Stewart-Peterson Market Commentary

Closing Commentary - December 13, 2018

Top Farmer Closing Commentary 12-13-18

CORN HIGHLIGHTS: Corn futures edged lower today losing 3/4 to 1 cent with Mar leading today's decline closing at 3.84. Today's trading range was rather small with most futures contracts trading within a 3-1/2 to 4 cent trading range. Losses in soybeans acted as an anchor on corn prices. However, a rally in wheat was supportive. Small grains as a whole continue to move upward with not only wheat but oats pushing higher in recent weeks as well. The old saying is oats knows and with oat futures now trading 50 cents off their low at near 2.95 on Mar it could potentially be a sign for corn prices to gather more gain. The gain in oats off the low from a percentage perspective is over 20%. If corn had a similar rally this would suggest Mar futures near 4.25. Do we believe this could happen? Yes, we believe it could happen, but at present we don't see any reason for it. Our rationale is that farmers have plenty of inventory on hand and a rally will likely be viewed as an opportunity to sell and consequently this would act as a wet rag over the market, likely well below 4.25. Yet, technicians will argue that a chart gap between 4.18-1/2 and 4.19-1/2 on Mar futures is an eventual target for Mar futures to recover too.

SOYBEAN HIGHLIGHTS: After a firm finish the last two sessions, bean prices moved lower today losing 10 to 13 cents as Jan led today's drop closing at 9.07, after reaching a high today of 9.20. Yesterday's high in Jan soybeans was 9.28. Today's activity was somewhat surprising and disappointing considering where this morning was that China was to purchase 1.5 to 2 million metric tons of soybeans over the last 48 hours. This purchase may move into reserves, but nonetheless, it's positive news. Traders may have bought the rumor and sold the fact as word after the G20 Summit two weekends ago suggested China may buy up to 5 million metric tons. Some rumors have up to 8 million. Whatever the case, the market took today's news and moved lower. Weaker soybean meal by 2.00-3.00 and soybean oil also weighed on futures. It is also likely that traders who were recently long beans and short wheat are beginning to reverse this position as wheat prices finished with strong gains, nearly a mirror opposite of the losses that occurred in soybeans. Export sales at just over 29 million bushels were termed neutral. Sales to date are 916 million bushels and this compares to a year ago at this same time of 1.383 billion.

WHEAT HIGHLIGHTS: Wheat futures had an impressive showing today with solid gains on all three exchanges as Chi and KC led the way higher. Chi gained anywhere from 8-1/4 to 12-1/2 higher as Dec led today's rally with Mar closing 9-1/2 higher at 5.36, its highest close since mid-October. KC gained 7-1/2 to 8-3/4, while Mpls 4-1/4 to 5-1/4 as Mar led the way higher there closing at 5.88, a solid finish above the 50-day moving average. The technical picture is beginning to look much stronger for wheat with today's levels breaking above nearby resistance and in KC a solid close above the 50-day moving average, something that has not occurred since early September. Chi Mar closing at 5.36, sets the stage for a potential move up to the 100-day moving average at 5.42. Less-than-ideal crop conditions in the Midwest, expectations for stronger demand, and short covering all aided in today's rally. We also believe that traders were unwinding short wheat long soybean spreads by doing the opposite today in buying wheat and selling beans. Export sales of 27.7 million were termed supportive with hard red winter the biggest winner today at 15.4 million. All wheat sales to date come in at 601 million which still trails a year ago at this time by 664 million. Yet, we believe strong sales are due in the weeks ahead.

CATTLE HIGHLIGHTS: Cattle markets put in mixed closes today, appearing to lose upward momentum after strong recent rallies. The nearby Dec live cattle contract closed 32 cents higher to 119.45, Feb closed a nickel lower to 122.85, and Apr closed 10 cents lower to 124.80. Jan feeders were up 40 cents to 147.97 and Mar feeders were up 65 cents to 145.92. Choice beef values closed 2.21 lower yesterday afternoon to 212.25 but were up 47 cents this morning to 212.72. Cash trade today has been quiet so far, with published bids only reaching as high as $115. Beef export sales for the week ending December 6 were solid, with a total of 10,300 tons sold for 2018. Last week, the U.S. actually posted a net import total, so this week's sales total is a nice recovery, and is up 19% from the previous 4-week average. Technically, today's price action was quiet and may be hinting at the cattle market's reaching a near-term top. The best traded Feb live cattle contract traded at its highest point today since October 29 and then fell lower. Apr futures made a new contract high and then fell lower as well. Momentum higher may be waning. Nearby feeder contracts tested and failed nearby resistance levels and failed to make impressive closes.

LEAN HOG HIGHLIGHTS: Hog markets made mixed to mostly lower closes today, drifting to the lower edge of the recent trading range but holding onto some very significant trendline support. Dec hogs closed 7 cents higher to 54.80, Feb closed 87 cents lower to 64.82, and Apr closed 1.60 lower to 70.35. The CME Lean Hog Index was down 44 cents to 55.54. Carcass cutouts closed 89 cents lower yesterday afternoon to 72.44 but were up 32 cents this morning to 72.76. A total of 22,300 metric tons of U.S. pork reported shipped for the week ending December 6. This was up 12% from last week and up 18% from the previous 4-week average. China was a buyer for the third week in a row, with purchases of 1,800 metric tons. This, along with the large China purchase of U.S. soybeans today appears to be keeping positive trade momentum going. That said, the market is already expecting trade progress, so there may be a sense of buying the rumor and selling the fact. The best traded Feb contract traded sharply lower early in the session, breaking below its 50-day moving average support level. However, prices found buyers at trendline support near 64.10 and rallied back above their 50-day moving average support level. The successful hold of this support level is a positive technical development. Apr futures showed similar price action, trading down to and closing at their trendline support from early August.

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