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Water Street Solutions

Water Street Solutions Daily Report 2018.4.26
2018-04-26T02:29

Corn had a hard time trending positive, with favorable planting weather taking center stage across the Corn Belt, -1 (Dec). Not to mention funds are heavily long, putting pressure on the CBOT. The USDA announced a private sale this morning, with 107,600 MT sold to “unknown” destination for 2017/18. However, weekly sales came in well below the range of estimates of 1.1-1.5 MMT, around 620K MT net with a 76,600 deduction for 2018/19. This was the lowest weekly tally in 15 weeks. Notable customers included Mexico, Japan and Colombia. Corn export prospects for the U.S. will get an opportunity to grow if the Brazilian second crop corn continues to get downgraded. However, at this point the USDA estimates corn export sales to lag last year by 3%.

Soybeans got support from a logistics issue and firm meal demand but also saw weakness from the escalating Chinese trade dispute, -1 ½ (Nov). As mentioned yesterday, a dock at an important port in Rosario, Argentina, was destroyed by a ship collision. This is notable as this dock loaded 22% of the Argentine soymeal exports, and it will be out of commission for 3-6 months. USDA weekly sales reported this morning were on the light side, totaling 537,800 MT for both marketing years. Expectations ranged from 800K-1.4 MMT. This was not a surprise as it has now been 10 consecutive days without a sale to the Chinese. However, weekly sales were still above the threshold needed to reach the USDA yearly projection, with purchases from Europe and Argentina providing an offset. The USDA is estimating 2017/18 sales to be down 5% from last year. Next week’s meetings in Beijing between U.S. trade representatives and the PRC will be closely watched, as stakes are high.

Wheat gave up a good chunk of what was gained yesterday with no fresh news to stimulate buying: Chicago SRW -9 ½, Kansas City HRW -5 ½ (July) and Minneapolis HRS -3 ¼ (Sept). Spring wheat seeding is up and running in the N Plains and Canada after a slow start due to spring snowstorms. Wheat was the only grain to offer a bright spot on the weekly sales log, as numbers exceeded the range of expectations of 50K-500K MT, pegged at 577,900. The sales were equally distributed between the two marketing years. However, it is likely wheat exports will be trimmed by another 25 mbu in the May WASDE Report.

Live Cattle had a setback today with a bearish engulfing bar on the charts, -1.225 (June). Selling liquidation prevailed, as losses were incurred across all the deferred contract months. Concerns of huge beef production to come in the weeks ahead are providing a limiting factor to recovery rallies.

Hogs took a pause yesterday from their steep descent, but resumed today as June finished -1.350. As with cattle, supply issues continue to come to the forefront and smother thoughts of rallies. Also, the large premium of futures to the cash market is a large hurdle, and will need help from strong export sales.


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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.4.25
2018-04-25T01:46

Corn caught the bullish vibes from the rest of the grain complex, as trade tensions seem to be abating and there is less farmer selling due to planting, +5 ¾ (Dec). EIA weekly ethanol reporting showed production down by 2.38% vs last week (for the week ending April 20th). Ethanol stocks were up 1.67% compared to last week, but down 6.74% vs last year. Corn used in ethanol production was on the light side at an estimated 102.61 mbu. Corn use needs to average 103.655 mbu to hit the USDA annual target of 5.575 bbu. Ethanol is the lowest cost octane on the market. Ethanol demand will only continue to grow globally, as both China and Japan plan to increase its use to clean up smog in large urban areas. The University of California and North Carolina State did a study that found ethanol reduced toxic auto emissions by 50%.

Soybeans kicked up their heels today on optimism that trade tensions with China will be resolved, +6 (Nov). Also, adding to the rally, was news of a cargo ship collision with a port in Rosario, Argentina, which will no doubt disrupt the flow of grain. This dock loaded 22% of soymeal exports last year and is expected to be down 30-40 days. No new export sales were announced this morning, making 9 days in a row with no sales to China – although, this is quite normal for this time of year. Chinese crushers are paying the price trying to avoid impending tariffs on U.S. soybeans, as they are forking over a premium for Brazilian beans. President Trump is sending over a high level delegation to the PRC, which is hoped to bring results. It does not seem that anyone stands to benefit from an all-out trade war. Also worth noting, China will be out on holiday from Thursday through Monday.

Wheat had a break-out session to the topside on concerns that world wheat production is starting to decline, with all varieties posting solid gains: Chicago SRW +14 ¾, Kansas City HRW +14 ½ (July) and Minneapolis HRS +8 (Sept). It is surprising that KC is not gaining more on Chicago, as KC conditions continue to deteriorate while Chicago’s have improved. The big Wheat Quality Tour kicks off on May 1st, and should bring more clarity to the situation. On the world scene, Eastern Australia is experiencing a deepening drought with another 2 weeks of heat and dryness to come.

Live Cattle showed strength into the close, +.525 (June). The warm weather forecasted for the next several days should encourage grilling. Supporting the bounce from last Friday’s lows was a strong jump in beef prices as well as the thought that cash cattle will trade steady this week. Strong packer margins should be well supported by the upward trending beef prices.

Hogs traded both sides as the market demonstrated a degree of volatility, +.525 (June). Technical action and indicators have been weak. Futures and cash are starting to move closer together, but the June contract still holds a $17 premium to cash. NAFTA negotiations seem to be headed in a more positive direction, which is key to exports and the hog market.


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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.4.24
2018-04-24T02:20

Corn was able to keep yesterday’s momentum going after technicals from Friday were pointing lower, +2 ¼ (Dec). The University of Illinois took a look back to the 1980’s and found farmers are capable of planting their entire corn crop within an average of two weeks. This study included the three “I” states of IL, IN, and IA. At this point, there is not a big planting problem to worry about even though the crop is only 5% planted compared to the 15% average. However, if we get to May 7-10 and are not 50% planted, more concern will be warranted. Corn planted after May 15th is known to show declining yields. In Brazil, mounting worries are surrounding the most recent forecast, as nearly the entire safrinha second crop growing area is not expected to receive any rain in the next 10 days. If this materializes and yields are downgraded, expect to see a rising demand for U.S. exported corn.

Soybeans were able to rebound on strength realized from an important export sale, + ½ (Nov). The rising Dollar of late has been putting pressure on the market. But, the streak of eight consecutive days without an export announcement was broken this morning with Argentina stepping up and purchasing 130K MT. The quiet spell from China is not to be ignored though, and U.S. trade representatives are reported to be considering a trip to the PRC to discuss face-to-face. All eyes are squarely focused on demand and the U.S. crop. Look for more sideways trade leading up to the May WASDE Report.

Wheat gained traction from unimpressive winter wheat conditions were announced yesterday, Chicago SRW +9 ¾, Kansas City HRW +9 ¼ (July). Winter wheat rated good/excellent is unchanged from the week before at 31%, but this is well below the average of 54%, with 37% poor/very poor. World wheat prices continue to appreciate in value, with Australian wheat into new seasonal highs. Russian wheat has also risen in price. However, the stronger Dollar is negating some of this price opportunity. Wheat is a more global product than corn and beans, and supplies are plentiful. Russia’s record crops and improved logistics are neutralizing any notions of tightening balance sheets and weather elsewhere. Minneapolis HRS +3 (Sept).

Live Cattle had a weak finish after sporting positive numbers most of the session, +.175 (June). Feeders and the cattle deferred months all finished in the red. Although the Cattle on Feed Report was not considered bearish, the number of animals On Feed is up 7.4% over last year, which equates to 810,000 head. Front-end cattle supply is projected to reach a record high by August. On a positive note, rising employment and wages equal growing beef demand.

