vs. last month’s estimate of 37.5 MMT. U.S. on farm corn price is penciled in at $3.40 compared to $3.40 last month and $3.61 last year. With the entire growing season in front of us, where do we go from here?

Soybeans were sharply lower today initially on bearish news from Supply and Demand as well as Crop Production releases, but made a solid comeback to finish, -2 ½ at 9.39 ¼ (May) and -1 ¼ at 9.48 ½ (Nov). Soybeans garnered much attention by report watchers this month, as the USDA report inked them higher than last month in every category. U.S. ending stocks were seen up 10 MMT to 445 MMT, while world stocks went from 82.8 to 87.4 MMT. Also changing for higher compared to last month was the South American crop production, with Brazil leading the way at 111 MMT vs. 108 MMT. Argentina, not wanting to be outdone, also showed an increase of 500K MT over last month at 56.0 MMT. U.S. on farm soybean price is viewed at $9.55 vs. $9.60 last month and $8.95 last year. In China, the USDA raised estimates of their soy imports by 1 MMT to 88 MMT with a 6.2% expected gain in crush. Time will tell if we have put in a new low.

Wheat exhibited a big mood swing today, as they also plummeted early but made a big reversal to finish in the green across the board. Minneapolis was the star of the show with a gain of +7 ¾ (May), followed by Chicago’s SRW at +4 ½ and Kansas City’s HRW at +4 ¼. As expected, wheat was of the same persuasion as its grain siblings, showing ending stocks higher everywhere. In the U.S., stocks increased from 1.129 MMT to 1.159 MMT, and globally from 249.9 MMT last month to 252.3 MMT. It is not the norm to see all three grains show such large increases in world stocks this late in the season. Weather has been a big factor with wheat, and as of now US winter wheat is looking better, and there is no evidence of a problem for the EU or FSU. U.S. on farm wheat price is pegged at $3.85 vs. $3.85 last month and $4.89 last year.

Live cattle continued its bullish mindset, boosted by futures’ discounts to expected cash prices this week and the news China plans to lift bans on U.S. beef, +2.150 at 123.250 (April) and +1.400 at 113.700 (June). Beef demand is lower this time of year, but usually gets the seasonal bump after Easter. Keep an eye on the closely monitored Fed Cattle Exchange tomorrow for price direction, with 5,200 head on the sale block.

Hogs initially exhibited weakness after the USDA grain report this morning, but reversed course to show a gain in the June contract, +.725 at 74.000. On the one hand, cash prices are being pulled down by bigger hog numbers and holiday plant shutdowns, but on the other hand wholesale pork values could get a bump from post-Lent grilling. Packer margins are up $32.50 per head from Monday’s positive $28.40 per head.



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 2017.4.10
2017-04-10T02:38

Corn took the lead today with a big bar on the charts, +7 ½ at $3.67 (May). Futures found support in continued wet weather in the U.S. and South America (Eastern Argentina and far southern Brazil) as well as a private sale announced by the USDA of 101,600 MT of corn sold to “unknown” destination for 2016/17. While today was positive, it is hard to find a reason at this juncture as to why managed funds would cover their large short position, and old crop supply continues to grow. It is likely the market will wait for the focus to flip to new crop and planting here stateside before building in much weather premium. The USDA weekly inspections penciled in corn at 1.170 MMT for the week ending April 6th, compared to expectations of 1.450 MMT. Look for nearby support at $3.57 ¼ and $3.55.

Soybeans were able to stay virtually even, receiving support from an oversold condition and copious rains in Argentina, - ¼ (May). Beans and the rest of the grains are experiencing the tug-o-war between the bulls and the bears. The bears are counting on large stocks, enormous South American production and the lack of news around the idea of planting delays. The bulls are focused on possible crop hiccups and the complacency that comes with multiple years of repeat performances. A recent positive development is the meeting between Presidents Trump and Xi last week, in which they were able to stabilize relations between the two superpowers in the short term. However, there is still much open for debate and consensus, not only on trade but North Korea. Soybean weekly inspection numbers released by the USDA this morning showed a solid 832,957 MT compared to estimates of 550K MT. AgRural confirmed thoughts of a bumper Brazilian crop, by raising their production forecast from 107 MMT to 111.6 MMT. The USDA is also expected to raise their estimate for Brazil from 108 MMT to 110 MMT.

Wheat continues to find support near current lows, +4 ¾ Chicago, +3 ¾ KC and +1 ½ MN. Will the WASDE report indicate any sort of decline in stocks? Old stocks are large, but that is widely known and thought to be priced into the market. USDA inspections were above expectations for wheat, coming in at 641,365 MT for the week ending April 6th, vs thoughts of 600K MT. It looks like weather will continue to play a role, as the 6-30 day outlook includes above average rains for most HRW areas. This will improve yield prospects, as areas of the Dakotas, MN, MO, OH Valley and AR have been dry and will welcome the increased precipitation. On the global stage, Russian wheat exports for 2016/17 were reported to be 5.5% higher compared to last year, at 22.19 MMT.

