Stewart-Peterson Market Commentary

Closing Commentary - September 25, 2018

Top Farmer Closing Commentary 9-25-18

CORN HIGHLIGHTS: Corn futures saw two-sided trade today before finishing with a positive tone on the day with the contracts up 1-3 cents. Front month Dec corn was up 1/4 cent to 3.63-3/4, while Mar was up 3-1/4 to 3.75-3/4. Dec corn futures posted their highest close since the September 12 USDA WASDE report, as prices have now rallied 21 cents off the most recent lows. Weather conditions across the Midwest are bringing support under corn futures as wet weather conditions are slowing harvest in many areas. In areas where harvest weather has been favorable, advanced maturity has this year's corn crop moving along quickly. In yesterday's Crop Ratings, the USDA posted this year's crop at 16% harvested, approximately 5% above the 5-year average. Despite harvest pressure with new bushels coming on board, corn markets stayed resilient in today's trade, but spillover support was coming from a strong open in the market. Corn futures are challenging the most recent topside channel, and today's close may give some potential breakout through that top of the most recent trading range of that downward formed channel.

SOYBEAN HIGHLIGHTS: The soybean complex was firmer today, with soybean futures trading 2-4 cents higher. Front month Nov beans were up 4-3/4 to 8.45-3/4, while Jan beans finished 4-1/2 cents higher to 8.59-3/4. Despite today's positive close, soybean futures finished the day well off of early session highs as the Nov contract traded nearly 15 cents higher to 8.58 for today's intra-day high. Early in the session, the oil world published a report of Chinese buyers looking to purchase Argentina soybeans for import, which in turn led to a projected 60-70 million bushel usage of U.S. beans to Argentina over the next few months. Like corn, beans are still being driven by the demand side of the equation, and at these depressed prices are prone to aggressive moves on favorable news. Though nothing is still concrete, at these price levels the demand side of the equation should stay firm. In addition, wet weather across portions of the Grain Belt may be limiting harvest, which helps add some buying support into the bean market. Strength in soybean meal and soybean oil markets also added some underlying support in today's trade.

WHEAT HIGHLIGHTS: Wheat futures were the lagger in grain markets today, as Chi wheat futures were 6-7 cents lower. Front month Dec was down 6-1/4 to 5.20-3/4, while the Mar contract was down 6 to 5.39-1/2. Weakness fell onto other wheat classes as KC hard red winter Dec contract was down 7 to 5.22, and Mpls spring wheat Dec contract was down 3 cents to 5.81-1/4. Wheat futures saw some additional long liquidation, but stayed range-bound overall in trade as the market cannot maintain the strength seen in the other grains today. With the move toward grain stocks numbers at the end of the week, U.S. wheat supplies are currently ample, and the U.S. is still struggling against other components for international trade. The U.S. dollar index may be near the bottom of its most recent trading range, but the potential of a firming dollar as we move toward Wednesday's expected Fed rate hike may help bring some of those sellers forward. Recently, the U.S. dollar has softened vs the Russian ruble which has helped allow U.S. exporters become more competitive at global market prices, as well as continued reductions of the Australian crop provides support underneath the market overall. With U.S. wheat supplies staying ample, at least in the short term, demand will be a key that is still lacking from the U.S. market. This may be a developing story in the weeks ahead, but currently, prices are failing to find any traction.

CATTLE HIGHLIGHTS: Cattle futures closed moderately higher today despite two consecutive bearish reports in a row. The nearby Oct live cattle contract closed 17 cents higher to 112.35, Dec closed 20 cents higher to 117.20, and Feb closed 25 cents higher to 121.55. Sep feeders were up 17 cents to 156.25, Oct feeders were up 17 cents to 156.47, and Nov feeders were up 50 cents to 156.42. Yesterday's Cold Storage report showed a record amount of beef stocks for this time of year, up 5.6% from last year. The 10-year average increase for the month is 0.1%, so the 4% jump from July is bearish as well. This plus the bearish Cattle on Feed report from Friday had the market on edge today. Beef prices were supportive though, with choice cuts closing 1.36 higher yesterday afternoon to 206.16, and up another 38 cents today to 206.54. As of last Tuesday, speculators held a net-long position of over 74,000 contracts, by no means extreme, but considering the expectations for a contra-seasonal increase in Q4 production, this could be seen as bearish. Price action was relatively quiet today, contradicting many expectations. The nearby Oct live cattle contract closed higher, but was unable to break through its 10-day moving average resistance level. Dec cattle were also unable to close above their 10-day moving average level, but the Feb contract held its 10-day moving average support. Nonetheless, upward momentum is waning and prices may make a turn lower.

LEAN HOG HIGHLIGHTS: Lean hog futures finished mixed, remaining relatively sideways ahead of today's Cold Storage report. Oct hogs closed 70 cents higher to 61.00, Dec closed 42 cents lower to 56.97 and Feb hogs closed 52 cents higher to 65.45. The CME lean hog index is up 1.65 to 59.09, its highest value since 8/13. Pork values continue their trend higher, closing 23 cents higher on Friday afternoon to 79.18 and trading up another 78 cents this morning to 79.96. Today's Cold Storage report showed relatively heavy numbers but likely not enough to cause a serious sell-off in the face of other fundamental developments. Frozen pork supplies were up 6% from last month and up 1% from last year, while pork belly stocks were down 14% from last month and up 82% from last year. Hurricane Florence only really caused production issues for Smithfield, so it is unclear how much average weights will decline as Smithfield ramps production back up over the next several weeks. African swine fever cases continue to develop in China, with two more cases announced on Friday in two new provinces. China has officially recalled 40,500 pigs to date, but the actual number is likely more. The Chinese pig population is more than half of that of the entire world, and China is a net importer. This could be a major development long term. Technically, developments today were light. The Oct contract made an inside session. Dec held its 10-day moving average support level, and Feb held its 10 and 20-day moving average support levels.

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