Hogs are trending lower under the weight of overbought technicals and a wide cash basis, -1.550(June). The premium of June futures to cash is a big hill for cash to climb, considering the spread is over $18, more than double the average for this time of year. As a result, sellers came out in force, driving the market lower
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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 they may not be suitable for all investors

Water Street Solutions Daily Report 2018.4.23
2018-04-23T03:06

Corn was able to diverge from beans’ negative direction, +1 ¾ (Dec). The Commitment of Traders Report last Friday showed fund managers had lightened their long position by 37,000 contracts. This coupled with positive fundamentals and strong demand boosted the mood of investors. USDA weekly export loading data for the week ending April 19th was strong, as inspections were pegged at 1,719,025 MT vs estimates of 1,450,000 MT. It is hard to conceive that the market has reached its high for the year with planting and pollination ahead. Look for Crop Condition reporting later this afternoon, as expectations are for planting to be running behind. In South America, the Brazilian safrinha corn crop looks to be receiving little to no rain the next two weeks, so this will be closely monitored for potential yield reductions.

Soybeans shed length with red numbers to start the week, -6 ¾ (Nov). Weekly export inspection data showed beans a little off expectations of 500K MT, coming in at 470,817 MT. There were no new daily sales announced for the 8th consecutive day. Adding to the heavy atmosphere, the Commitment of Traders Report data from last Friday afternoon showed managed funds had added to their net long position to the tune of 17,000 contracts. New buying is hard to come by. Soybeans need a fresh story, and without one all attention is focused on trade tensions with China and positive trending weather in the States.

Wheat was a tale of two different varieties, with the winter wheats mixed to negative, but spring incurring significant losses. Chicago SRW -2 ¾, Kansas City HRW + ¾(July) and Minneapolis HRS -9 (Sept). While there were weekend rains that covered parts of HRW country, it was not enough to take the pressure off. Weekly USDA inspections were solid, coming in at 619,251 MT compared to ideas of 450K MT. Winter wheat conditions will be released later this afternoon, so watch closely to see if further deterioration of HRW is noted. There is chatter that a good chunk of S. Kansas, W Oklahoma and Texas Panhandle acres will be written off by claims adjusters. Stats Canada will be coming out with their first stab at acreage estimates this Friday.

Live Cattle was able to entice buyers following a non-bearish Cattle on Feed Report Friday, +1.150 (June). Cattle on Feed were at 107% of last year vs expectations of 108%, feedlot placements were seen at 91% vs expectations of 90% and marketings were right in line. Will June/Aug cattle be able to get back to the $110 level and offer a hedging opportunity? The COT Report showed funds have continued to pare down their net length, down to around 22,000 contracts, which is the lowest since July 2016.

Hogs slipped lower today, as packer margins are down and industry expansion is moving full steam ahead, -1.175 (June). Grilling season being delayed by a cold spring has not helped. Futures are way too far out in front of the cash market, with the June contract at almost a $21 premium. Sluggish export demand needs to pick up soon, as technical indicators are indicating the market is overbought.

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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.4.20
2018-04-20T01:47

Corn ended the week in a defensive posture, -5 ½ (Dec). Today marked Option Expiration for the May contract. December corn closed at its lowest level since the day prior to the March 29th Acreage Report. Favorable forecasts in the Midwest are getting all the attention, but longer term fundamentals have a more optimistic outlook. In trade news, NAFTA negotiators are hoping to find agreement “in principle” in the next few weeks. There are signs that there could be a deal in the works – auto production and agriculture are the two biggest areas that need to find common ground among the North American trading partners.

Soybeans broke lower, filling the gap on the chart left from two weekends ago, -7 ½ (Nov). In addition to negative chart action, looming uncertainty over trade wars and the possible shift of spring wheat acres in the Northern Plains to beans due to weather delays, is having an effect. From a demand standpoint, it is hard to see how the tariff situation has much impact overall. If China shifts more buying to Brazil, the U.S. will likely see a transition of European buying to the States. Also, Chinese crushers are squawking just as much as the American farmers about tariffs, as they need beans and do not want to see the flow interrupted. Is it possible that the Chinese could actually use soybeans as a concession to negotiations because of how important they are to their national appetite? No new export sales were announced this morning, as the PRC pitched a shut-out this week.

Wheat took the biggest hit today with all three complexes in the red: Chicago SRW -13 ½, Kansas City HRW –12 ½ (July) and Minneapolis HRS –12 ¼ (Sept). The positive condition reports for HRW earlier in the week combined with more friendly forecasts have the market in a risk-off mood. Spring wheat seems to be suffering from a poor export sales report yesterday morning which included 61K MT in cancellations. Europe’s exports are also hurting in large part to Russia’s dominance, as Strategie Grains lowered their export estimate by 900K MT for EU wheat exports in 2017/18 to 20.3 MMT. The Plains Crop Quality Tour will commence on the 30th, so look for results to be influential.

Live Cattle closed strong after early weakness, with the Cattle on Feed Report on tap this afternoon, +.725 (June). USDA boxed beef values ($211.54) have contributed to the beef market achieving its lowest level since February 2016. Cattle on Feed data will be released at 2pm CDT.

Hogs tailed off after reaching a high yesterday not seen since March 16th, -.525 (June). Technically the market is overbought, and carrying a large premium to cash. The cash market will need positive news to stimulate buying interest.

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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.4.19
2018-04-19T04:01

Corn continued its sideways pattern with no fresh news, - ¼ (Dec). Weekly export sales were strong at over 1.2 MMT, and corn has caught up to now only trailing last year by 2%. Buyers included China (leading the way), Colombia, Taiwan, Japan and Korea. The drought in Argentina has been a big boost to both corn and bean exports this spring. NOAA weather forecasts do not offer anything to the extreme, and likely more sideways chop will continue.

Soybeans were able to rally off early lows to finish -3 ¼ (Nov). Also providing a measure of weakness was liquidation of fund length in soymeal. Weekly soybean sales were just above the range of expectations of 1.3-2.1 MMT, with half booked for 2017/18 and half for 2018/19. Year-to-date, soybeans are only 3% behind last marketing year. According to AgResource, soybean sales since early February are a record 386 mbu, which is up 86% from last year. However, today marked the 5thconsecutive morning with no new 8am sales announcements. Trade volumes are low as there is nothing of note to excite action.

Wheat trended positive in the winter varieties, while spring wheat gave up gains: Chicago SRW +1 ½, Kansas City HRW +6 ¾ and Minneapolis -5 ½. Weekly export sales were a net negative 66,900 MT for 2017/18, while 2018/19 were reported at 240,400 MT. The range of expectations was 100K-500K MT. For the marketing year-to-date, wheat is down 17%, and the USDA is expected to lower its 2017/18 export projection by 5-15 mbu. EU Strategie Grains lowered their export estimate, as Russia continues to dominate the globe. There does not seem to be much positive news to latch onto - how much longer will wheat trade the Drought Monitor?

Live Cattle broke to the downside on technical selling, -2.275 (June). Tomorrow will feature the Cattle on Feed Report. Beef weekly export sales were announced at 19.9 MMT. The main buyers included Japan, Mexico, Korea and Canada.

Hogs gave up modest losses today, with June -.450. The Lean Hog Index was up $.49 to $54.02. Weekly pork exports were 17.9 MMT, with the main customers including Korea, Mexico, Japan and Canada. Trade negotiations for NAFTA and with Asia are being closely watched.

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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.4.18
2018-04-18T02:24

Corn managed a modest gain on lower volume trade, +2 ½ (Dec). The market seems less concerned with U.S. planting delays, while keeping an eye on emerging dryness issues for Brazil’s safrinha crop. EIA Ethanol weekly reporting today was expected to show production down and stocks up. Production was down 2.42% compared to last week and up 1.61% over last year. This is the lowest production in 14 weeks. However, stocks continued their impressive drawdown by declining 2.30% compared to last week and 7.34% compared to last year. Corn used in ethanol consumption was 105.13 mbu, well ahead of the 103.601 mbu weekly pace needed to hit the USDA annual projection of 5.575 bbu. It is thought this will level will not be difficult to maintain with summer driving season ahead and ethanol margins profitable. Look for key resistance at 4.16 and support at 3.96 December.

