Stewart-Peterson Market Commentary

Closing Commentary - August 22, 2017

Top Farmer Closing Commentary 8-22-17

CORN HIGHLIGHTS:Corn futures softened again today, losing 2-1/2 to 3 cents as Sep and Dec led today's drop. New crop Dec closed at 3.60, a new low for this calendar year. The contract low for Dec corn came on August 31, 2016 at 3.58-1/2. Today's low was 3.60. While crop ratings didn't change much, it was noted that IL saw another increase in the poor to very poor category, and this could suggest that the crop is not likely to get much, if any, bigger. Recent rains were welcome and could add some weight, but from a bigger perspective, it's likely that the USDA will be lowering yield expectations, at least some on subsequent reports. So far the Pro Farmer tour is finding much variability, as expected, but in totality nothing of significance in contrast to USDA numbers.

SOYBEAN HIGHLIGHTS:Soybean futures ended the day quietly but gained 3/4 to 1-1/4 cents on export activity. Recent rains were viewed as beneficial, but today's export talk had China buying U.S. soybeans. In addition, there is continued talk of slow Brazilian farmer selling, and that China may be shifting more demand toward the U.S. Though recent rains have been beneficial, there have been many who have missed rains as well. The crop may be starting to level out in its ratings, as was indicated yesterday. While it is early to talk about cold weather, there is some talk beginning to circulate that temperatures could run well below normal in early September. We wouldn't bank on that yet, but it is something that seems probable given the string of below-normal temperature forecasts that have occurred on the 6-10 day outlook since mid-July.

WHEAT HIGHLIGHTS:Wheat futures were on the defensive once again. It's just another day with the same story, as new contract lows were posted with futures losing anywhere from 7-1/4 to 8 cents. There is just nothing underneath this market holding it up. Despite a weaker U.S. dollar, and what appears to be a good pace for export activity year-to-date, the market continues to erode on ideas of ample world inventory, as was echoed on the August Supply and Demand report. Expectations for record production out of Russia and new lows in European wheat prices, weighed on Chi, as well as KC futures. Mpls was no exception either, as it lost ground today with Sep closing 14 lower at 6.41, a new low close for the downturn since prices peaked about six weeks ago. Today was the lowest close since mid-June.

CATTLE HIGHLIGHTS:Cattle futures closed moderately higher today, bouncing out of oversold levels and finding some support near the April lows. The nearby Aug contract closed 72 cents higher to 106.72, Oct closed 1.87 higher to 107.72, and Dec closed 2.02 higher to 110.07. Speculative short-covering was also a factor today, along with the market-wide feeling that prices may have already priced in the traditional late summer drop. Carcass cutouts were softer again yesterday afternoon, choice cuts closing 1.20 lower to 193.09 and select cuts down 88 cents to 191.62. At midday today, boxed beef values were slightly higher with choice cuts up 73 cents to 193.82 and select cuts up 1 cent to 91.63. Cold Storage results released this afternoon were relatively neutral. Total red meat supplies were up 1% from last month, but down 8% from last year. Beef stocks were up 4% from last month, but down 8% from last year. Placements on Friday's Cattle on Feed report are expected at 106.2%, marketings at 104.9%, and on feed at 104.7%. Placements have come in above last year for the past four months.

LEAN HOG HIGHLIGHTS:Hog futures pushed lower for the fifth consecutive day today, as pork values drift lower and lower. The nearby Oct and Dec contracts both closed 80 cents lower to 63.87 and 59.05 respectively, and Feb closed 87 cents lower to 63.75. Round one of NAFTA negotiations concluded yesterday and traders are still nervous over possible export repercussions. Carcass cutouts bounced 42 cents yesterday afternoon to 90.56, but were down 2.43 by midday today to 83.13. Cash belly prices were the culprit of this drop, down 17.50 to 153.06 today. This afternoon's Cold Storage report was friendly for prices. Frozen pork supplies were down 1% from last month and down 7% from last year. Pork belly stocks were down 21% from last month and down 65% from last year. On the technical front, the Oct contract has until October 13 to converge with cash, so minimal support will be drawn from that until closer to expiration. We see prices testing the lows made on April 21, before rallying to cash.




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