Live cattle is susceptible to rallies with a large discount to cash – in that vein, futures were up solidly today, +1.050 at 121.100 (April) and +.500 at 112.300 (June). As part of China’s efforts to avert a trade war with the U.S., it has been reported that the PRC is ready to lift the ban on U.S. beef imports. This also seemed to help provide a spark to the market. In boxes, choice rose $.13 and select fell $1.62. First Notice for April Live Cattle is today.

Hogs found support in cattle today as well as a boost in pork cut-out values Friday afternoon, finishing even in April and +.500 at 73.275 (June). Carcass values are firmer at $76.85, up $1.57 per cwt. Hogs are oversold, and seemingly in position for a positive bump, as we move into grilling season.

Tomorrow is the April USDA WASDE (World Agricultural Supply and Demand Estimates) Report at 11am CDT.

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 2017.4.7
2017-04-07T03:31

Corn headed into the weekend by giving back another portion of the post-report gains, -1 ¼ at 3.59 ½ (May). Mexico continues to posture the US by reiterating their interest in South American corn imports as an alternative. Most recently their economic minister said at Forum in Buenos Aires that they are mulling the idea of allowing tax free imports from Brazil and Argentina. The next USDA report is Tuesday, and we will get a look at the latest supply and demand forecasts. Grain analysts are viewing Brazil corn production at 92.5 MMT compared to the USDA’s March of 91.5 MMT and Argentina at 37.8 MMT compared the USDA’s March estimate of 37.5 MMT. Also world corn stockpiles are predicted by analysts to be 222.0 MMT, which is also an increase over the last USDA report of 220.7 MMT. And, U.S. stockpiles to mildly appreciate to 2.35 billion bushels compared to the March report of 2.32 billion bushels. In China, their think-tank, CNGOIC, increased expectations of corn imports from 1 MMT to 2 MMT (the USDA said 3 MMT). While cool and wet weather has slowed field work and planting across the mid-section of the U.S., next week is looking much better with warmer and drier condition.

Soybeans - While world news is heating up with the U.S. missile attack on Syria and the Presidential summit between Trump and Xi, the soybean market did not seem to be much affected. May futures traded both sides of unchanged before finishing + ½ at 9.42. Negative Chinese crush margins in addition to other bearish fundamentals neutralized gains. Will the USDA report on Tuesday move the market? It is hard to see much in the way of new bearish factors, as South American harvest is predicted at record levels and acres expected to increase by 7 million in the U.S. – but do not discount the idea that the USDA may trim export demand. The average prediction for U.S. soybean carryout is 450 million bushels vs. 435 million bushels last month. Brazil and Argentina production are both predicted to be up by 2 MMT and 500K MT respectively. China’s CNGOIC also upped their prediction of soybean imports for 85 MMT to 86.5 MMT, which is now in line with the USDA.

Wheat continued trade in a sideways range. Chicago (+ ¾) and Kansas City (+1 ¾) were able to head into the weekend with small gains, while Minneapolis Spring wheat struggled to a negative finish, -3 ½. Large stockpiles on are everyone’s mind, as no big weather events or other announcements have moved the market to a large extent coming into the next USDA report on Tuesday. The French reported their wheat conditions (for the soft variety) at 90% good/excellent compared to 92% last year at this time. It is rumored that Algeria is in for 570K MT of wheat for June with the EU being the majority source of origin. Initially, it was thought some U.S. HRW was part of the tender, but does not appear to be the case.

Live cattle made a large positive move finding impetus from technical buying and futures’ discounts to expected cash prices, according to traders. June futures finished at 111.800, up +1.675. Look for cash prices to weaken with negative packer profit margins, seasonally slow demand, and large numbers of cattle for sale. Monday is First Notice Day for live cattle deliveries against April.

Hogs were bogged down by profit taking from Thursday’s rally and lessening cash and wholesale pork prices, -.925 at 72.775 (June). Packers are still profitable, but supplies are growing, based by warm spring temperatures that allow pigs to grow faster. Look for spring and summer pork belly storage to influence wholesale pork prices post-Easter.


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 2017.4.6
2017-04-06T03:04

Corn joined the other grains, down -4 at 3.60 ¾ (May) and -3 ¼ at 3.86 (Dec). There does not seem to be any correlation between export sales reported this morning and action on the charts as corn came in with strong weekly report numbers. It is obvious the market has shifted focus to new crop supply, which offers more uncertainty than answers. Corn sales announced this morning for the week ended March 30th featured corn above the market expectations of 700K-1.0 MMT at 1.138 MMT, a welcome departure from last week’s disappointing results. Seasonally, this is a favorable time of the year for US corn export sales with Brazil usually getting heavy into the mix by June/July. U.S. Corn customers this past week included Mexico, Korea, Colombia and Japan.