Soybeans struggled in sideways trading, with a lack of new export sales news to boost sentiments, + ½ (Nov). U.S. weather looks to be more moderate and warming in the upcoming days, which may create enough of a window for planting corn, which will lessen the chance of acres shifting to beans. There were no new export sales announcements for the fourth day in a row, as U.S. exports have been somewhat constrained recently with Brazil’s basis improving, a weaker Real currency and cheaper South American meal. The recent rash of sales directed to the U.S. had given some hope of a counter-seasonal rally, but there has not been follow through. Brazil announced that it has harvested 90.5% of its soy crop. The CBOT is sitting on a large amount of open interest in contracts, and with First Notice Day eight days away more liquidation is likely ahead of option expiration on Friday. Look for key resistance at 10.60 and support at 9.97 ¾ November.

Wheat took the lead today based on constantly shifting weather prospects. As of now, it is trending drier across the Central Plains, with Kansas seeing limited coverage. The market always reacts to weather news, irrespective of any net effect on the yield at this point. Almost every HRW state showed decline in condition ratings earlier this week, so it almost seems like a delayed reaction. Chicago SRW +7 ¾, Kansas City HRW +8 ¼ (July) and Minneapolis HRS +3 ¾ (Sept). U.S. and world wheat stocks are growing, so we will need a weather problem in another part of the globe to get a longer term rally.

Live Cattle sported more gains as the market has had a firm tone due to a positive seasonal outlook for beef and strong packer margins. Two important USDA reports will weigh in later this week, with Livestock Slaughter on Thursday followed by Cattle on Feed this Friday. April Cattle on Feed is predicted to be at the highest level since 2006. June +.375.

Hogs broke out to a new high, well above a 50% retracement from the late February high to the April 4th low. June finished +1.775. The June contract is at about a $25 premium to the cash market compared to the average of $7.40. Will cash experience a strong seasonal rally to come into alignment, or is this level an important selling opportunity? The concern expressed by some analysts is that June has rallied too far too fast.

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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.4.17
2018-04-17T02:03

Corn continued to chop sideways to lower, -1 ¼ (Dec). The two main topics being watched closely by traders include Central U.S. weather and trade banter with China. U.S. corn export sales will begin to decline as the seasonal window is closing. The South American crop is taking a good piece of the market, as South American corn is now $.20 is below the U.S. Gulf. Corn progress reported from last week to this week was minimal, with only 3% of the crop in the ground compared to 6% on average. The next three weeks will be pivotal to bringing more clarity as to possible adjustments to corn acreage in the June 29th Report. While weather has been an impediment and the coldest April since 1907 in the Central part of the country, the future forecast is looking brighter, taking the edge off bullish enthusiasm. And, farmers have proven they can plant 40-45% of the crop in one week.

Soybeans made a late rally to finish +5 (Nov). While fundamentals are positive, anxiety abounds as traders await fresh news to propel the market into new highs. The spread between Brazil and U.S. has tightened, with Brazil now at a $.40 premium. This is not enough to move Chinese buyers away from Brazil. Also, now that Brazilian prices have fallen from $1.95 to $1.32, European buyers have stopped switching sales from Brazil over to the U.S. Soybean sales were quiet this morning and have been slow the last several days. However, the American farmer is very forward sold on soybeans, leaving room to the topside. Important resistance lies ahead at 10.60, the high achieved on April 2nd. If this level is breached, look for higher, with corn along for the ride.

Wheat showed mixed results early but all varieties ended in positive territory. U.S. weather is improving for the Plains and this has made it hard for wheat to stop the selling and attract new buyers. The winter wheats finished: Chicago +2 ½ and KC +2 ½ (July). Minneapolis spring wheat ended +2 (Sept). The crop condition reports showed HRW deteriorating in all but one state. However, the HRW crop prospects are looking better with rain in the forecast, which will likely cap attempts at rallies. Some of the HRW acres may be beyond repair, which could result in them being torn up and replanted with soybeans or another crop. Overall winter wheat conditions were at 31% good/excellent, with 37% poor/very poor. The ten year average is 48% good/excellent at this point in the season. The Wheat Quality Tour is set to kick off later this month.

Live Cattle saw solid gains, with June +.725. Recently, chatter has been that large supplies will overwhelm the market. But, one must not forget that demand has been very strong, with positive factors such as low unemployment, tight housing markets, and consumer confidence all playing a role. Forward beef sales are up, with end users taking advantage of low futures prices to cover future needs. The four week average exports sales are running 31% ahead of last year.

Hogs forged out more gains in the deferred months, as worries regarding Chinese pork tariffs appear to be offset by demand from other sources. June traded both sides before finishing slightly under, -.050. Non-NAFTA buyers are taking advantage of low pork prices, as export sales to them were 36% higher than last year. Large slaughter numbers are feeding the export pipeline. Look for significant resistance in June around 78.05, where short-term highs were achieved this week.

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.4.16
2018-04-16T03:17

Corn did not have much fodder to feed the bulls today as it could not resist the negative pull of wheat and beans, -3 ½ (Dec). Weather remains squarely in focus, and while it is cold, wet and miserable across much of the growing area, there appears to be a decent chance of a window of warm and moderate weather coming up after the 25th. Export shipments on the weekly USDA log were solid again this week, at 1.505 MMT, on the high end of market expectations. Corn needs a strong pace for the remainder of the year in order to catch up and reach the USDA projection of 2.225 bbu to be met. The USDA is estimating exports to be down 3% on the year. Brazil’s first crop corn is 72% harvested and safrinha second crop is seen to be mostly in good condition. Look for U.S. crop progress later this afternoon.

Soybeans took a dive in the latter half of the session, with profit-taking and liquidation of long positions, -9 ¼ (Nov). The NOPA Crush report was above expectations and record large, as members reported 171.9 mbu, well above the average estimate of 168.2 mbu. This compares with 153.1 mbu last year. Soybean oil stocks were in line with expectations. The USDA reported soybean weekly inspections within the range of market expectations at 445K MT. This is up a bit over last week but still below the weekly average needed to hit the USDA annual estimate. The USDA sees soy exports down 5% on the year. Globally, soybean stocks are tightening, and until U.S. planting gets underway, they will likely find support. Will more soybean acres get planted than estimated in March, due to a favorable bean to corn price ratio?

Wheat played a role in dragging down the entire CBOT grain complex today, with the following closes: Chicago SRW -10 ¼, Kansas City HRW -18 (July) and Minneapolis HRS -9 ¾ (Sept). Much needed rains for the Plains over the weekend and in the forecast is dampening the market. Weekly export inspections were pegged at 483K MT, which was at the top end of the range of expectations. Wheat is also running behind last year and the USDA’s number for this year. Likely, the USDA will pencil in a downward revision, as the end of the 2017/18 marketing year is less than two months away. Overall, cumulative wheat exports are down 10% from last year. Will condition reports this afternoon (which are expected to trend slightly negative) help to stop the hemorrhaging?

Live Cattle gapped higher out of the gates, with June leading +.525. The deferred months showed moderate losses. Recent news of cold temps and large accumulation of snow in SD, NE and MN boosted the market, as the weather is making life stressful for feedlots, young cows and calves. The seasonal trend for cattle is for higher for the next month and a half, but large supply numbers will be a reality check to rallies.

Hogs went the opposite direction as beef today, with June -.850. The cash market is weak, sporting a large discount to June futures. This could play a role in limiting upside for hogs, in the short-term. Pork also has a seasonal trend to gain over the next several weeks. And, this coupled with President’s Trump sudden new interest in rejoining TPP, could bode well for the complex.

