Stewart-Peterson Market Commentary

Closing Commentary - August 18, 2017

Top Farmer Closing Commentary 8-18-17

CORN HIGHLIGHTS:Corn futures edged higher, gaining 1-1/4 to 1-3/4 cents as May 18 led today's rally. New crop Dec closed 1-1/2 higher at 3.65-3/4. It was a rough week for corn futures, as they lost ground with generally cool temperatures and scattered rain throughout the Midwest. Many have indicated to us that rainfall has been less than expected, and this week's rain did not live up to expectations. For the week, Dec corn lost 9 cents. Bearish traders will argue that, with carryout similar to last year, corn futures have more room to lose after Dec 2016 corn futures bottomed at 3.15. Bulls will argue that acreage is down, yield is down, and while demand has diminished on the Supply and Demand table balance sheet, there is still excellent demand at current prices, and the market has little business working lower. We agree with the bullish argument. Prices may drift, but there is little expectation that this year's crop is bigger than the 169.5 yield the USDA is estimating, and it is highly likely that the market will search for a low sometime in the next 15-30 days.

SOYBEAN HIGHLIGHTS:Soybean futures gained 4 to 7-1/4 cents, as Sep led today's rally, closing at 9.37-1/2. New crop Nov gained 4-3/4, closing at 9.37-3/4, which is positive for the third consecutive session after posting a hook reversal higher on Wednesday when prices bottomed at 9.21. For the week, Nov beans lost 7-1/4 cents. The big news, of course, this month was improved weather conditions for many producers, but more importantly, a negative Supply and Demand report last week. The question now is whether or not recent rains have been beneficial enough on a widespread scale, and if forecasted rain in the near term will add to production potential. We have been surprised at the number of producers we've talked to this week who have suggested rainfall totals have been disappointing or nonexistent.

WHEAT HIGHLIGHTS:Wheat futures finished with small gains. Chi gained 1-1/2 to 2 cents as Sep led today's return to positive territory, gaining 2 cents and closing at 4.16. Sep Chi finished last week at 4.39-1/4, and with today's close at 4.16, it represents a market that has been free falling. Oversold? There is no doubt many technical indicators suggest wheat prices are oversold, but last week's negative USDA report, along with heavy liquidation, suggests that prices have not found their near term low yet. Nonetheless, wheat is becoming a value to the world, in particular with the US dollar trading near 14-month lows. New news of consequence was lacking this week, and that may have also weighed on futures. Export sales were supportive yesterday but not enough to change the overall negative near term trend.

CATTLE HIGHLIGHTS:Cattle futures set back again, ending the week with 4 days of losses. The nearby Aug contract closed 75 cents lower on the day and 3.35 on the week to 106.37. Oct closed 32 cents lower on the day and 1.50 lower on the week to 105.90. Dec closed 42 cents lower on the day and 1.47 lower on the week to 107.85. Cash trade in the country was all but silent today, with bids seen at 109, 6.00 below last week's trade. Slaughter today at 115,000 head was 1,000 head more than last Friday and 2,000 more than a year ago. That plus rising weights will create large beef production totals for this week. Choice cuts closed 1.88 lower yesterday afternoon to 195.63, and select cuts closed 84 cents lower to 194.20. By midday, choice cuts were down another 57 cents to 195.06, and select cuts were down 1.70 to 192.50. These are the lowest levels for boxed beef values since late February. Technicals were not quite as negative as one might expected. The Aug contract closed at its lowest level since 4/6, but the best traded Oct contract put in a doji star price pattern today, possibly signaling a reversal. However, prices are still below the 200-day moving average levels, not a great sign.

LEAN HOG HIGHLIGHTS:Hog futures closed lower for the third day in a row this week, confirming the heavy losses for the week. The nearby Oct contract closed 2.50 lower on the week and 80 cents lower today to 66.12. Dec closed 1.92 lower on the week and 47 cents lower today to 61.32. Feb closed 1.45 lower on the week and 30 cents lower today to 66.00. The CME lean hog index was 33 cents lower to 83.70. The weaker trend this week in the cash market added to selling pressure today, along with fears that the lower slaughter pace observed recently may have been due to slow producer marketings, not a trend. Carcass cutouts closed 42 cents higher yesterday afternoon to 91.97 and were up another 1.06 by midday to 93.03. This jump was led by an increase in belly values of 8.74 to 190.15. Apparently, some traders are nervous about possible negative ramifications of the new NAFTA deal, which began negotiations this week. The nearest contract months both closed below their 200-day moving averages for the first time since 8/4. The Feb contract did trade to its 200-day moving average and closed just below its 100-day moving average. Late session buying in all contracts did limit losses today and could possibly set up Monday for positive price action.




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