Markets Waiting for Next Move Out of Washington
Jan 31, 2017
Good Morning! Paul Georgy with the early morning commentary for January 31, 2017.
Grain markets are slightly higher on short covering. However, the improving crop conditions in South America weigh on prices. Stock indices are lower as investors are concerned about the President’s stance on immigration.
Weather conditions look favorable to crops in Argentina as rain is expected across the region later this week. This moisture is expected to re-hydrate the topsoil which has dried out from the heat in recent days. Growing crops should react favorably to the moisture. In Brazil, the crops are remaining good to excellent.
Key chart points to watch are the 50-day and 100-day moving averages in March corn which cross at $3.57 and $3.55 respectively. In March soybeans, the 100-day and 200-day moving averages should provide some support. They cross at $10.15 and $10.10.
US corn values at the gulf are competitively priced in the world for immediate shipment but South American corn harvest will begin in a few months. Soybean values at the gulf are losing steam as Brazil’s soybeans head to the ports.
Corn and soybean basis bids across the Midwest were mostly steady as farmer selling came to a standstill.
Funds were estimated to be net sellers across the grain complex on Monday. They sold 9,000 corn contracts, 10,000 soybeans, 4,000 soymeal, 6,500 soyoil and 4,000 wheat contracts.
Volume data showed large selling of 12,500 corn and 4,400 wheat contracts on the close yesterday which was thought to be technically triggered as March contracts were closing below key support.
Buenos Aires Grains Exchange lowered their soybean crop estimate down from 56 million tonnes to 53.5 due to the recent weather issue. They see 770,000 hectares affected by excess rains and of that, 400,000 lost. USDA's most recent estimate is 57 mmt. The trade discussion has been for a 3 - 7 mmt drop which is now turning into only a 3 - 4 mmt.
The FOMC members meeting starts today. Trade is expecting a slight chance for a 25 bp hike in interest rates. Today's Jan Conference Board U.S. consumer confidence index is expected to show a -0.8-point decline to 112.9, reversing only a small part of December's 4.3 point surge to 113.7.
Cattle Inventory report will be released this afternoon. Trade average for All Cattle is 101.3%, beef cow inventory 101.1%, heifers retained for cowherd 100.8%.
Cash cattle trade this week is now expected to be lower as packer margins remain in the red. Strength in product is coming from packer’s reducing production the past few weeks, not an improvement in demand.
April live cattle futures dropped below moving average and remained under pressure into the close on Monday. The aggressive long position buildup by managed funds in recent weeks could create a round of profit taking as up trending channel has been broken.
April lean hog futures continue their choppy way. Support crosses at last week’s low $66.62 and resistance is last week’s high $70.57. Cash hogs stay firm on seasonal packer demand.
Dressed beef values were mixed with choice up .65 and select down .01. The CME Feeder Index is 131.20. Pork cutout value is up .57.
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