Stewart-Peterson Market Commentary

Closing Commentary - June 19, 2018

Top Farmer Closing Commentary 6-19-18

CORN HIGHLIGHTS: Corn futures finished with losses of 1-3/4 to 2-1/4 cents as Jul led today's drop, closing at 3.53-3/4. However, today's low was 3.38-3/4. Dec corn finished down 1-3/4, closing at 3.75-1/2, its lowest close for the contract but well off its lows of 3.60. Prices blew out shortly after the 8:30 resumption of trade. Soybeans raced to near limit lower, as Nov lost 67 cents. This seemed to be enough to drag corn and wheat down, as sell stops were likely triggered. Our best guess is fund money that was long finally gave up its holdings and liquidated significant contracts. Traders took the big washout as an opportunity to buy, and while corn prices did not finish in positive territory, today's close of a couple cents lower is likely a fair close and reflective of good growing conditions and expectations for continued weather supportive to crop growth. Today's radar also indicated big rain systems pushing through drier regions through Missouri and Iowa, which should help alleviate dry conditions in those areas as well as push eastward and alleviate dry conditions in parts of Illinois and Indiana. The negativity to the corn market was predicated on another round of trade tariff talk, as the Trump administration is proposing another $200 billion in tariffs due to China's lack of cooperation.

SOYBEAN HIGHLIGHTS: Soybean futures lost ground, pushing to their lowest level since March 2016. Prices had a blowout this morning, caving in and trading near limit lower as Nov soybean futures traded as low as 8.64-1/2 before finishing down 20-1/2 cents at 9.11. Nearby Jul closed 19-1/2 lower at 8.89, well off the low of 8.41-1/2, 19-1/2 cents lower for the day. Worries about trade talk, along with a conducive weather forecast for the near term and rain on the radar, in particular Missouri and Iowa, weighed on prices. Retaliatory tariff implications with the Trump administration suggesting they may tack on another $200 billion on Chinese goods set the tone for a weak overnight and what we believe was massive liquidation after the resumption of trade at 8:30.

WHEAT HIGHLIGHTS: Wheat futures continued their slide today, losing 12 to 16 cents on all three exchanges. Jul Chi finished at 4.77-3/4, down 12-1/4 and at its lowest close since mid-April. The trend remains down, and reports are that, where combines are running, some of the yields are better than anticipated. Dry weather concerns in parts of the Black Sea region have been alleviated as well. With political tensions high in beans and corn and a significant spiral downward, wheat has been more of a follower. However, the last couple of sessions, HRW what has led the drop, losing significant ground to Chi wheat on better than anticipated yields as combines roll north. Yet, we cannot believe the crop is all that good, as we have heard enough yield results that were poor to suggest that crop ratings are probably accurate.

CATTLE HIGHLIGHTS: Cattle futures put in a bullish outside day, finding buying interest on an early morning selloff and closing higher. The nearby Jun contract closed 22 cents higher to 108.52, Aug closed 1.25 higher to 106.42 and Oct closed 92 cents higher to 108.50. Choice cuts closed 88 cents lower to 220.71 and were down another 46 cents this morning to 220.25. Most of today's buying was due to revised cash trade from last Friday. Initially, cash activity was centered around the 110 area, but new numbers were released, indicating cash trade as high as 112 on Friday. Especially given the negative start to the session, the discount of Jun futures to cash and Aug futures to cash was too wide and attracted buying interest. Tomorrow's fed cattle exchange online auction should give futures markets an indication for the direction of this week's cash movement. Technical price action today was impressive. The Jun and Aug contracts both traded down to their 50-day moving average support levels early in the session and then found buying to close higher. The Aug contract put in its highest close since 3/20, just below its 100-dasy moving average resistance level. Oct futures recorded its highest close since 5/3, showing similar strength.

LEAN HOG HIGHLIGHTS: Hog futures were unable to build on yesterday's gains, instead falling victim to increased trade worries and technical selling. The nearby Jul contract closed 1.85 lower to 81.87, Aug closed 1.70 lower to 77.72, and Oct closed 1.75 lower to 63.17. Traders were heavy sellers today for a few reasons. Many are seeing a seasonal peak in demand for pork products coming soon, a seasonal low in pork production and the possibility of sharply lower pork exports for the second half of the year. Carcass cutout values picked up 322 cents yesterday afternoon to close at 84.41 and were up another 30 cents this morning to 84.71. Coming into today, Stochastics were giving an overbought reading in both the Jul and Oct contracts. The recent strength, particularly the gains from 6/6 and 6/13, were seen as too much too soon, especially given the current fundamental picture. The best traded Aug contract failed to close above its 100-day moving average today. Aug futures have not closed above that moving average for two sessions in a row since late February. Losses were limited today once the Aug contract traded just below its 20-day moving average level.

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