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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.4.13
2018-04-13T01:46

Corn saw its share of profit-taking today heading into the weekend, -2 ¾ (Dec). Two of the main topics on the minds of traders include spring planting and trade wars. The bias is higher, with less acres, strong demand, and much uncertainty with the whole growing season ahead. However, the ride could be bumpy with extreme volatility, considering all the underlying political variables with China, Russia and others. Many have been somewhat surprised by the lack of rally of CBOT corn, but Brazil is now cheaper than the U.S. Gulf, and they are going after the business. The Commitment of Traders report will be released this afternoon, so look for results in Monday’s commentary.

Soybeans also succumbed to profit-taking and a risk-off posture heading into the weekend, -4 (Nov). While fundamentals are tending more bullish, traders are wary of the unpredictability of potential weekend tariff announcements and weather pattern changes. Surprisingly, there also were no new bean export sales announced this morning. Brazilian FOB soybean basis has corrected from $1.95 last Friday to $1.30 while the U.S. FOB is $.92 over. With the spread much narrower, EU crushers are less interested in the U.S. beans now, as they would prefer Brazilian beans with higher soyoil content. In ethanol news, President Trump seems to be indicating he is open to waiving RVP for E-15, which would allow it to be sold year around across the country without condition. A new policy would still need to be adopted by retailers and with accompanying infrastructure in place to implement – which could take years to be fully operational.

Wheat is down on dampening optimism, as the next 14 days offer three different storm systems moving through the Plains and Midwest. Snow will be part of the mix as some areas could receive over 20” of snow! Cool and wet weather should last well through April. Chicago filled the gap left on the chart, dipping below the 200-bar moving average. Wheat just does not have much positive news to latch onto in the wake of the bearish Tuesday Report. And, Russia’s exports keep swelling to higher levels, with IKAR upping their estimate from 38.5 MMT to 39.5 MMT. Results today included: Chicago SRW -9, Kansas City HRW -11 (July) and Minneapolis HRS -6 ¾ (Sept).

Live Cattle showed a mostly positive bias across contract months today after a strong showing yesterday, with June down slightly -.050. Exports reported yesterday were positive, as they are running 33% over the four week average, and 16% over last year. This is needed in order to keep up with strong 2nd quarter production numbers, which will be the largest increase over the 1st quarter since 2006.

Hogs stayed positive, reaching higher at the close, +.400 (June). Export sales announced yesterday were a bit light in comparison to recent weeks, but still respectable. Not helping the total, China canceled 3,700 tonnes, likely in response to tariffs. The trend has definitely been for higher, after the low was put in place on April 4th. Watch the wide basis in June to possibly limit upside action.

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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.4.12
2018-04-12T02:02

Corn was able to forge out small gains today, as traders are hesitant to take on too much risk heading into the weekend with uncertainty related to relations with Russia and China hanging over the markets, +1 ½ (Dec). USDA Weekly corn sales were slightly below expectations, pegged at 896K MT (both crop years) compared to the range of expectations of 1.0-1.6 MMT. Also, helping the mood of trade, is President Trump indicating that there will be no changes to biofuel policy and the RFS for several months. This delay is due to a desire to placate the American farmer who is already enduring indigestion over concerns of declining demand due to potential tariffs.

Soybeans led the way today as the world needs more soybeans, +7 (Nov). All the uncertainty around trade as well as geopolitical strife has not been able to hold down the market, as buying continues. Weekly export sales announced this morning were huge, at 2,464,500 MT, well above estimates ranging from 1.3-2.0 MMT. Buyers included “unknown”, China, Egypt, Mexico and Taiwan. The threat of trade war between the U.S. and China drove Brazilian values sky high, which brought other world buyers to the U.S. to pick up the slack. This has helped to neutralize fears of less sales to the PRC. Soybeans have built a very long net position at the CBOT, which makes them vulnerable to adverse news.

Wheat values declined, as the possibility of rain across the Plains and Midwest dampened enthusiasm. Kansas City HRW was hit the hardest, with 60% of the growing area expecting precipitation, -9 ¾ (July). KC filled the gap on the chart left from earlier in the week, while Chicago stayed above it. SRW was down –6 (July). Weekly sales were underwhelming today, as the USDA announced them at 188,700 MT, which was well off estimates of 250K-650K MT. The largest buyers of new crop Mexico and Honduras. The Russian Ruble is weak, achieving a 15-year low yesterday, which only makes it that much harder for the U.S. to compete for global sales. Minnesota HRS also gave up gains, -4 ¼ (Sept).

Live Cattle made a strong move to the topside today, as June finished +2.125. Looking at a choice cutout seasonal price trend, both the 5 and 10 year averages show a break through this week, followed by a strong seasonal rally during spring grilling season, according to AgResource. The longer term mid-summer view is still bearish based on large supplies ahead in the marketplace.

Hogs continued their rally from the low on April 4th, as June showed solid gains +1.475. Has the market gone up to far too fast based on fundamentals of large supplies? The seasonal trends would support a cash rally over the next few weeks. Of concern is the very large premium of the June contract over April, as April goes off the board. The premium is hard to justify, and April’s expiration will leave a large continuation gap to the next spot May contract.

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.4.11
2018-04-11T02:57

Corn was not offered any exciting news today, as profit-taking and selling prevailed. While ethanol numbers were supportive, the market still managed to leak out some gains, -2 (Dec). EIA Ethanol data released today showed production for the week ending April 6thdown 0.39% vs last week and up 4.87% compared to last year. Ethanol stocks were down 2.58% from last week and 4.62% from last year. Corn usage for ethanol was estimated at 107.76 mbu which is well above the 103.677 mbu average needed to achieve the USDA annual projection. Last Friday showed record ethanol exports of 219 million gallons with a large discount to Brazilian prices. Additionally, President Trump has indicated he wants to delay any biofuel policy changes for several months, likely due to trade uncertainty and growing producer anxiety.

Soybeans faltered at the finish after getting a boost from exports, -1 ½ (Nov). The USDA reported two private sales this morning – one to Mexico for 141,518 MT for 2018/19 and another to Argentina for 120,000 MT for 2018/19. This is the first sale to Argentina of soybeans since 1997-98, per the USDA. U.S. beans are the world’s least expensive, and more sales are expected to follow to Argentina, Europe, Egypt and China. U.S. and world stocks are lower than expected per the Report yesterday. Also worth noting, the USDA did not adjust soybean exports lower despite the ongoing trade dispute with the PRC. While the market needs to add premium for weather before planting gets into full swing, cold weather in the Northern Plains could actually result in an increase in soy acres, with producers switching acres from spring wheat.

Wheat struggled to gain positive footing today after the less-than-friendly Report yesterday. The winter wheats both were under pressure, with Chicago –4 ¼ and Kansas City –4 ¾ (July). However, providing a measure of support was a declining U.S. Dollar. World wheat stocks are up to a record level, and the U.S. has had trouble competing on price on the world stage, with Russian wheat exports upped to 38.5 MMT from 37.5. On the other hand, spring wheat has a glimmer of hope, as it appears less acres will be planted due to the persisting cold and snow in the Northern Plains. Momentum indicators are overbought for Chicago and KC – are we reaching a top?

Live Cattle was mixed, trading sideways after recovering from a new low achieved last week, -.525 (June). It is the same story of extremely large supplies weighing down the market, stifling any attempts at a rally. Beef production is expected to increase from 1stto 2nd quarter by the largest amount since 2006.

Hogs were able to find modest gains, as some of the fears related to less exports to China seems to be wearing off, +.725 (June). Also providing support is USDA data showing a larger decline in production from the 1st to the 2nd quarter than expected. However, buying is being checked by the large discount of cash to the June contract.

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.04.10
2018-04-10T02:27

Corn responded to a “neutral” USDA Report in an indecisive manner, equaling yesterday’s high before faltering, - ¾ (Dec). Ending U.S. stocks were 2.182 bbu compared to 2.127 bbu last report, but below expectations of 2.196 bbu. Feed and residual was docked 50 mbu, which contributed to the increase over the last stocks’ projection. Argentina and Brazil both saw yield reductions, with Argentina now behind last year’s 41 MMT to an estimated 33 MMT. World corn stocks were also down from last month’s 199.2 MMT to 197.8, and compared to last year’s 230.9. Look for the market to add weather premium in the near-term with wet and cool in the U.S. planting forecast, coupled with declining world stocks.

