Stewart-Peterson Market Commentary

Closing Commentary - September 19, 2018

Top Farmer Closing Commentary 9-19-18

CORN HIGHLIGHTS: Corn prices rebounded today on the heels of higher wheat and soybean prices gaining 2-1/2 cents on most futures contracts. Nearby Dec closed at 3.45-3/4 gaining 2-1/2, while new crop Dec 2019 gained 2 closing at 3.85-3/4. We point out the 2019 because there is a carry in the market which has held for most of the season. Should prices rebound out of harvest, lows will likely add to 2019 sales if Dec can move above 4.00. We like the demand side of the equation but with harvest pressure and expectations that this year's yield will be record it could be some time before corn prices make an appreciable rebound. Yet, we like the demand side of the equation as export sales to date are excellent and the USDA continues to ratchet up long-term usage. Harvest pressure will continue to exert itself, but in the near term rain could keep producers out of fields. Other supporting factors are the dollar gradually weakening over the last few weeks and energy prices remain firm closing in on their highest prices for the year.

SOYBEAN HIGHLIGHTS: Soybean futures had an impressive day gaining double-digits with futures closing 15-16 higher, as Nov led today's rally closing at 8.30, its highest close in three sessions. Strength in soymeal, which gained more than 5.00 on futures contracts, along with steady to higher soybean meal helped provide underlying support as well. A lack of farmer selling, ideas a near-term selling was overdone, and potential rain delays for Midwestern harvest may have been catalysts to today's recovery. We believe buy stops were triggered once prices began moving higher helping to accelerate prices upward. As for new news, we couldn't find much to justify a strong up day today. Yet, if selling has somewhat diminished it doesn't take too many buy orders to uncover stops. In addition, the technical strong commercial buying was noted today, which may be a reflection of end users beginning to take advantage of weak prices and more aggressively buy value. As for tariff news, there wasn't much new talk after rhetoric was ratcheted upward this week. Chinese officials continue to suggest that China will reduce meal rations in its feeding of pork from a 20% mix to 12%, which in theory suggests a reduction of 27 million tons of soybeans needed per year.

WHEAT HIGHLIGHTS: Strong gains were noted on all three exchanges today, as wheat prices saw double-digit gains in both Chi and KC, and solid gains in Mpls. Nearby Dec Chi closed 12 higher at 5.22-1/2, Dec KC 10-1/4 higher at 5.26-1/4, and Dec Mpls up 7-3/4 at 5.88. Wheat prices followed overnight firmer trade in Europe as generally dry conditions are a concern for winter wheat planting. This is a continuation of dry conditions that created issues with this year's crop and a shortfall of production. Australia continues to struggle with dry weather as well and the market seems to be taking more notice. While conditions here in the U.S. are expected to improve from a moisture perspective, we're not convinced that world inventories are likely on the rise, and consequently the market is likely searching for a low. We'll stay with our defensive posture, but we're becoming more convinced that the recent downturn in prices from near 6 weeks ago when prices peaked, is a market that followed corn and soybean prices lower, but also reflected disappointing news on USDA reports. Don't be surprised if future USDA reports show reductions to world inventory.

CATTLE HIGHLIGHTS: Cattle futures were choppy to lower today, beginning to settle in before Friday afternoon's Cattle on Feed report. The nearby Oct live cattle contract closed 12 cents lower to 113.10, Dec and Feb were both steady at 117.97 and 121.85, respectively. Today's Online Fed Cattle Exchange yielded zero sales with 528 head offered. Beef values have been on a steady slide, with choice down 75 cents yesterday afternoon to 205.29 and down another 23 cents this morning to 205.06. Friday's Cattle on Feed report is expected to show placements at 105.1%, marketings at 100.3%, and total cattle on feed at 105.2%. With mostly uneventful trade since last Friday's surge in futures prices, prices are still overbought. Speculators are likely closing positions out before Friday's report.

LEAN HOG HIGHLIGHTS: Hog futures made mixed closes today, with Oct up 82 cents to 60.00, Dec down 7 cents to 57.90, and Feb up 15 cents to 65.95. The CME Lean Hog Index was up 1.10 to 54.58. Carcass cutout values closed 1.55 higher yesterday afternoon to 77.57, and were up another 98 cents this morning to 78.55. This is 7.50 higher than the same time last week. Picnics and hams led the way higher today, with picnics up 2.95 to 53.56 and hams up 1.76 to 58.96. This recent surge in cash and product prices has helped to support the nearby Oct contract while traders remain conflicted about the longer term effects of the East Coast production disruption and African swine fever issues in China. Open interest has been declining relatively quickly as traders with short positions move to the sidelines until plants can ramp up production again in NC. The Oct contract made its highest close today since July 3. Futures are overbought, but fundamentals may be allowing some more room higher. Dec futures were unable to breach their 200-day moving average resistance level while the Feb contract struggles to break through resistance from the mid-April highs.

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