Soybeans were back to their negative bias, after a positive binge yesterday, -2 ¾ at 9.41 ½ (May) and -3 ¼ at 9.50 ¾ (Nov). Soybean sales announced were right in line at 482K MT compared to a range of expectations of 350-550K MT. Considering the large size of the Brazilian crop, U.S. sales have kept a very respectable volume, as sales have averaged 19.8 million bushels/week compared to 14.7 million/week last year. China has been a strong buyer of old crop, and once these reserves are all spoken for, there will likely be a significant decline. Of particular interest to soybean traders is the visit this week of Chinese President, Xi Jinping, to President Trump’s Mar-a-Lago club in Florida. A lot is riding on maintaining a positive trade relationship with our primary economic and military rival. Almost half of the U.S.’ trade deficit is with China, as they account for $347 billion of the pie. Mr. Xi wants very badly to avoid major conflict with the U.S., which could undermine his credibility at home where they are enduring an economic slowdown. Speaking of China, it has been promulgated that they have bought 4-15 cargos of Brazilian soybeans this week. Also of note, Argentina was brought to a standstill as union employees walked off the job last night, completely paralyzing the grain export sector – will this be a developing story over the next few days.

Wheat was down across the complex, despite good export numbers, with Chicago SRW -6 ½, KC HRW -5, and the Minneapolis Spring variety -1 ¼ (May). Sales announced were 568K MT compared to estimates of 250-450K MT. This is in stark contrast to last year same week, which highlighted net cancellations of 2.1 million bushels. However, new crop sales were on the low end of expectations, showing only 87K MT vs. 50-250K MT. Buyers included Mexico, Taiwan, Japan, Korea, Algeria and “Unknown” (which took the largest amount). The United Nations’ Food and Agriculture Organization is predicting world ending stocks to rise to the highest level in 17 years. But, weather issues continue to be a leading concern that could influence the wheat market.

Live cattle found market support in futures’ discounts to prospective cash prices, +.700 at 110.125. Of note, no animals sold on the Fed Cattle Exchange yesterday for the first time since the exchange started publicly reporting on May 25, 2016. Packer margins have become unprofitable, and that coupled with large supplies, could impact cash prices. The USDA export report showed strong results for the week ended March 30th, with sales at 19,300 tonnes compared to 10,900 tonnes last week (mostly to Japan).

Hogs found support in a positive U.S. export report, with a reported 21,500 tonnes compared to 21,100 last week (mostly to Mexico), +1.675 at 73.700 (June). While Easter ham sales are declining, grilling season is ramping up. Applying pressure to the market is declining cash and wholesale pork prices. Technically, there is bullish divergence between price and the RSI in the June contract – have we bottomed out?


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 2017.4.5
2017-04-05T01:49

Corn was buoyed by a wet weather forecast and a bounce in beans, +1 ¾ at $3.64 ¾ (May). The EIA Ethanol numbers were released today, and they showed stocks up for the week ending March 31st by 448K bbl to 23.71 million bbl. EIA refinery capacity was pegged at 90.8% compared to expectations of 90% and last week at 89.3%. Production dropped sharply but is still 4.4% above last year, dropping 300 million gallons/week from 310 million last week. If corn for ethanol usage continues higher than last year, the USDA will need to continue to make upward revision adjustments. As with wheat, weather is becoming a more important barometer short-term. Many areas across the growing area are receiving large amounts of precipitation, which could delay planting. Longer term, what happens in July will dictate yield to a greater extent. Another interesting dynamic is the potential for a clash of exports. Louisiana and Texas corn plantings are way ahead of schedule this year, which could bring early harvests into direct conflict with the apex of South American corn exports. This would not be helpful to global corn prices and could have a negative impact on a languishing US farm economy.

Soybeansafter reaching lows yesterday not seen since last fall, responded positively today with a “relief rally”, +6 ½ at $9.44 ¼ (May). Futures are considerably oversold, and overnight trading saw heavy volume in the May/July spread. Also, rains in Argentina are playing a small part, as there are always the accompanying thoughts of risk to harvest. Additionally, the Chinese returned to the market after a holiday. It is likely the positive vibes will be short-term in nature, with fundamentals remaining bearish, as South American production estimates continue to climb. The latest to raise the bar, Celeres, is now predicting a Brazilian soy crop of 113.8 MMT, up from previous March estimates of 109.7 MMT.