Soybeans could not hold onto early big gains off a “bullish” Report, ending +4 ¾ (Nov). The first bit of good news came in the form of U.S. ending stocks, as they were estimated at 550 mbu compared to the last USDA thought of 555 mbu and average estimates of 575 mbu. The crush got a boost of 10 mbu while exports were left unchanged despite trade war talk with China. As expected, Argentina got a downgrade with their yield now estimated at 40 MMT compared to last month’s projection of 47 MMT and last year’s 57.8. Brazil was bumped up 2 MMT to 115 MMT. World soybean ending stocks were also reduced, as they were pegged at 90.8 MMT compared to last month’s 94.4 and last year’s 96.7.

Wheat showed mixed results, on the heels of a “bearish” Report. The winter wheats were on both sides of unchanged with Chicago SRW +2 ½ and Kansas City HRW -1 ¼ (July). Spring wheat had the largest gains early but faltered, -1 ¼ (Sept). U.S. ending wheat stocks were penciled in at 1.064 bbu, lower than last year’s 1.181 but higher than the average estimate of 1.037. World wheat stocks were up to 271.2 MMT compared to ideas of 268.9 and last year’s 254.6. However, the weather in the U.S. Plains has not been cooperating, and looks to have more snow and cold in store for the Northern Plains. The declining Dollar was also a supportive factor to trade today, as the U.S. needs all the help it can get to compete with less expensive Russian wheat, which continues to dominate exports.

Live Cattle was mixed, with June showing the highest trading volumes, -.400. Cattle hit a new low last Wednesday, but has struggled to be able to leverage that into a sustained rally. Factors causing weakness include large supplies, poor demand and weather, as well as long liquidation by traders.

Hogs, like cattle, had the largest trading volumes in the June contract, and also finished in the red, -.825. Today was a departure from yesterday, which featured a huge positive bar on the chart as seasonal buyers were out in force. June hog futures are currently at over a $20 premium to the cash market, which is much higher than the five-year average premium of $7.40.

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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.4.9
2018-04-09T02:17

Corn acted in step with wheat’s bullishness today, finding support in big export numbers and a slow start to planting season. Dec corn finished +2 ¼ at 4.14 ¾. USDA weekly inspections were announced at a whopping 1,937,040 MT for the week ending April 5th, compared to estimates of 1,250,000 MT. This is the second highest weekly total on record and makes the argument for a 50 mbu increase by the USDA to U.S. corn exports. The April USDA Report does not normally result in big volatility, but will be watched closely this year with potential bullish developments on the world scene.

Soybeans got a big boost ahead of the USDA Report tomorrow, as trade war chatter regarding China has seemed to smooth over in hopes things will be worked out. President Trump has been making an effort to calm nerves, as he has indicated he will stand with American farmers, who he considers “patriots”. This could be done with Section 32 of the recent Omnibus Bill, which could take funds from custom duties and use them in a way that would return to the farm community. Details would need to be worked out, but at least there is a positive tone that has been set. While China may want to avoid U.S. beans, they are somewhat caught as Brazilian basis has risen, and China needs beans. In that vein, a private sale of 232,500 MT was reported to “unknown” destination for 2018/18. November soybeans closed +10 at 10.43 ¼.

Wheat led the charge of the grains to open the week, with snow/cold in the Dakotas/Midwest and dry conditions across the southern Plains, coupled with a weak Dollar which has fallen below 90.00. USDA weekly inspection data indicated a good week for wheat, with an announced 430,080 MT compared to the expected 350K MT. The U.S. has exported 9.4% less than last year, as Russia has been a formidable competitor. Look for winter wheat condition reports later this afternoon, which are estimated to be 31% good/excellent. Chicago +17 ½, Kansas City +16 ¼and Minneapolis +17 (July).  

Live Cattle were mixed with the front month April showing a modest loss, -.200. Cattle continues to search for a short-term low, as supply and demand continues to battle. The bounce in equity markets helped to stem the tide of selling and the negative vibe over the complex.

Hogs had a big recovery bars on the charts today, with April up modestly by +.775 and the deferred months approaching limit up territory. Trade war fears seem to have abated, and buyers reacted in kind.

USDA Crop Production and Supply & Demand Report tomorrow 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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.3.27
2018-03-27T04:05

Corn traded in a tight range right around breakeven, EVEN(May) and + ¼ (Dec). The markets seem to have stabilized ahead of Thursday’s mega-Report from the USDA, as most are expecting corn acres to be even-to-under a million short of last year. Corn appears to be positioned for more fund buying (stochastics are showing oversold) and shrinking global supply. Currently, managed fund net longs are estimated around 248K contracts. In South America, Brazil’s first crop corn harvest is progressing at a normal pace, and second crop safrinha corn is doing well – in contrast to Argentina’s dire yield reductions.

Soybeans leaked away a few more cents today, as most are in “hurry up and wait” mode, -6 (May) and –5 (Nov). Anticipation is growing for Thursday, and expectations are for bean acres to increase by around a million acres, while soybean stocks are expected to be record large. Concerns still loom over the market regarding trade wars with China. However, some of that hysteria seems to have subsided, and one must remember that of the PRC’s 36 MMT of imports last year, 39% came from the U.S. To the South, Brazil looks to be hauling in another record-size crop, with Brazil crop roundup estimates now at 116 MMT vs. the USDA forecast of 113 MMT. Brazilian beans are currently about 67% harvested.

Wheat was down today, as winter wheat weekly condition ratings improved in yesterday’s data. The 6-14 day forecast is showing wetter, which prompted more selling from traders. However, much of the HRW belt is staying dry with no rains in the next 48 hours. Exports have been disappointing, with yesterday’s weekly inspections below estimates. Inspections are currently at 77.4% of the USDA forecast compared to the five-year average of 78.3%. Russia’s wheat stocks are up 25% over last year and export demand is eating it up. Russia looks poised to produce another bin-buster, as winterkill does not appear to be a major issue this year. Chicago SRW -5, Kansas City HRW –4 ¼ and Minneapolis HRS –3 ¼ (July).

Live Cattle took a pause from their freefall, +.250 (April) and -.050 (June). The Cattle on Feed Report confirmed large supplies ahead with big herds in feedlots combined with a wide basis. The market is also technically oversold. The battle between supply and demand continues.

Hogs seemed to find some footing today, as the search for a bottom continued, -.275 (April) and -.075 (June). Bringing pressure is stout short-term supply coupled with higher slaughter numbers than expected. Also the market is nervous about NAFTA negotiations, as well as concerned about China’s plan to impose a 25% tariff on pork. In other news, South Korea had their first case of hog hoof and mouth disease (900 were culled), but it is not believed to be widespread.

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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.3.26
2018-03-26T02:04

Corn succumbed to long liquidation and profit-taking ahead of Report Day and month end, -3 ¼ (May) and –2 ½ (Dec). The Commitment of Traders report out last Friday, showed managed funds still net long in excess of 200K contracts of corn, and they took the opportunity to take off risk. USDA weekly export loading data helped support, as it was pegged at 1,153,963 MT compared to estimates of 1,375,000 MT. According to the Ag attaché to Mexico, they will likely import 5% more corn this next year. While soybean meal has been the main focus regarding Argentina, crop scouts are now downgrading estimates of their corn production to 28-30 MMT. This compares with 39 MMT last year, and will definitely raise some eyebrows.

