Stewart-Peterson Market Commentary

Closing Commentary - October 17, 2018

Top Farmer Closing Commentary 10-17-18

CORN HIGHLIGHTS: Corn futures finished uneventful, but lost ground for the second consecutive session with losses of 3/4 to 1 cent. Nearby Dec led today's drop closing at 3.74-1/4 in a very subdued trade range of 3 cents. Good weather on tap should keep harvest pressure in full swing and potentially a challenge for prices to move higher. On the other hand, private estimates have fund buying as net positive coming into today by 20,000 contracts. The last four weeks, in particular, have seen a precipitous drop in short positions held by funds as they appear to be moving out of shorts and beginning to establish long positions. This does suggest that either there's not much of an appetite to be bearish or short covering has ensued. If it is short covering, there is a chance the funds could go back onto the negative side if prices run out of steam. Therefore, if behind on sales use this 10% recovery in value of corn prices to make a cash sale and get current with recommendations.

SOYBEAN HIGHLIGHTS: Like the corn market, soybean futures also had a subdued range bound trading session. However, it managed to claw into positive territory finishing 1/2 to 1 cent higher as Nov led today's small gains. Strength in soymeal through the session continues to suggest that processors may be short of inventory and, consequently, meal prices are moving upward. Solid crush margins and good demand continue to underpin meal in the soy complex. Yet, the likelihood that prices can sustain an uptrend at this time of year may not be very good for soybeans as a very significant projected carryout and harvest pressure in the weeks ahead could weigh on futures. Rain delays the last 2-3 weeks have created an environment where crop went from well ahead of schedule to behind harvest on the 5-year figures. Harvest through Sunday, October 14, indicated 38% harvested vs a 5-year average of 43%. If behind on sales, get current. The futures market has made nearly a 10% increase in value and typically this is a point where farmer selling picks up. Between harvest pressure, farmer selling, and overhead resistance, prices could be vulnerable to a setback. We realize basis isn't very good and cash prices have a long way to go, so we're encouraging storage on the remainder of the crop. But if behind, recognize that prices may yet move lower and there is no guarantee that this year's low is in place.

WHEAT HIGHLIGHTS: Wheat prices suffered losses today of 4 to 6 cents in Chi, 5 to 7 in KC, and 7 to 8 in Mpls. Futures had no strength from the beginning of trade and continued to struggle throughout the session on a lack of positive news and a firmer U.S. dollar. With a better weather forecast, so should winter wheat seedings, as well as the remainder of spring wheat harvest for the northern Midwest or Canada over the next week. Some rain for parts of Australia were considered negative as well for price. We think the bottom line is that there just wasn't any positive news today and traders took this as a cue to exit longs, establish new shorts, or both.

CATTLE HIGHLIGHTS: Cattle futures put in mixed to lower closes today in a relatively quiet trading session. The spot month Oct live cattle contract closed 27 cents higher to 112.92, Dec closed 40 cents lower to 117.37, and Feb closed 35 cents lower to 121.47. Oct feeders were up a nickel to 154.07, Nov feeders were down 87 cents to 153.35, and Jan was down 87 cents to 149.07. Beef values today were neutral, closing 19 cents lower yesterday afternoon to 204.61 and bouncing 22 cents higher this morning to 204.83. Today's Online Fed Cattle Exchange had 1,103 head listed and zero actual sales. Cash trade so far this week has been quiet, but the current premium of futures to cash may be incentivizing feed lots to overfeed their animals leading to higher weights down the road. This week's Cattle on Feed report is expected to be bearish. Placements are expected at 100.1%, marketings at 97%, and on feed at 106.4%. While the Oct contract remains linked to the cash market until expiration at the end of the month, the Dec live cattle contract is now the most frequently traded contract. Since the surge on Monday, Dec futures have been unable to build any momentum higher, instead testing their 20-day moving average resistance and failing. Today's close below the 10-day moving average level looks negative.

LEAN HOG HIGHLIGHTS: Hog futures had a day of sharp losses, finding more selling interest after yesterday's poor closes. The Dec contract closed 2.17 lower to 54.70, Feb closed 1.67 lower to 62.57, and Apr closed 97 cents lower to 68.50. The CME Lean Hog Index was down 16 cents to 68.59. Since making a recent peak on October 9 at 69.36, the index has moved mostly lower, but remained essentially steady. Carcass cutout values closed 63 cents lower yesterday afternoon to 80.87 and were down another 1.37 today to 79.50. Today's move was led by a sharp drop in cash belly values, down 6.27 to 140.01. Retail chicken prices are near record lows, and just yesterday, chicken plants were given waivers by the Federal Government to allow higher chain speeds. This is likely to lead to similar chain speed increases for hog processing plants which could increase meat supply and pressure prices. Price action today was quite sour, with the Dec contract just barely holding onto its 50-day moving average level. The Feb contract made just its second close below its 50-day moving average level since August 15. While prices may be nearing oversold levels, a wave of long liquidation could knock futures out of their recent trading ranges.

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