Winter Wheat was able to piggyback on the strength of corn and beans, with Chicago +2 ¾ and Kansas City +3 ¼. Minneapolis was of a different persuasion, with the May contract showing a loss today, -3 ½. There has been a lot of talk about wheat planted acres predicted to be down to the lowest level in 108 years. In that vein, Informa released their 2017 winter wheat production estimate at 1.285 billion bushels, a significant drop from last year’s 1.672 billion bushels. Will the USDA confirm this line of thinking on May 10th when they release their first winter wheat production estimate? Areas that were dry are now getting much needed rains with widespread wet weather across the mid-section of the growing areas and into the Central Great Lakes. In Europe, there is growing concern of dryness, which could help support the wheat complex. On the global stage, Algeria is tendering for 50K MT of soft wheat, while Japan is in for 120.5K MT of US/Canadian wheat.

Live cattle followed yesterday’s losses with a strong close today to finish slightly positive, +.125 at $109.425 (June). Factors negatively influencing include seasonally slow beef demand, poor packer margins and large numbers of cattle on the sale block this week. According to the USDA, average wholesale beef prices were down $1.74 per cwt to $211.69 and select cuts shed 96 cents to $200.39. The Fed Cattle Exchange today will help give price direction for the remainder of the week, as 3,500 animals are offered for sale. Look for a support level in the area of $107.85 and resistance at $111.60 in the June contract.

June Hogs traded both sides of unchanged, finishing +.050 at 72.025 (June), while April ended slightly negative, -.05. The April contract experienced weakness on Tuesday’s lower cash and wholesale pork prices against a backdrop of large supplies. The lean hog index also fell by -.710 to $67.590, as the April 17th settlement day approaches. The Saturday slaughter numbers are expecting to be down as most buyers have wrapped up their Easter holiday ham purchases. Will June be able to turn the corner and into a more seasonally positive trend? Give consideration to support around $69.85 and resistance at $74.60 (June).


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 Solution Daily Report 2017.4.4
2017-04-04T03:02

Corn was unable to sustain positive momentum as weather is not helping the cause, with generous rains canvassing most of the US yesterday and planting conditions showing the southern states well ahead of schedule compared to average. May futures fell -4 ¾ (3.63) with Dec following suit at -4 ¼ (3.87 ¾). Corn is likely going to need an assist from weather to get jump started on a rally. In the US, weather forecasts are predicting more precipitation on the way over the next two weeks. The market will continue to see resistance on rallies from producer selling, as on-farm stocks are a healthy 4.9 billion bushels. On another note, bird flu continues to hover over the news, as an industry group said that France will not need 330K tonnes of feed this year due to widespread culling of ducks in efforts to contain the virus. A good portion of the ration is composed of corn. It is also affecting the chicken population, which could potentially lead to the drop of another 80K tonnes of animal feed in France.

Soybeans were able to stabilize on the heels of a 2-day freefall, - ½ at 9.37 ¾ (May) and -1 ¼ at 9.49 (Nov). May soybeans are down over $1.40 from highs in January, now in oversold territory as funds are building a short position. The market is still trying to decide how to process Friday’s report of high stocks and planting intentions, as well as the big numbers predicted from our southern hemisphere neighbors, as the Argentine crop roundup has production at 56.5 MMT vs the USDA estimate of 55.5 MMT. The harvest is just beginning in Argentina, but so far reports are exceeding yield expectations. And, in Brazil, soy exports are up 30% over last year. The USDA has US soy shipments at 85% of the target compared to the five year average of 86%. Soybeans are running short on fresh sellers after the big decline. Will we experience a relief rally correction in the short-term?

Wheat gave back early gains yesterday but still finished positive. Futures continued sideways trade today with mixed results: Chicago – ¾, Kansas City +2 ¾ and Minneapolis -3 ¾ (May). Some support may be found in dry weather issues developing in Europe combined with speculators holding a very large net short position. The USDA reported winter wheat at 51% good/excellent vs 59% last year and 56% on average. It was reported that South Korea bought 65K MT of feed wheat, assumed to be of Black Sea origin. In India, they are reporting a record wheat crop of 98 MMT. Look for wheat to continue to trade weather and to follow the other grains. And, as always keep an eye on the Dollar, which has snuck back up over 100.

Live cattle continued to show weakness today, with beef demand exhibiting complacency that could affect cash prices later in the week, -1.400 at 109.300 (June). Market losses also resulted from technical selling and sell stops according to traders. Looking at prices yesterday, wholesale beef prices fell 69 cents per cwt compared to Friday, while select cuts also shed $2.65 according to the USDA. Other influencing factors include negative packer margins and a larger pool of cattle for sale this week. Speculators have a large net long position but cash is leaning negative. Investors may want to consider selling rallies.

