Stewart-Peterson Market Commentary

Closing Commentary - October 19, 2017

Top Farmer Closing Commentary 10-19-17

CORN HIGHLIGHTS:Corn futures once again had a small trading range and finished uneventfully with nearby Dec gaining 1/2, closing at 3.49. Bullish traders may be a little disappointed as futures traded with gains of 1-1/2 to 2 cents throughout the session but ran out of steam late. Once again, the 40-day moving average is acting as overhead resistance on most futures contracts. News of consequence was lacking, which allowed prices to drift late in the session. Farmer selling remains light, but so far to date, yield results reported to us suggest that most producers are finding yields as or better than expected. Export sales at 39.4 million were termed supportive. The slow start to the export sales season, however, suggests that this year's total at 588 million bushels is about 34% less than the previous year's figure. Shipments continue to be slow, however, which is a reflection of strong use of shipping for soybeans, which remain at a very strong pace. With good weather generally on tap and a lack of favorable news, prices are likely to trend more sideways to lower. If you're bearish, you have received plenty of negative news through increased yield as well as good harvest weather now and better than expected results, yet prices are trading at the same level they were 7 weeks ago. This tells us the market is more interested in building a base, as end users buy dips and farmers become reluctant sellers on price drops.

SOYBEAN HIGHLIGHTS:Soybean futures finished with gains of 2 to 2-1/2 cents. Nov futures closed 2-1/4 higher at 9.86-1/2. Nov 2018 closed 3-1/2 higher at 10.03-1/2. It may be worth noting that Nov 18 at 10.03-1/2 is a good starting point to sell at least 10% for the year ahead. We realize that is a long way out, but consider using hedge to arrive or futures contracts if you don't like basis. When dividing the price of Nov 18 soybean futures by Dec 18 corn futures, this equates to a ratio of 2.54. Typically, in the area of 2.45 to 2.5, farmers begin to switch to beans. In other words, the market may be telling producers today to consider growing more soybeans next year. Export sales were outstanding at 46.9 million bushels and are rapidly catching up to last year's pace. Year-to-date sales are now at 966 million, 7% behind last year. Export activity will ebb and flow during the year, and after a record South American crop, there was little surprise that sales might not be as strong during the summer months as China had a strong resource. Now that South American supplies are substantially less available, the U.S. becomes a more utilized exporter.

WHEAT HIGHLIGHTS:Wheat futures moved higher most of the session on concerns that drier weather this week could hamper winter wheat planting progress. IN addition, with wheat prices as low as they are and not a lot of optimism, there is general concern that wheat acreage will once again mirror last year or even be lower. Last year, wheat acres were at a hundred-year plus low. Large supplies and lack of incentive to grow wheat will likely be a catalyst for farmers searching for other commodities to plant. Nonetheless, there will be a certain level of wheat produced. The near term picture continues to look questionable for wheat prices, as there is no positive news. Export sales today at 22.6 million bushels was termed neutral. Without much of a weather concern and not much help from the corn market, wheat prices are likely to stay sideways.

CATTLE HIGHLIGHTS:Cattle futures closed mixed with the only major activity due to position taking before tomorrow afternoon's Cattle on Feed report. The nearby Oct live cattle futures closed 27 cents lower to 111.20, Dec closed 50 cents lower to 116.15, and Feb closed 10 cents higher to 120.65. Oct feeders finished the day 62 cents higher to 153.15. Nov was up 70 cents to 152.77, and Jan was up 1.07 to 151.20. Yesterday's online fed cattle exchange sales at 109 sparked bids in the 109 to 110 area today in the country. No sales were noted early this afternoon, and we do not expect much to develop before the Cattle on Feed report tomorrow. Boxed beef values closed softer yesterday afternoon. Choice cuts were 40 cents lower to 197.26, and select cuts were down 76 cents to 189.09. By midsession, choice cuts had bounced back 50 cents to 197.76, and select cuts were 1.34 higher to 190.43. Slaughter was heavy at 118,000 head today. Weekly U.S. beef export sales for the week ending last Thursday were reported this morning at 13,600 metric tons, vs the previous 4- week average of 15,550 metric tons. This leaves cumulative sales for 2017 at 684,600 metric tons. This is 9.1% ahead of last year's pace. Price action today was fairly uneventful. Prices traded through technical resistance points early in the session, then fell below support levels later in the session and finally closed back in between at the end of the day.

LEAN HOG HIGHLIGHTS:Hog futures pushed moderately higher though stopping short of the highs put in mid-August. The Dec contract closed 50 cents higher to 64.25, Feb closed 47 cents higher to 68.47 and April closed 52 cents higher to 72.42. Weekly U.S. pork export sales for the week ending 10/12 were reported this morning at just 11,400 metric tons, vs the previous 4- week average of 23,450 metric tons. This is the lowest weekly total since 7/6 and the second lowest for 2017, but traders were buyers today nonetheless. Carcass cutouts closed 93 cents lower yesterday afternoon to 78.33 and were 5 cents higher by mid-session to 73.93. Loin prices were 1.27 higher to 73.80, but butts, picnics, hams and bellies were all softer. Today's slaughter was high at 465,000, vs 463,000 last Thursday and 444,000 a year ago. Today's closes were the highest since 8/15, but there are some underlying technical factors that do not appear bullish. Trade volume has been light recently, especially today. This indicates a lack of conviction in the move higher. In addition, prices today moved further into overbought territory, increasing the odds for a correction soon.




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