Soybeans saw some selling pressure as traders position themselves ahead of the Report, -2 ¾ (May) and –1 (Nov). The Argentina situation has continued to deteriorate, being looked at as a “worst case scenario”, as their crop may now dip below 38 MMT on poor yields and record large abandonment. What does this mean? It means there would not be enough soymeal to meet global demand and China would need to import more beans to process for SE Asia. Brazil is well into their soybean harvest, and estimates are now swelling to over 117 MMT, which would be a new record and would put them within range of the U.S. as the world’s largest soybean producer. On the USDA weekly inspection log, soybeans came in slightly above expectations at 584,612 MT vs. 550K MT. Two daily sales were also reported that included a private sale of 132K MT to “unknown” destination and 120K MT of soymeal to Spain for 2017/18.

Wheat was down across all varieties, with Kansas City HRW leading the way, -10 ½ (July). Chicago SRW was –5 and Minneapolis –4 (July). The next 10-14 do not hold much in the way of precipitation for the HRW Belt, according to the GFS weather model. The Plains drought is underpinning U.S. wheat, according to AgResource. Wheat conditions in Kansas continued to decline, showing 55% very poor compared to 53% previously. Wheat weekly export inspections were off for the week ending March 22nd, coming in at 278,815 MT compared to ideas of 375K MT. The USDA appears to still be too high on their wheat export estimate, and may need to make a downward revision.

Live Cattle took up right where it left off last week, -.875 (April). There has been a marked difference between cash and futures. Cash has traded relatively steady, while futures have dropped off substantially. This is not normal for March, which could support a rebound this week. The Cattle on Feed Report Friday was considered mildly bearish. Placements were at 107% compared to expectations of 104%, Marketings 102% vs 101% (slightly friendly) and On Feed 108% which was slightly above estimates. The COT report showed that funds liquidated their cattle positions to the lowest level since December 2016. Will 2nd quarter demand be enough to overcome large production?

Hogs trended lower once again, with April -.400 and June -.050. While China is levying a 25% tariff on U.S. pork in retaliation to U.S. imposed tariffs, China is not that big of a piece of the U.S. pork export pie. It is likely that supply chains will be redirected to fill gaps, if the PRC sources more from the EU and Canada. It is not a positive development, but may not be as damaging as would appear. The hog market is extremely oversold but has not signaled a low yet.

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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.03.23
2018-03-23T02:04

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

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

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

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

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

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

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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.3.22
2018-03-22T03:45

Listened to Modern Farm Business™ podcast yet? New episodes to help farm leaders develop their business, communication, and leadership skills each Thursday morning. Visit www.modernfarmbusiness.com or find us on Apple Podcasts, or wherever you get your podcasts. 

Corn eked out a small gain, finding technical support, +1 (May) and +1 ¼ (Dec). USDA Weekly Export Sales will be delayed until tomorrow by a temporary shutdown of government due to weather. Managed funds have continued to build a large net long position in corn, estimated at over 220,000 contracts. From a chart perspective, the market has now moved back to a 50% retracement of the entire move up from December to March. Acreage intentions, trade wars, and planting season will all have something to say in the very near future, with next Thursday featuring important USDA data. Yesterday’s weekly ethanol report was supportive, and that has been followed by news from a Chinese State source that they expect domestic ethanol production to rise by 500K MT this year.

Soybeans traded both sides as fears of trade retaliation from China is reaching a crescendo, EVEN (May) and + ½ (Nov). It has been reported that President Trump is set to announce at least $50B in tariffs on the PRC and to add restrictions on technology transfers and acquisitions by Chinese firms. This has been viewed as intellectual property theft, and Trump aims to level the playing field. It is the right time of the year for China to lash out at soybean exports, with Brazil set to deliver another bountiful crop. It would not be a long-term situation, as China does not want to rely entirely on Brazil and Argentina for their needs, but they could try to make it painful for the U.S. in the near-term.

Wheat found support in selling exhaustion yesterday and reports that India’s production is dropping due to adverse weather. The winter wheats finished in July, +2 ¾ (Chicago) and +6 ¼ KC. India’s decline could result in India importing 2-4 MMT of wheat this season. While TX, OK and KS have wet weather in the forecast, the Drought Monitor is still of concern across the Plains. Look for long liquidation to likely subside in the near-term, as the market is looking for fresh news from next Thursday’s Report. Minneapolis spring wheat finished strong, +2 ¾ (July).  

Live Cattle is searching for a short-term low, as the market was able to reverse course after several consecutive days of sharp losses, +.450 (April) and +1.025(June). Traders have been in long-liquidation mode, as managed funds were over 100K contracts net long in last Friday’s COT report. The Cattle on Feed Report is tomorrow with March placements estimated at 104% of last year, marketings 101% of last year and On Feed 108% of last year. USDA Cold Storage is scheduled for this afternoon.

Hogs made a strong move lower today when it looked like the market may have been trying to put in a short-term low, -1.250 (April). Technically, the market is extremely oversold, which may provide impetus for a recovery bounce in the near-term. Hog weights are well above last year, and severe weather on the East Coast and South are not helping demand however.

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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.3.21
2018-03-21T01:56

Corn found support in a positive ethanol report and export sale but showed mixed results, + ½ (May) and – ½ (Dec). Exports continued their strong run with a sale reported today to Korea for 138K MT for 2017/18. Ethanol production was on the rise again, according to EIA reporting this morning, pegged at a 2.34% increase over last week and 0.48% over last year. Ethanol stocks were down 2.15% vs last week and 5.15% vs last year. Corn used for ethanol was a solid 109.12 mbu, well above the 104.499 mbu weekly average needed to hit the USDA annual estimate of 5.575 bbu. Regarding the 199 Tax Code provision, it is hoped that a “fix” can be attached to the Omnibus Spending Bill, scheduled for a vote this Friday to avert a government shutdown. Preliminary voting could be as soon as today. Some Democrats are trying to block changes to the tax code, which they feel was put together too hastily the first time around.

Soybeans did not have a new story to latch onto, but futures were able to rebound in May (+1 ½) and November (+1 ¼). Currency is taking center stage, with the Brazilian Real near lows. This is not positive for U.S. exports, as China may be even more tempted to retaliate against the U.S. in the bean market over President Trump’s expected tariff announcement tomorrow, which could total $60B on the PRC. Retaliation would not likely be long-term, as the USDA expects that China will increase their soybean exports to 100 MMT next year compared to 97 MMT this year. Attention has now shifted squarely to the March 29th planting intentions report, with nearly universal agreement from analysts that soybean acres will increase from last year’s 89.5 million acres – the question is by how much?

Wheat pushed lower across all three complexes, but the soft red rebounded late: Chicago SRW + ½, Kansas City HRW -4 and Minneapolis HRS -3 ¾ (July). The possibility of rainfall across the Western Plains towards the end of the month did not help ease bearish mindsets. HRW is getting closer to being price competitive globally on the break, and managed funds are near a net flat position in KC wheat. Russia remains the heavyweight on the world stage, with estimated wheat exports adding up to 23.1% of the global total.

Live Cattle continued its steep descent of long liquidation, with its 5th consecutive day of losses, -1.875 (April). Fears of large 2nd quarter supplies of all meats are overwhelming any hints of bullishness. The March Cattle on Feed report, scheduled to be released this Friday, is estimated to show Cattle on Feed at 107.6% of last year, Placements 100.4% of last year, and Marketings 100.4% of last year.

Hogs traded both sides before closing positive in the deferred months. April lost ground, -.675. The Quarterly USDA Hogs & Pigs report is scheduled to be released on March 29th, with increases expected across the board compared to last year. Estimates include All Hogs and Pigs at 103.3% of last year, Kept for Breeding at 101.7% of last year, and Market Hogs 103.4% of last year.

In Other News, the Federal Reserve voted 8-0 to increase rates by a quarter of a percent to the range of 1.50% to 1.75%.