Hogs were pressured by the cattle markets as well as declining cash prices today, -.675 at 71.975 (June). According to Reuters, some speculators sold nearby hog contracts and simultaneously bought deep-deferred months in a trading strategy known as bear spreading. The large supply of pigs is keeping pressure on the market, with some speculators liquidating positions. Look for pork bellies to be a key price influencer with expected solid demand, as ham will likely decline as the Easter buying slows.


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 2017.4.3
2017-04-03T02:48

Corn had a big burst of energy early in the session, but settled in for a modest gain, +3 ½ (May) and +3 ¾ (Dec). Corn got the better end of the Friday USDA reports, with acreage intentions showing plantings of 90 million acres, down 4 million from last year. However, March 1 stocks came in much higher than anticipated at 8.6 billion bushels (on-farm stocks are up 13% from a year ago), which put a check on pre-planting euphoria. With normal growing conditions this summer, it is likely that corn carryout will be reduced by 600+ million bushels, which could lead to .25-.30 cent higher prices – feed buyers beware. The USDA served up the usual Monday weekly inspection numbers this morning, and they pegged corn at 1.475 MMT for the week ending March 30th, compared to the expected 1.350 MMT. Weather is now the big topic of discussion. A question to consider - is negative news already “baked in” or are small rallies bull traps that lead to lower prices?

Soybeans experienced a free fall on the heels of Friday’s reports, as farmer planting intentions tallied 89.5 million acres this year compared to 83.4 million last year. Today continued the negative trend, -7 ¾ (May) and -3 ¾ (Nov). Soybean planting intentions acres are up in 27 of the 31 states that are showing estimates for 2017. Compounding the situation, soybean stocks also showed an increase over expectations, up 13% to 1.7 billion bushels. USDA weekly inspections had soybeans over the expected 600K MT at 620,725 MT. In the face of bearish fundamentals, demand continues to be good. The closely watched corn/bean ratio is now 2.42 3/8, continuing its trek below 2.50.

Chicago Wheat chose to follow corn in a positive direction today, although sputtered its way to the finish, +1 ¼ (May). Results from Kansas City and Minneapolis were not as positive, -1 ½ and -3 ½ respectively. Wheat supplies continue to bust bins, as all wheat stocks were up 21% over last year at 1.7 billion bushels. Wheat also made a good showing on the weekly inspection log, with 559,646 MT recorded for the week ending March 30th, compared to expectations of 550K MT. It has been reported that Turkey is buying from alternative sources to Russia as part of a trade dispute bubbling over from an argument related to the downing of a Russian fighter jet in 2015. This is significant because Turkey is the world’s biggest exporter of flour, and consumes a large amount of high quality wheat. Time will tell if this will be a significant shift on the export balance sheets.

Live cattle seems to have optimism on the horizon with strong support and good demand. However, futures experienced a modest pullback today on selling tied to slumping wholesale beef values, -.175 at $110.700 (June). Factors also affecting trade include negative packer margins, seasonally slower beef sales, and plenteous supplies. Look for short term support at $109 and resistance at $113.10 in the June contract.

Hogs saw investors selling today, as prices tumbled to $72.650 (June), -1.200. It is expected that hog numbers will increase over the spring and summer, which will temper price increases. Look for short-term support at $71.75 and resistance at $76.25 in the June contract.

In weather news, widespread rains dropped a generous amount of moisture across most of the growing areas in the US last week with more on the way. As for the 90-day temperature forecast, the eastern part of the US will tend to be above normal, while the west will tend normal.

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 2017.3.31
2017-03-31T02:50

Corn responded bullishly to the USDA report today, +6 ¾ at 3.64 ¼ (May). Today was one of the biggest USDA report days of the year, featuring duel announcements of acreage planting intentions and quarterly stockpiles. The average prediction by analysts was 90.9 million planted acres for corn, however the announcement saw corn a million acres lower at 90 million (94 million were planted last year). As expected, quarterly stocks were well above last year at 8.616 bbu (7.822 bbu LY) and above estimates of 8.534 bbu. Of that amount, 4.91 bbu were stored on farms, which is up 13% over last year. On the South American front, Informa Economics released their latest estimate and it showed Brazil’s production at 95 MMT (up from 91 MMT) and Argentina at 38.2 MMT (up from 35.2 MMT). Now that we know the USDA acreage planting estimates, the main focus will be on weather. What will be the long term impact of this report on the markets?

