Stewart-Peterson Market Commentary

Closing Commentary - May 22, 2019

Top Farmer Closing Commentary 5-22-19

CORN HIGHLIGHTS: Corn prices edged higher with Jul closing 1/4 cent higher at 3.94-1/2 and new crop Dec 2-1/4 higher at 4.12-3/4. Gains of 6-7 cents in beans provided support, but Chi wheat finished 4-6 lower. We might argue today was a consolidation day, but once again, prices traded lower during the session and found buying interest. We continue to expect that recent buying has primarily been short covering, as funds were estimated to exit 37,000 contracts yesterday and likely more today. They are estimated to also be net short 143,000. In other words, the bull market that could be at hand is just getting started, first with short covering. We say bull market because our bias is unplanted acres will continue to rise in the days ahead. Some parts of the Midwest have a prevent plant date of 5/23, and the forecast looks generally cool and wet in these regions for the next 7-10 days. Therefore, unless corn prices bolt higher and encourage farmers to plant anyway, we believe planted acres will be reduced by upwards of 4 million or more.

SOYBEAN Highlights: Soybean futures gained 6-7 cents, as futures recovered after losses late in the session yesterday. Consolidation describes the last several sessions of trade. Prices traded higher yesterday and then closed lower on scuttlebutt that a 2.00/bushel market facilitation payment would likely be experienced by bean producers. The initial reaction may have come on the heels of this announcement, because the thinking was that farmers would plant more bean acres. As it looks now, a payment would be administered on a 5-year actual production history and be available to beans that are prevented plant. Giving that planting season is behind on beans, just as it is in corn, the concern of declining yield potential and/or abandoned acres is also alive. Yet, the prevent plant dates for beans, as compared to corn, are much later in June.

WHEAT HIGHLIGHTS: Wheat futures finished with losses of 2-3/4 to 6 cents in Chi, 3 to 3-3/4 in KC and steady to higher in Mpls. Concerns of spring planting conditions and abandoned acres due to wet conditions are providing underlying support for Mpls. Winter wheat is in a precarious place as it has recently rebounded and growing concerns of disease are mounting; yet, prices seem to have stalled the last few sessions. Nonetheless, ample world inventory will keep rally potential in check. We continue to keep one eye open to Australia, which is in a dry pattern. This could loom larger in the weeks ahead. For now, prices have probably reached a near term peak. While corn prices could arguably go higher on abandoned acres, it is more challenging to argue for wheat prices to move higher. Nonetheless, crop ratings may be at a turning point and start declining.

CATTLE HIGHLIGHTS: Cattle futures closed mostly lower today on talk of sluggish beef demand heading into the Memorial Day holiday weekend. June lives were down 20 cents to 110.65, Aug lives were down 32 cents to 107.95, and Oct lives were down 50 cents to 107.80. May feeders were up 1.07 to 135.45, and Aug feeders were down 40 cents to 142.60. Cash trade so far this week has been light but is already a dollar below last week's trade. Today's online fed cattle exchange saw no actual sales and just 309 head offered. Beef values closed 1.87 lower yesterday afternoon to 219.58, their lowest value since 5/16. Choice beef was up 1.01 this morning to 220.59. Temperatures look mostly cool and wet for the upcoming three-day weekend, not exactly ideal for active grilling on a holiday. Yesterday's technical price action did not inspire much buying today. Live cattle futures made bearish outside sessions, trading higher than the previous day's highs, lower than the previous day's lows and making a negative close. Live cattle futures again tested their 10-day moving average support levels today but were able to hold by the closes. May feeders found some short covering as we draw closer to expiration, while the deferred feeder contracts drifted lower.

LEAN HOG HIGHLIGHTS: Hog markets closed moderately lower today, drifting toward the low end of the recent trading ranges. Jun hogs closed 45 cents lower to 89.66, Jul hogs were down 32 cents to 91.05 and Aug hogs were down 30 cents to 92.17. The CME lean hog index was down 22 cents to 84.37. Carcass cutout values were up 54 cents yesterday afternoon to 87.07 but were down 64 cents this morning to 86.43. Mexico has not yet lifted their 20% tariff on U.S. pork products, which has slowed U.S. pork flow. This was reflected on today's Cold Storage report, showing frozen pork supplies up 2% from last month but down 2% from last year. Pork belly stocks were up 4% from last month but down 5% from last year. Jun hogs were unable to close above their 10 and 20-day moving average support levels, but the best traded Jul contract held its 10-day moving average support level. Momentum may be turning lower in the near term.

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