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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.3.20
2018-03-20T02:10

Corn saw more profit taking today as the attention is shifting from drought problems in Argentina to the U.S. acres and planting season. It is estimated that funds liquidated 25,000 corn contracts yesterday, leaving them about 215,000 contracts net long. Most analysts seem to be in agreement that corn acres will shift lower this year, with AgResource the latest to give an estimate of 89 million. Planting in southern states is slightly ahead of a year ago, with Texas leading the way at 35% complete and due to the dry soil conditions. The USDA reported a private sale of 110K MT of corn to Peru for 2017/18. Ethanol producer margins have been able to stay in the black at about 5-10 cents/gal. China will be upping their ethanol blending requirements with an E10 mandate deadline of 2020.

Soybeans shed a large amount of length yesterday but were able to stabilize today. The action left some befuddled, but likely it was a combination of profit-taking with balancing of excessive length and HRW wheat getting precipitation relief. Other factors hanging over the market include fears of trade retaliation from China, lower protein exports from the U.S. vs Brazil, and a stricter foreign matter requirement slapped on the U.S. compared to the competition. Global and domestic stocks are more than adequate despite the Argentina drought and most are expecting soybean acres to increase stateside.

Wheat was also able to level out after yesterday’s blood-letting in the winter varieties. Yesterday’s condition ratings were viewed as friendly, and the recent rains in the Plains have been factored in. From a seasonal perspective, wheat does not have a history of rallying in March, so watch to see if this trend can be reversed. Also not helping wheat’s cause, is the fact that the U.S. is priced well above its competitors currently, which is not helping export sales. Recently, Australia was $26 better for an Iraqi tender.

Live Cattle showed indecision today with early losses followed by a slight rebound off the lows, with 2ndquarter production increases and supplies on the minds of many. The Cattle on Feed report later this week should help bring more clarity, as the last report showed feedlot supplies up 7.9% up over last year. As with the grains, concerns over trade wars and a decline in exports are also weighing on the market.

Hogs were mixed in trading today, with selling pressure applied early on in the session. The market has seen a sharp drop since highs reached in late February. Will spring demand be able to neutralize the large short-term supplies? With exports to Mexico and others being so vital to pork, uneasiness over NAFTA and other trade alliances have added to the bearish mood.

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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.3.19
2018-03-19T03:42

Corn was weighed down by beans, wheat and markets in general, -7 ¾ (May) and –6 ¼ (Dec). USDA weekly export loadings were solid, at 1,409,281 MT compared to projections of 1,350,000 MT. Corn has made a strong surge to get back into alignment with expected export sales, as total commitments are now only 1.17% behind last year. The USDA reported a new daily sale of 115K MT of corn to “unknown” destination for 2017/18 and 206K MT of new crop to Japan. Ethanol potential looks good moving forward, as Brazil has continued to import a significant amount of U.S. ethanol in spite of a 20% tariff, due to price competitiveness. Brazil’s ethanol usage is high due to flex fuel vehicles and high gas blending mandates. It will be important how the RIN credit negotiations on Capitol Hill play out, as too low of a price cap would negatively affect ethanol demand and the resulting corn usage.

Soybeans need a new story with Argentina harvest beginning and premium already accounted for, -27 (May) and –18 ¼ (Nov). The COT on Friday showed managed funds have built very net long positions, with trade war talk looming over the market and many are expecting for some type of Chinese retaliation in response to President Trump’s new tariffs. While Argentina’s yield prospects continue to dwindle, the focus is shifting to Brazil’s more than adequate crop and thoughts that U.S. planted acres will increase. The March 29th Report is taking center stage, as traders balance positions and liquidate length in advance. USDA Weekly Inspections data released today (week ending March 15th) was disappointing for beans, pegged at 490,536 MT vs. expectations of 900K MT. There were no new export sales announcements today.

Wheat found weakness in the overall CBOT selling mood, as well as positive weather for the U.S. Plains. The weak Dollar was not able to stem the tide as KC hard red winter led the way to purgatory, with a 28 ½ cent loss in the July contract. Chicago soft red was not far behind, -17 ¼ (July). USDA weekly inspection numbers were a small bright spot, with a reported 443,269 MT for the week ending March 15thvs. estimates of 325K MT. Of note, Russian wheat has now reached a seasonal high, and likely was helpful to Australia nabbing a recent sale to Iraq. The U.S. has been left on the sidelines for many global opportunities due to high prices. Minneapolis spring wheat finished -13 ½ (July).

Live Cattle continue to enjoy higher prices in the cash market, but this has not been enough to support futures from losing ground, April -1.025. As of Friday afternoon, the beef cutout reached its highest level since June 29th. Futures are at their lowest levels in two months, as April bounced off the 200-day moving average. The large supply of cattle in feed yards will give packers more leverage in their bidding once these animals reach slaughter weight, which should result in sharply lower cash prices. Look for the Cattle on Feed report later this week.

Hogs are technically oversold and searching for a bottom, but still managed to rack up more losses across the months, with April -2.300. Looking at seasonal charts, one would expect a turnaround over the next three months, but a counter seasonal move is not out of the question considering the supply fundamentals. The upcoming Hogs & Pigs Report on the 29th will help provide market direction.

All opinions expressed in this commentary are solely those of Water Street Advisory. This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies. Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness. There is significant risk of loss involved in commodity futures and options trading, and they may not be suitable for all investors
Water Street Solutions Daily Report 2018.03.16
2018-03-16T02:15

Corn continued to extend its correction, with May –4 and Dec -2 ½. Farmers have been selling into the rally, keeping the pipeline well supplied. Every weekend seems to be centered around weather, so stay tuned for any changes to Argentina’s forecast. While Argentina is not a large corn producer, reductions to their yield potential are still felt due to the strong demand underlying the market. The Rosario Exchange has downgraded their corn production estimate to 32 MMT from 35 MMT, with last year coming in at 40 MMT. Brazil seems to be in better shape than their South American counterparts. Other factors affecting the CBOT include ongoing NAFTA negotiations, ethanol and the RFS debate on Capitol Hill, as well as anticipation of month end stocks reporting and acreage intentions. Look for the Commitment of Traders Report later this afternoon to shed light on managed fund positioning.

Soybeans were able to gain more length, with May +8 ¾ and Nov +7 ½. The Argentina story and the continued reductions of soybean harvest estimates by crop scouts and traders have supported the premium built into the market. This is an important time for pod filling, and dryness has persisted over critical Argentine growing areas. As with corn, attention is shifting to the end of the month acreage intentions and ending stocks reporting. The only announced sale on the books for today was a private transaction reported by the USDA of 20K MT of soyoil to “unknown” destination.

Wheat found weakness in the winter varieties, with a wet weather forecast due for KS and NE dampening the market: Chicago SRW –11 and Kansas City HRW -14 (July). From a technical chart perspective, it is hard to take away any positives from recent action. Crop conditions have improved by double digits this month, and it is thought that there has also been some pressure applied from a good amount of farmer selling. Russian prices have setback a bit this week due to a declining Ruble and improved logistics. However, USDA export sales data this week underperformed, as U.S. prices are some of the highest, giving less chance to compete for incremental global business. Minneapolis spring wheat ended –3 ¼ (July).

Live Cattle pushed lower on follow through selling, with June now trading below the 200-day moving average. April also saw losses, finishing the session -.600. Record large 2nd quarter production is weighing heavy on the market. On a positive note, USDA weekly export sales yesterday showed good results, and total exports for the year are now 16% over last year. WASDE’s latest annual beef export estimate is predicting record large results at 3 billion lbs.

April Hogs look to be searching for a bottom, as they continue to leak value, -.275. April hogs are at the lowest value since August 30th. All months battled back from early session lows to finish with less in the loss column. In addition to high weights and slaughter, market weakness is being provided by slower than expected retail demand on the East Coast.