Soybeans could not stop the bleeding today, finishing -17 at 9.46 (May). Many were expecting a bearish report, and the USDA confirmed suspicions with projected US planted acres rising to 89.5 million acres compared to expectations of 88.2, and stockpiles accumulating to 1.735 bbu compared to predictions of 1.684 bbu and 1.531 last year. However, it is worth considering that the last 12 years in a row have seen the February daily average price eclipsed by the November contract in the time period of March 1 – September 30th. For example last year the February price was $8.85, and the peak price later in the season rose to $11.86. Different this year is the fact we started at a much higher February price ($10.19) and stockpiles are at record levels. However, the unpredictability of beans and the underlying demand always seem to rise to the top and confound even the best analysts. It is too early in the season to think that all is lost. In South American news, Informa raised their forecast of Brazil’s soybean production to 111 MMT from 108 MMT and Argentina to 57.5 MMT from 55 MMT. Brazil’s number continues to climb higher, and this is definitely having a profound influence on trade in addition to US numbers that came out today. The closely watched corn/bean ratio is now 2.45 ¾, below 2.50 for the first time since last October.

Winter Wheat followed corn with a positive response to the report today, with Chicago +5 ½ and KC +3 ¼. However, Minneapolis took it on the chin, -9. Wheat planted acres were even lower than record low estimates of 46.1 million acres, at 46.06 million. Stockpiles were slightly higher at 1.655 bbu vs. the expected 1.627 bbu and 1.372 bbu last year. On-farm bushels were 9% higher this year than last at 350 mbu. The drought monitor is looking more benign as the Southern Plains as well as many other dry areas received rains this week with more on the way.

Live cattle made a nice comeback, finishing even at 110.875 in the June contract. This in the face of declining wholesale beef prices and eroding packer profit margins. Feeders showed a nice gain at 132.700, +1.275 (May). On a side note that is positive to beef, McDonald’s announced that they will be converting to fresh beef patties for Quarter Pounders by mid-2018. Consumers are demanding fresher and healthier options, and McDonald’s does not think this will have a big impact on the price of the burgers.

Hogs responded mildly bearish to the Hogs & Pigs report yesterday, with June ending -.400 at 73.850. To recap the report – all Hogs were at 104% to last year vs. estimates of 103.9% (this is record large for the quarter), March-May Farrowing at 101% vs. estimates of 101.8%, and Marketings of 104% vs. estimates of 104%. Abundant supplies have limited gains, but demand has also been good. Some traders cashed in their profits on short positions. Average packer margins were down modestly from last week’s $20.20 to $19.75 and wholesale pork fell $1.04 to $75.18 per cwt.

In other news, Sonny Perdue passed the first hurdle on his way to becoming the next Ag Secretary, as the Senate Ag Committee gave their approval and sent him on to the full Senate for a confirmation vote. Next Thursday is Easter recess, so if he is not confirmed before then, the vote will be pushed out until the end of April.

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 2017.3.30
2017-03-30T03:52

Corn limped in on the last day before the USDA report at $3.57 ½ (May), -1. Weekly export sales announced today were deflating for corn, as they were well below the expected 900K-1.2 MMT at 717K MT. Last year, the next 10 weeks of spring sales were very impressive, so it is hard to see corn exports gaining ground from this point forward. Additionally, there is talk that Mexico is looking to buy more South American corn, as rumors have them already securing at least one cargo. Ukraine is also competing with the US for South Korean sales, as the Koreans have become the world’s 5th largest corn importer. From a weather standpoint, the entire mid-section of the US will see a rain-train of multiple storms over the next several days, which should provide an excellent moisture base for planting season.

Soybeans took up where they left off yesterday, down -6 to $9.63 (May). Futures continued to follow a pattern of weakness, on the heels of selling in palm futures overnight and a fall in Dalian beans. The market seems to be fixated on either the idea that the Friday report will show fundamentals are worse than expected or that another large US 2017 crop is on the way. Export sales today appeared to be very strong at 681K MT vs. expectations of 350-550K MT. However, a downward adjustment from last week of 207K MT took a little wind out of the sails. On the bright side, the USDA reported a private sale to China for 2017/18 of 165K MT. These have been few and far between with the seasonal shift of Chinese buying from South America.

Wheat followed the other grains and a negative weather forecast, -4 ½ at the CBOT. Kansas City also fell in line at -6 ¼, while Minneapolis posted – ½. Wheat came in first place on the export board today, with announced volume of 464K MT sold, above the range of expectations of 250-450K MT. This was their best showing in six weeks and hopefully will continue as the US has become very price competitive with the Black Sea region and others. Wheat has been dependent heavily on the weather forecast, and at the present this is trending bearish, with a nice swathe of showers predicted to blanket the major growing regions of the US over the next couple of weeks.

Cattle took a trip down the charts today, as a result of technical selling, - .975 at $110.875 (June). Prices on the Fed Cattle Exchange this week were down to $131.17 per cwt compared to $133.35 last week. Wednesday afternoon’s wholesale beef prices as well as select cuts also dropped, according to the USDA. Export sales were down from last week’s 14,600 tonnes to 10,900 tonnes (mostly to South Korea). Feeder cattle also followed suit with the May contract down, -1.550.

