Stewart-Peterson Market Commentary

Closing Commentary - July 13, 2018

Top Farmer Closing Commentary 7-13-18

CORN HIGHLIGHTS: Corn futures saw selling pressure as contracts posted modest losses, down 3 to 4 cents. Sep corn was down 4-1/2 to 3.41-1/4, while Dec finished 4-1/2 lower to 3.54-3/4. Jul ended its trading life, settling at a final price of 3.30-1/4 in today's trade. For the week, Dec corn futures saw a push to a new contract low, losing 18-1/4 cents. Despite yesterday's technical reversal on daily charts, after the USDA released a classified as "friendly overall to expectations" Supply/Demand report, follow-through buying failed to find any traction in today's trade. Being weighed on heavily by double-digit losses in the bean market, corn futures traded the majority of the session in negative territory. With the latest round of USDA numbers behind us, the market focuses back to the weather, where forecasts are staying favorable for additional crop development. Despite heat across the majority of the Corn Belt over the past week, forecasts are calling for cooling temperatures next week following a strong potential for coverage of rain this weekend. With crop ratings staying strong at this stage, prospects of more favorable weather only help traders' mindset to focus on the potential size of this year's crop. With USDA leaving crop yield numbers unchanged yesterday at 174 bushels/acre, likely the market is projecting that number to rise in future Supply/Demand reports. Global world stocks were at 191.7 million metric tons, and new crop down to 152 million metric tons, are bullish long-term factors that will likely keep corn prices supported at this stage. Those numbers could change if U.S. production does excel as we move into the weeks and months ahead.

SOYBEAN HIGHLIGHTS: Soybean futures were the anchor on grain markets this afternoon, as contract finished from 11 to 15 cents lower. Aug beans dropped 15 cents to end at 8.18-3/4, while Sep beans were down 14-1/4 cents to 8.24. The Jul contract expired in today's trade, finishing at 8.14. For the week, Aug bean prices saw another round of aggressive selling losing 58-3/4, while contract Nov beans dropped 60-1/4 cents. Yesterday's USDA supply/demand numbers made its first adjustments for potential trade issues and tariffs in future reports. When making adjustments of 250 million bushels in potential trade next year, 2018-19 carryout jumped from 385 to 580 million bushels. World stocks, due to lack of overall demand because of trade concerns, jumped to 996 million metric tons. These numbers had a heavy weight on bean markets, as prices tumbled to new contract lows before seeing some afternoon pullback or short-covering. On its intra-day low, Aug beans traded as low as 8.11-3/4, while Nov beans challenged the psychological 8.25 barrier. With all eyes on trade, as well as weather looking very conducive to producing strong yields, it is difficult for buyers to step into this market and the path of least resistance looks softer.

WHEAT HIGHLIGHTS: Wheat futures were the strength of grain markets this afternoon, as contracts finished 7 to 12 cents higher. On its last trade day, Jul Chi wheat contract finished at 4.81-1/2, down 1 cent from yesterday's trade. Sep wheat futures led the pack higher up 12-1/2 cents to 4.97, while Dec was 11-1/4 higher to 5.12-1/4. For the week, Sep Chi posted an 18-1/4 cent loss. In other wheat markets, Sep KC wheat finished 10-1/2 cents higher to 4.91-3/4, while hard red spring wheat finished 1-1/4 higher to 5.31-3/4. Wheat futures saw support despite yesterday's supply/demand numbers boosting production to 1.881 billion bushels and old crop carryout to 1.1 billion bushels for U.S. wheat supplies. The focus in the marketplace stays on weekend production forecasts for Ukrainian, European, and Australian wheat. With forecasted reductions in those countries export numbers, a potential for additional export business moving back to the U.S. has helped bring some buyers into the wheat market. In addition, the USDA made adjustments on U.S. wheat yield, softening winter wheat yield to 48 bushels per acre, down 0.4 bushel per acre from its June forecast, and down 2.2 bushels from last year. A laggard on the wheat market is a potential explosive spring wheat forecast, which was estimated at 614 million bushels, up 48% from last year's overall drought-stricken crop. Today's strength in wheat futures may be improving a short-term technical picture, challenged by upside resistance at moving averages. Traders' eyes will clearly stay focused on global wheat production given the overall U.S. supplies.

CATTLE HIGHLIGHTS: Live cattle futures saw moderate losses as contracts were 0.170 to 0.525 lower. Front month Aug cattle was down 0.475 to 104.55, while Oct was down 0.225 to 107.375. To end the negative week on the Aug contract, Aug cattle softened 1.825 in this week's trade. Cash markets stayed relatively quiet, and will likely be a late Friday afternoon affair with bid activity at $108, while asking prices were holding firm around $114-$115. Boxed beef cutout values at midday were lower with choice carcasses down 1.86, and select down 0.410. The weakness in retail values was a large gap between asking and bid prices in cash trade, will likely have cash prices steady to weaker over last week's trade. This will likely be the driving force for next week's trade and setting direction for early week futures positioning. The Aug market continues to run a discount to premium cash levels, and if cash prices slide going into the weekend, will bring some selling pressure into Monday's market.

LEAN HOG HIGHLIGHTS: Lean hog futures saw mixed to firmer trade as deferred contracts recovered from this week's aggressive selloff. Aug hogs finished 0.275 lower to 70.15, while Oct hogs gained 1.53 to 55.30. Triple-digit gains were noticed throughout the entire deferred contracts up until Apr 2019. For the week, Aug hogs struggled with an aggressive selloff of 5.275. Despite ample supplies of hogs available to packers, and concerns regarding summer demand, the main force pushing on hog markets this week was renewed trade tensions between the U.S. and China. In addition, concerns regarding trade with our second largest importer of Mexico have kept sellers active in hog markets. Hog futures were aggressively sold on Wednesday's trade, only to see some short-covering going into the end of the week. Cash prices have been trending lower in IA/MN cash reports, but carcass values did provide buying support, gaining 1.13 for cut weight at midday trade.

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