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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.3.15
2018-03-15T01:50

Corn battled off its lows after spending time on both sides of mid-court, with the sellers getting the edge by stifling the late session rebound, -2 (May) and –1 ½ (Dec). Allendale, an Illinois commodity broker, released their findings from a 27-state survey regarding U.S. acreage intentions. The results were counter to the USDA Ag Outlook numbers offered by economists, but more in line with general sentiments as they see corn acres declining to 88.5 million from last year’s 90.2 million and for beans to increase by 2.0 million acres to 92.1. Wheat acres are expected to increase by close to a million with ND adding more spring wheat. USDA weekly export sales were giant, the largest weekly sales since December 1994. The record was set in 1990 when Russia would occasionally buy very large quantities of U.S. corn in a single swoop. If strong demand for corn can continue, the market will be very solidly supported.

Soybeans had a reversal today based on solid export sales and a positive NOPA crush report, +8 ½ (May) and +4 ¾ (Nov). NOPA members reported a month of February record soybean crush of 153.7 mbu, eclipsing the 2010 February mark of 148.4 mbu and last year’s 142.8 mbu. This was also well above trade expectations of 149.4 mbu. The soybean oil yield among NOPA members is behind last year’s 11.62 lbs/bu at 11.51 lbs/bu. Soyoil stocks also grew to the highest February level in four years. Soymeal production was pegged at 3.643 million tons vs. 3.356 last year. In exports, USDA soybean weekly sales were a solid 1.35 MMT, in the upper half of the estimated range of 900K-1.5 MMT. This is an unseasonably strong level, with China the usual leading buyer. Total commitments are still running 8% behind last year, with a corresponding decline of 8% in exports.

Wheat showed weakness across all three complexes: Chicago SRW -10 ¼, Kansas City HRW –11 ¼ and Minneapolis HRS –5 ¼ (July). Wheat underperformed on the weekly export sales log, as higher domestic wheat prices of late coupled with a gaining Dollar are hard to overcome on the world market. Sales were announced at around 220K MT compared to the range of estimates of 250K-600K MT. Egypt’s GASC inked another large transaction of 240K MT of wheat, opting for Russia and Romania as their origin of choice. It has been very difficult for any other global competitors to break into the Egyptian market, as Russia has a stranglehold.

Live Cattle was down across all months, liquidating all of yesterday’s gains, with April -1.150. As huge production lies ahead, rallies could be muted and short-lived. On the other hand, the market is technically oversold, which should help bring stability and possibly consolidation in the resistance zone.

Hogs showed losses in the front month April (-1.150) but gains in the deferreds, June +.825. In the near-term, plenteous supplies and weak pork and cash markets are holding the market in check. April hogs are in oversold territory, so will the selling be able to continue?

In Other News lawmakers have an agreement on the table to revise the 199A portion of the Tax Code with a provision to provide a balance between coops and other buyers. The flaw in the new Tax Plan favoring coops has caused an uproar, and now it is up to lawmakers to figure out how to get a revision passed. The proposed change adds language that was similar to pre-Bill, but also includes a deduction of up to 20% of net income. The deduction is anticipated to equate to 1% of gross sales plus 11-20% of net farm income from those sales. It is hoped by proponents to be attached  to the Omnibus Spending Bill set to pass on March 23rd.

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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.3.14
2018-03-14T01:56

Corn took beans’ cue with a downside correction, -3 (May) and –2 (Dec). EIA Ethanol reporting today showed production down, compared to last week (-3.03%) and last year (-1.91%). Ethanol stocks were up 4.91% vs last week and 6.65% vs last year. Corn used in ethanol production was estimated at 106.6 mbu, which is still easily above the weekly average of 104.69 mbu needed to hit the USDA annual projection of 5.575 bbu. Ethanol is a hot topic, being the huge consumer of corn that it is, with continued talks about the RFS on Capitol Hill taking center stage. The EPA is trying to approve a waiver for a Philadelphia refiner to allow them to cut their RIN debt in half as a form of a “bail out”. This is not a positive development for ethanol, and could set a dangerous precedent, although it must be approved by legislators.

Soybeans had a substantial correction today, with May –16 ½ and Nov -15 ¼. The American Soybean Association sent an urgent letter to President Trump regarding modifying or reversing steel tariffs on China to avoid a trade war. Retaliation could send shock waves through the Ag economy, as China purchases about 52% of the U.S. total soybean production. The other factor playing into the relationship with China is the ouster of Secretary of State, Rex Tillerson, who is being replaced by Mike Pompeo. How will this affect the relationship with the PRC? Tillerson had taken a “softer” approach toward trade deficits, and now that he is gone it is likely a more hardline stance may be the modus operandi. China usually makes announcements over the weekend, so likely traders will be tentative heading into the weekend. Look for USDA weekly export sales tomorrow morning, as they are expected to be fairly sizeable.

Wheat traded counter to corn and beans, with the winter varieties both showing gains: Chicago SRW +1 ¾ and Kansas City HRW +4 ½ (July). The market seems to have stabilized in the short-term after dropping around thirty cents from highs at the beginning of the month. The U.S. Dollar has been in recovery on the heels of solid economic data, which is not supportive to exports. The GFS weather forecast is looking much wetter for parts of the Plains, which if that materializes will affect price direction. Minneapolis spring wheat finished –3 ¾ (July).

Live Cattle had large gains in the front month, +1.100 (April), while the deferred months were unchanged to up modestly. The market may be signaling a short-term low, with sellers harder to find as cattle seems to be losing downside momentum in its oversold condition. Even though supply is burdensome, demand, strong packer margins and a firm cash market are providing support.

Hogs lost ground in April (-.850), while the summer months showed solid gains. Like cattle the market is technically oversold and showing a loss of downside momentum, with pork prices showing strength and fears abating over the trade war hysteria. NAFTA negotiations will continue this month so will be important to watch the results.

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 they may not be suitable for all investors
Water Street Solutions Daily Report 2018.3.13
2018-03-13T02:09

Corn saw strong buying today in both old and new crop, with May +1 and Dec +2. Technical chart action was positive after yesterday’s reversal, as Dec corn forged a new high. Will corn be able to buy more acres as we move closer to the month end intentions report? The biofuel meeting scheduled for yesterday between lawmakers and industry leaders was postponed indefinitely, as RINS remain a hot topic of conversation. Ethanol demand is strong along with exports, so stay tuned for the EIA ethanol reporting tomorrow. In daily sales, South Korea was in for 210K MT of optional origin corn.

Soybeans led the grain complex today, as chart action seemed to be at a decision point for higher or lower, May +7 ¾ and Nov +8. March futures expire tomorrow which has helped the weekly charts as they are rolled. The uncertainty over Argentina’s production continues to dominate the headlines. Renowned crop scout, Cordonnier downgraded his Argentine soybean estimate to 43 MMT from 45 MMT, while leaving Brazil unchanged. Look for February NOPA Crush numbers tomorrow – estimates range from 148-150 mbu compared to 163.1 mbu last month and 142.9 last year.  

Wheat traded both sides in over a ten cent range, with July finishing –3 (Chicago). Kansas City rounded out the winter wheats -1 ¾ (July). Winter wheat conditions released yesterday afternoon showed Kansas declining modestly while Texas and Oklahoma both showed improvement over last week. Minneapolis featured a “shooting star” on the chart, indicating that early buying was not able to be sustained throughout the session, as spring wheat finished – ¼ (July). Russian Black Sea wheat continues to appreciate in value, up a Dollar from last week. However, recent gains in U.S. prices are keeping exports less than competitive.

Live Cattle were up in April, but down in subsequent months, +.350 (April). The USDA Report last week predicted the largest ever increase in beef production from one quarter to another. This is not exactly a bullish recipe, as speculators have continued to liquidate long positions. Technically, the market is starting to cross over into oversold territory.

Hogs also have become oversold, and this helped to trigger a bounce today, +.050 (April). The market is relieved that Mexico and Canada are exempt from steel tariffs as they are a large part of U.S. pork exports. According to Hightower, Mexico takes 22% of all U.S. pork.

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 they may not be suitable for all investors