June Hogs reversed course after probing down to key support areas yesterday, +1.500 at $74.250. It is thought that seasonal trends will spark futures, with grilling season coming into play, etc, helping demand. Pork exports were down this week to 21,100 tonnes (mostly to Mexico) compared to last week’s 31,100. The Hogs & Pigs report is due out at 2pm today and will be watched closely for market direction.

The USDA will release both the Prospective Plantings and Quarterly Grain Stocks reports at 11am CDT tomorrow. 

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 2017.3.29
2017-03-29T02:36

Corn was able to stay positive, building on yesterday’s small gain, + ¾ at $3.58 ½ (May). After the U.S. Energy Information Administration showed supplies growing to a near record of 23.257M barrels, Ethanol futures on the Chicago Board of Trade fell more than 1 percent to their session lows at mid-morning. The EIA report also stated ethanol stocks increased 662,000 barrels to the highest levels since the week ended March 6, 2016. Friday report estimates remain steady between 90-92.5M corn acres.

Throughout the day, May Soybeans moved slightly lower closing at $9.69, -3 (May). Given the oversold nature of the market, increased short covering is likely to continue prior to Friday’s report. The big question for Friday – are the new polls showing US plantings of 88.2M soybean acres on the low or high side? One would think anything 87.5M or below would have to be considered bullish stay tuned...again.

May Wheat was mixed today, with Minneapolis being the winner, +8 ¼. Chicago was up +1 and KC – ½. For upward action in the market, wheat continues to be dependent on some favorable rains next week. On the global scene, Jordan bought 50,000 tonnes hard wheat sourced from optional origins in tender.

Live cattle moved higher today closing at $111.850, +.250 (June). Both short covering and futures' discounts to this week's cash price expectations caused the move. Packers may push back against bidding up for cattle given their declining margins as wholesale beef values soften. Processors have plenty of cattle contracted against the futures market at their disposal. Nonetheless, there are fewer animals for sale than last week and some supplies remain tight - especially in the northern Plains.

June hog made a small rebound after reaching down to key support, finishing +.300 at $72.750. Short-covering and bargain buying periodically lifted CME lean hogs that at times were pressured by lower cash and wholesale pork prices. Positioning before Thursday's U.S. government quarterly hog report pressured deferred contracts.

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 2017.3.28
2017-03-28T02:02

Corn experienced Turnaround Tuesday to a small extent, as the market is looking for any signs of positive news, +2 at 357 ¾ (May). The bounce is likely a reflection of the lack of bearish news against a backdrop of oversold conditions. Corn planting in the US is ahead of schedule with Texas planting up 14% to 45%, Louisiana up 45% to 80%, Mississippi up 26% to 30% and Arkansas up 18% to 19%. Looking ahead to Friday’s report, estimates range from 90 to 92.5M corn planted acres. The market will respond in kind, also taking into account quarterly corn stocks, which may be anywhere from 8.205B bushels to 8.9B bushels.

Soybeans were able to eke out a small gain also, + ½ at 972 (May). There is nothing coming out of South America to give cause for excitement, as a crop scout, who traipsed through the Argentina countryside, upped his soybean harvest estimate by 1 MMT to 56 MMT, and Paraguay from 9 to 10 MMT (with some saying 10-11). Brazil has about 70% of the soy harvest under their belt, and is showing average to very good yields. Their weekly crop estimates show an optimistic 109-110 MMT vs USDA forecasts of 108 MMT. The big question for Friday – are the new polls showing US plantings of 88.2M soybean acres on the low or high side? One would think anything 87.5M or below would have to be considered bullish…stay tuned.

May 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 jumped to gains early aided by buying and futures’ discounts to cash prices, settling for a small gain, +.150 (June). The average wholesale beef price declined $1.71 per cwt and select also fell by $1.93, according to the USDA. Average packer margins are still a positive $50 but down over $30 from yesterday. Tomorrow’s Fed Cattle Exchange will offer 3,900 animals and will likely provide direction for the cash market, as it is known to do on a weekly basis.

June hog continued their descent toward key support, influenced by yesterday’s lower cash prices and generous supplies, -1.075. There is some trepidation among traders ahead of the Thursday Hogs & Pigs Report, which is weighing on trade. A bright spot has been the continued strong demand for pork exports and spring grilling.

In other news, bird flu in the US has raised its ugly beak again, this time with a reported case in Georgia. They join the list of states including Alabama, Tennessee and Kentucky that have reported outbreaks this year. This is always a topic to monitor as it could have implications for the market if the story continues to get legs.

