Stewart-Peterson Market Commentary

Closing Commentary - May 18, 2018

Top Farmer Closing Commentary 5-18-18

CORN HIGHLIGHTS: After a weak finish yesterday, corn prices rallied today, gaining 6-1/2 to 7-1/2 cents as Sep led the way higher, closing at 4.11. Sharply higher Chi wheat futures and higher beans provided underlying support. The dollar was slightly higher. Focus continues to suggest that weather could be impactful for corn production, as dry weather continues in most of the Midwest. The 6-10 day forecast suggests relief is in sight. Private forecasters continue to lean toward a warmer and drier June and July. The National Weather Service 30 and 60 day outlooks both indicate above normal temperatures for the entire Midwest. Talk that China will return anti-dumping fees levied against sorghum was viewed as supportive and helped get prices off to a firm start on the overnight trade. Today's finish was supportive and impressive. For the week, Jul corn gained 6 cents, and Dec corn gained 5-3/4. For now, stay short with Dec corn as prices are still stuck in a sideways pattern and trading near the same level they were in early April. The longer term trend since January is upward, and if prices do break above the 4.25 level, we may choose to exit futures. However, we will stay short at this time. The next upside objective in Dec is the contract high from last summer at 4.29-1/2.

SOYBEAN HIGHLIGHTS: Soybean futures edged higher, gaining 3-1/2 to 4 cents and finishing nearly 6 cents off the day's low but well off the day's high of 10.15-3/4 Nov. Nov futures closed at 10.08-1/4. Nearby Jul closed 3-1/2 higher at 9.98-1/2 with today's close well below the high of 10.07-3/4. The near term downtrend remains intact. With Jul finishing the week under 10.00, this could send a signal to the market that futures may have more room to work lower with a target now of 9.88-3/4, the low from 2/2. If this level becomes breached, then look for a low, which occurred on 1/12 to be retested, at 9.65-1/4. The bean market is at a crossroads. On one hand, export sales will likely slow as they typically do this time of year as the world's main buyer, China, switches sources, namely Brazil. We also believe acreage is likely to be up from the 3/30 report. With that being said, the general tone in commodities this year is friendly, and meal continues to be a highly sought after protein. Therefore, look for choppy activity, with the bias that prices can move lower easier than higher.

WHEAT HIGHLIGHTS: Wheat futures exploded today with sharp gains of 19 to 20-3/4 cents, as Jul Chi led today's rally, closing at 5.18-1/4. Mpls closed 12-14 higher, and KC 18-1/2 to 19-3/4 higher. The overall catalyst continues to be dry weather, but now perhaps the market is reflecting concerns in Australia and the Black Sea region. While rain does appear to be in the forecast on the 6-10 day outlook for most of the Midwest and southern Plains, it appears the market may have taken a bet today that totals will be less than helpful in an already dry situation that seems to be getting worse. Crop ratings showed a slightly improvement, yet this could also be a reflection of abandoned acres that are no longer being rated. Volatility remains high in recent weeks; a week ago, prices plunged more than 50 cents, and this week they finished higher. Today's close above the 10-day moving average likely uncovered buy stops as well.

CATTLE HIGHLIGHTS: Cattle futures fell lower, unable to find any support on yesterday's stabilizing price action, and instead fell victim to cash market pessimism. The nearby Jun futures closed 65 cents lower and 5.22 lower for the week to 102.40. Aug closed 87 cents lower today and 6.20 lower on the week to 98.22. Oct closed 60 cents lower and 5.77 lower on the week to 101.70. No notable cash trade in the country was seen today. The drop in cash value of over 10.00 in the past two weeks has been the main pressure point. Despite the sharp drop in cattle trade, beef prices have remained very high and kept packer margins remarkably strong. At yesterday's close, choice cuts were up 1.65 to 232.68 and backed off just 6 cents today to 232.62. This is close to 2.00 higher from the same time last week. Despite another day of losses in cattle markets, technicals do not appear overly bearish looking forward. For starters, Stochastics are reading oversold at the moment. The new trading range begun on Wednesday remains intact today, and support levels were not violated. Most importantly, the current discount of Jun futures to the cash market is too wide and will begin to converge as we move into June.

LEAN HOG HIGHLIGHTS: Hog futures closed sharply lower, under pressure from bearish supply fundamentals continued trade uncertainty. The nearby Jun contract closed 1.77 lower to 74.70, Jul closed 95 cents lower to 77.25 and Aug closed 1.00 lower to 76.62. Jun futures lost 40 cents on the week, Jul gained 27 and Aug lost 32. The CME lean hog index gained 87 cents today to 67.01, capping off weekly gains of 3.28. Supply side concerns stem from the current heavy hog weights, especially during a time of year when hog weights should be declining. Despite the current seasonal trend of slaughter decline, quarter two production is expected to come in at a record level and 4.3% higher than last year. Third quarter pork production is expected to increase by 4.8% from last year. Carcass cutout values closed 1.11 cents higher yesterday afternoon to 75.50 but were down 1.67 today to 73.83. All primal cuts were lower today with picnics down 2.93, hams down 2.36 and bellies down 1.33. The Jun contract fell below its 10, 20 and 50-day moving average support levels. Jun futures have not been able to put more than two closes in a row above these moving average levels since mid-January. Jul futures were able to hold their 20-day moving average, while the Aug contract fell below all three moving average levels.

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