Stewart-Peterson Market Commentary

Closing Commentary - September 24, 2018

Top Farmer Closing Commentary 9-24-18

CORN HIGHLIGHTS: Corn futures rallied for the fourth consecutive session, gaining 2-1/2 to 3-1/4 cents. Dec led the rally, closing at 3.60-1/2 after reaching a high of 3.62. 3.62 is significant because it is the topside of a channel in which corn futures prices are currently trading. A push through this level could suggest a run to 3.67. Strong speculative buying last week, expectations for rain delays and ideas that corn is too cheap compared to world stocks and stocks to usage may have all contributed to the recent recovery. Today's push above the 21-day moving average may have also generated buy stops. Politically, there is not much friendly news in the marketplace, yet corn prices have moved higher regardless. This may be due, in part, to the idea that declining world and domestic carryout suggests that corn under 3.50 is a value.

SOYBEAN HIGHLIGHTS: Soybean futures finished with losses of 5-1/2 to 6-1/4 cents, as Nov lead today's drop, closing at 8.41. News that China had cancelled the upcoming tariff talks with the U.S. pressured prices from the overnight trade, and they never really recovered. This, despite higher corn and wheat prices. Soymeal lost 1.00 to 1.50, while soybean oil finished with small gains. Soybean oil may be considered a bargain, and it looks like money may have worked its way into that market last week after a hook reversal upward on Wednesday occurred after prices broke into new contract lows. Gains Thursday, Friday and again today, and a close just above the 40 and 50-day moving average, may help move bean oil higher. Traders may have been reversing long meal/short oil spreads, as ample supplies, due to crush of vegetable oil and soybean oil in and of itself, suggested no need for end users to aggressively buy. That being said, we are not necessarily bullish oil, but in recent sessions, it is helping to provide support. Beans will be the recipient of harvest pressure, but rain delays this week could keep combines sidelined in many parts of the Midwest. That being said, early yield results as a whole seem to be running about or better than expected, which would help to suggest bean yields may reach USDA's projected 52.8 bushels per acre, which would be a record surpassing 2016/2017's 52 bushels per acre. Export inspections at 25.5 million bushels were termed neutral. However, through the first three weeks of the marketing year, inspections are down 25% from a year ago and 3% behind the expected pace needed to meet this year's lower export inspections. Our overall bias remains defensive.

WHEAT HIGHLIGHTS: Wheat futures again flexed their muscle today, showing good signs of life, finishing 3-1/2 to 5-1/4 cents higher in Chi, 3-4 higher in KC and steady to 1-3/4 higher in Mpls. Today's solid close above the 21-day moving average on Dec Chi futures and its highest close since 9/12 suggests the market is poised to now move to 5.40. More importantly, however, after a poor finish on 9/13, when futures saw a low of 4.95, the market has now gained over 35 cents from recent low to high, suggesting traders are not married to short positions. Today's export inspections at 15 million bushels were termed neutral to bearish. Export inspections year to date are near 20% below a year ago. The U.S. continues to lose export share to Russia.

CATTLE HIGHLIGHTS: Cattle futures finished with moderately lower finishes today, gravitating toward some technical support levels. The nearby Oct contract closed 90 cents lower to 112.17, Dec closed 1.45 lower to 117 and Feb lives closed 5 cents lower to 121.30. Feeders showed more significant losses and were unable to hold support levels. Sep feeders were down 50 cents to 156.45, Oct feeders were down 1.77 to 156.30 and the Nov contract closed 1.87 lower to 155.92. Boxed beef values were a positive for today's session with choice cuts closing 28 cents higher on Friday afternoon to 204.80 and trading up 1.45 this morning to 206.25. Friday's Cattle on Feed report was clearly a pressure point today. Placements came in at 107.4%, and on feed came in at 105.9%, both well above the average market estimates. On this afternoon's Cold Storage report, total pounds of beef in freezers were up 4% from last month and up 6% from last year. Technically, the live cattle contracts had negative but not back breaking sessions. The Oct contract closed just below its 10-day moving average support level, Dec futures closed directly on their 10-day moving average support, and Feb closed 12 cents above its 10-day moving average support level. Feeders had a more difficult session, with the quiet September month not going anywhere, but Oct and Nov were both down sharply below their 10-day moving average support.

LEAN HOG HIGHLIGHTS: Lean hog futures finished mixed, remaining relatively sideways ahead of today's Cold Storage report. Oct hogs closed 70 cents higher to 61.00, Dec closed 42 cents lower to 56.97 and Feb hogs closed 52 cents higher to 65.45. The CME lean hog index is up 1.65 to 59.09, its highest value since 8/13. Pork values continue their trend higher, closing 23 cents higher on Friday afternoon to 79.18 and trading up another 78 cents this morning to 79.96. Today's Cold Storage report showed relatively heavy numbers but likely not enough to cause a serious sell-off in the face of other fundamental developments. Frozen pork supplies were up 6% from last month and up 1% from last year, while pork belly stocks were down 14% from last month and up 82% from last year. Hurricane Florence only really caused production issues for Smithfield, so it is unclear how much average weights will decline as Smithfield ramps production back up over the next several weeks. African swine fever cases continue to develop in China, with two more cases announced on Friday in two new provinces. China has officially recalled 40,500 pigs to date, but the actual number is likely more. The Chinese pig population is more than half of that of the entire world, and China is a net importer. This could be a major development long term. Technically, developments today were light. The Oct contract made an inside session. Dec held its 10-day moving average support level, and Feb held its 10 and 20-day moving average support levels.

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