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 2017.3.27
2017-03-27T02:04

Corn has experienced major selling the past month and continued to do so today, showing a loss of – ½ at $3.55 ¾ (May). Today was the sixth consecutive day in a row of losses, as futures are well below the 100- and 200-bar moving averages. To put it in perspective, managed funds have basically gone from 100K contracts long to a net short of 120K contracts in a little over a months’ time. All eyes are focused on the USDA planting intentions report this Friday, which is expected to show farmers will plant 90.9M acres of corn compared to 94 million acres last year. The range of acres predicted ranges from 90-92.5M acres. USDA weekly inspections were announced this morning showing 1.556 MMT for the week ending March 23rd vs expectations of 1.350 MMT. 

Soybeans cannot find a reason to think higher as they continue to work their way down the chart in anticipation of Friday’s USDA planting intentions report. Today saw the May contract down for the fourth day in a row, -4 ¼ at 971 ½. Managed money has been busy selling at a higher than expected rate as of late. Inspections announced by the USDA were slightly under expectations at 555,012 MT vs. 600K MT. According to AgRural, the Brazilian soybean harvest is now 68% complete. Will Friday’s report show US planting intentions above or below 88M acres?

Wheat also trended lower again today, with Chicago -4, Kansas City -6 ¾, and Minneapolis -3 ¼. The Commitment of Traders report on Friday showed large spec is getting close to their record short position of 164K shorts (currently 145K+). The US is the cheapest wheat option right now and the Dollar is at a four month low, so one would think SRW and friends could pick up additional export sales in the coming days. Wheat inspections this morning were basically in line with expectations, as the USDA announced 541,799 MT compared to expectations of 550K MT. Looking ahead to Friday, wheat stocks are estimated to be up 253M over last year, but wheat acres to be down 3.7 million acres from last year.

Live cattle slipped out of the gates this week, influenced by declining wholesale beef prices and pressure from outside markets, -1.400 (June). Supplies are plenteous and this is causing investor concerns related to the potential for falling cash and wholesale beef values. And, it appears that opportunities may be limited for US beef exports to take advantage of the Brazilian meat saga, as several countries have now lifted bans on Brazilian meats. The USDA Cattle on Feed report was released Friday afternoon and it was considered “neutral”, with On Feed 100% vs. 100.1% estimated; Placements 99% vs 98.9% estimated; Marketings 104% vs 103.3% estimated.

Hogs have dropped below key technical support levels as they fell sharply today, -2.225 (June). Buyers seem to be a bit skittish ahead of the US Hog & Pigs report this Thursday. However, it is expected that pork exports will continue to be strong, grilling season demand will increase, and Easter ham consumption will absorb some of the plentiful supplies.


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 2017.3.24
2017-03-24T02:58

Corn inched lower to finish the week on sympathy weakness to soybeans. May lost ½ a cent to close at $3.56 ¼, its lowest closing price since the end of December. For the week, May lost 11 ¼ or 3.0%. Cooperative weather in South America continues to weigh on the market. However, the market has moved into an oversold condition and extracted most weather premium before planting has begun. The wetter forecast in the US over the next several weeks combined with the funds now well short their corn position and farmer selling halted should mean a bottom to the market shortly. Look for May to find support in the $3.52 to $3.55 area. 

Soybeans dropped 15 ¼ cents in the May to the lowest level in more than four months on pressure from rising forecasts for already robust South American harvests and weaker meal values in China. Weakness in the cash market added further pressure to soybeans. Throughout the trading session, spot basis bids fell by 5 cents per bushel at a closely watched processor in Decatur, Illinois. Technically, soybeans have moved into an oversold position and should find stability next week as they have entered a value area ahead of the planting season and the March 31 intentions report.


Wheat stabilized to finish the week after spending the previous four days pricing in moisture for the dry areas of the plains. K.C. hard red winter wheat struggled to find the same price support as Chicago while spring wheat traded the weakest of the complex.

Live cattle turned up slightly in choppy action on Friday, consolidating after Tuesday and Wednesday’s strong markets and anticipation of higher prices for unsold slaughter-ready, or cash cattle. On Thursday, a small number of cash cattle in Nebraska brought $134.50 per cwt, up from $131 last week; however, Southern Plains cash bids stood at $126 per cwt versus as much as $134 asking prices. Today’s Cattle on Feed report showed On Feed at 100%, matching the trade estimate. Placements met trade expectations at 99% while marketings came in at 104% vs the estimate of 103%.

Hogs reversed yesterday’s fortunes to finish the week. April contract was down 0.625 cent per pound to 68.725 cents, and May down 0.100 cent to 73.850 cents. Profit taking, stirred by Thursday's lower cash and wholesale pork prices, pressured CME lean hogs. Packers resisted raising cash bids after their margins and pork cutout values declined. Brazilian meat industry group ABPA said that in wake of the investigation into alleged corruption among food inspectors, pork and poultry exports have fallen by $40M, or 22%.


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