Stewart-Peterson Market Commentary

Closing Commentary - September 21, 2018

Top Farmer Closing Commentary 9-21-18

CORN HIGHLIGHTS: After a challenging start to the week, in which corn futures posted new contract lows, prices finished today on a strong note and higher for the third consecutive session. Nearby Dec gained 4-3/4, closing at 3.57-1/4, above the 10-day moving average but up against the 21-day moving average, which now acts as overhead resistance. More importantly, yesterday's and today's close were both above the close the day of the September Supply and Demand report, in which the market was somewhat surprised by a larger than expected yield figure of 181.3 bushels per acre, a record figure. For the week, corn futures gained 5-1/2 cents, posting a friendly looking hook reversal. Rain delays may provide near term support, as will the idea that corn price near 3.50 per bushel may be low enough considering this year's carryout, both domestically and worldwide, will be smaller than last year's.

SOYBEAN HIGHLIGHTS: Soybean futures finished softer with only minor losses of 2-3/4 to 3 cents after trading as much as 7 cents lower during the session. More importantly, after strong gains the last two sessions, today's small losses were considered uneventful. Technicals look very favorable this week as the market posted a prominent weekly bullish key reversal, which means the market traded lower than last week's low, higher than last week's high and closed higher. At the bottom of a trend, this could be a very prominent signal. What will determine follow through buying is likely harvest progress, which appears to be delayed in the short term due to rain events. Yield results are varied to date but generally very good. However, if rain delays occur or if there are developments on the political front that are positive, prices may have found their low for the season. We have been arguing for 8.00 or lower, but this week may be the turning point for stability, if not higher prices. Regardless of tariffs, beans are still an excellent value. While supplies are expected to be very significant with record projected carryout, both domestically and worldwide, there is also record projected demand. Anything less than USDA projections of yield will likely spell a bottom.

WHEAT HIGHLIGHTS: Bear spreading was noted in Chi wheat today, with Dec closing 2-1/4 lower and next Dec up 1/2, closing at 5.80-1/2. Strong carry in the market is likely to encourage corn and soybean producers to potentially plant additional wheat acres this year. KC wheat finished 1-2 lower, and Mpls was down 2-3/4 to 4-1/2 lower, as Dec led today's drop, closing at 5.84. For the week, prices generally picked up a dime or more on all three exchanges. This is encouraging, as consolidation continues with prices holding together today after a weak start. Export sales are running on the light side so far this marketing year, but we believe that is in part to the idea that falling prices generally do not create an incentive for end users to aggressively buy. Once stability begins to develop or a strong technical signal is at hand, end users may become more aggressive in their purchases.

CATTLE HIGHLIGHTS: Cattle futures finished with modest gains, as the market prepared for today's Cattle on Feed report. Front month Oct gained 62-1/2 cents to 113.07-1/2, while Dec was up 55 cents to 118.45. For the week, Oct cattle softened by 72-1/2 cents, and Dec cattle finished 40 cents higher. The cattle market consolidated today waiting for the cattle on feed numbers, which were toward the higher end of expectations. Total cattle on feed as of 9/1 was 106% of last year at 11.1 million head. Placements was the most disappointing number at 107%, while expectations were for 104% placements in feedlots in August totaled 2.07 million head, confirming large supplies moving into the fourth quarter. Marketing was in line with expectations at 100%. With the cattle and numbers in place, trade direction next week will be focused on development of cash trade, which was relatively quiet today. Some late afternoon cash trade was running relatively steady with last week, noted at 111 in Texas and 110.50 in Nebraska.

LEAN HOG HIGHLIGHTS: Lean hog futures finished the week with selling pressure in the front month contracts, as Oct hogs were down 95 cents to 60.30. Dec hogs dropped 87-1/2 cents to 57.40. For the week, Oct hog futures surged 4.07-1/2 cents higher, while Dec gained 75 cents. Front month strength was led by stronger cash price trends, as well as retail values during the course of the week. This afternoon saw some profit taking after a strong week, as cash prices trended lower in today's trade, as well as softening midday carcass values. Today, midday carcasses were down 21 cents to 78.74, with the biggest weakness seen in loin primal cuts. Hog futures may be turning cautious after strong gains off of summer lows, as we look forward to next week's quarterly Hogs and Pigs report.

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