Stewart-Peterson Market Commentary

Closing Commentary - June 21, 2018

Top Farmer Closing Commentary 6-21-18

CORN HIGHLIGHTS: Corn futures closed 2-1/2 to 2-3/4 cents higher. Despite a significant washout on Tuesday, corn prices closed higher today than any other day this week. While this not say much, it does argue that the corn market is at least consolidating, and that price drops today, yesterday and Tuesday were all viewed as opportunities to buy. Soybeans finished with losses of 9 cents, but wheat finished higher, helping support corn. The dollar was slightly lower. Good rains continue to engulf most of the Midwest and are in the forecast again for next week. It is difficult to argue with the concept that rain makes grain, yet for some farmers, it has been too much too soon. This could hinder nitrogen uptake as well as root development, though high ground usually performs very well. Bottom line, it is difficult to argue that too much rain is a problem, but it is in some areas.

SOYBEAN HIGHLIGHTS: Soybean futures struggled into the close, losing 9 cents on the first four front month contracts. Jul closed at 8.80-1/2, and Nov was down 9 at 9.01-1/2, its lowest close for the year. Prices did hold yesterday's low of 8.98-1/2, so there may be a small victory in that development. However, Tuesday's low of 8.64-1/2 continues to loom large as the next target point for which prices to move down. Good weather, tariff concerns and technicals all continue to look weak. It is the same story but a different day, as prices have now closed lower 10 of the last 12 sessions. Without favorable news or at least the perception of such, bean prices could continue to drift to the downside, so stay with short futures and long puts. However, given the time of year and chances for weather to have significant impact, we will not be married to any short position.

WHEAT HIGHLIGHTS: Wheat futures gained 6 to 7 cents Chi, 4-1/2 cents in Jul KC and steady to 1/2 higher in Mpls. The spread between Chi and KC continues to widen, as KC is now 2 cents under Chi, a somewhat rare event. Harvest pressure from KC wheat and some areas indicating better than expected yields seem to be enough to keep more pressure on KC rather than Chi. Our bias is that, weather for the most part, has been conducive for SRW wheat, and we would not be surprised to hear an uptick in yield expectations. From a global perspective, weather remains mixed in the Black Sea region with warm and dry conditions in parts of the Ukraine, and Russia expected to give way to cooler temperatures and showers. Still, it looks like the world numbers will likely hold or shrink on the next USDA report, and this might be viewed as slightly supportive.

CATTLE HIGHLIGHTS: Cattle futures closed slightly lower, falling under pressure from tightening packer margins and an uncertain export future. The nearby Jun live cattle contracts closed 37 cents lower to 108.65, Aug closed 52 cents lower to 106.12, and Oct closed 27 cents lower to 109. Choice cuts closed 1.41 lower yesterday afternoon to 218.29 and were down another 89 cents by midday to 217.40. This is a drop of almost 5.00 from last Thursday and lends itself to a decent likelihood of lower cash trade this week. Cash bids today were published at 118, but actual trade has been quiet. Weekly US beef export sales for the week ending last Thursday were reported this morning at 16,700 tons, versus the previous 4-week average of 19,750 tons. Cumulative sales for 2018 have reached 531,800 tons, 21.2% ahead of last year's pace. Technically, the Aug and Oct contracts may be showing signs of putting in a near term top. Yesterday, both contract months tested and failed to close above their 100-day moving average levels. Today, futures again tested overhead resistance but closed lower on the day. Prices are very close to overbought levels and may have a difficult time moving higher in the short term, as technical sellers defend the 100-day moving average levels.

LEAN HOG HIGHLIGHTS: Hog futures closed slightly higher despite poor export data and tightening packer margins. Jul futures closed 45 cents higher to 80.47, Aug closed 57 cents higher to 75.72 and Oct closed 25 cents higher to 61.52. The CME lean hog index was up 1.09 to 85.14. Carcass values were neutral, up 17 cents yesterday afternoon to 84.88 and down 18 cents this morning to 84.70. Without continued strength in cash pork values, it is questionable just how far the index can rally. If pork prices cannot continue to appreciate, packers will be less willing to pay for cash hogs, especially with future export business in question. Weekly US pork export sales for the week ending last Thursday were reported this morning at 9,600 tons, versus the previous 4-week average of 16,425 tons. This week and two weeks ago are the lowest two net sales totals for the year. Cumulative sales for this year have now reached 682,300 tons, just 1% ahead of last year's pace. Price action was interesting today with futures trading lower for the majority of the session and finding buyers late in the afternoon to close positive. Yesterday's closes and the beginning of today's session were probing the bottom end of the most recent trading range. Considering the recent cash fundamental strength, the market was unable to push prices lower, instead buying futures back up from an oversold Bollinger Band reading.

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