Stewart-Peterson Market Commentary

Closing Commentary - October 16, 2017

Top Farmer Closing Commentary 10-16-17

CORN HIGHLIGHTS:After two consecutive positive closes, corn prices finished weaker today losing 2-1/4 to 2-3/4 cents, as Jul led today's drop. New crop Dec finished down 2-1/4 at 3.50-1/2, and about in the middle of its recent trading range since late August. The inability to breach the 40-day moving average for the third consecutive session, suggests traders are using this as overhead resistance. Last week's very impressive and friendly bullish key-reversal, along with a bullish key-reversal back on August 31, suggests the market is leery to go much lower, as farmer selling is not likely. In addition, a very significant build-up of short positions by speculative funds leaves the market vulnerable to a short cover rally. We do question how negative those who would be selling here expect prices to be, and whether or not it's worth the risk by taking a short-position. We believe the risk is transferred to the end-user, which should be buying corn at these cheap prices.

SOYBEAN HIGHLIGHTS:Soybean futures were under pressure throughout the session and finished with losses of 8-1/4 to 9-1/4 cents. Nearby Nov led today's drop closing at 9.91. Today's high was 9.99. Increased farmer selling, better weather for harvest this week, and yield results that continue to suggest as, or better than expected, all weighed on futures today. Yet, last week's very friendly USDA report in which carryout was lowered 45 million bushels, provided underlying support. We'll look for the market to remain in a sideways pattern in the near-term, but the stage is set for potentially higher prices should any disruptions with harvest over the next few weeks occur. As it looks now, the weather forecast is near ideal. This should allow farmers to make good progress this week, in a harvest year which is well-behind schedule. Lastly, export inspections at 65 million bushels were viewed as supportive. Yet, prospects for increased farmer selling due to the recent price recovery and harvest progress this week, weighed on futures.

WHEAT HIGHLIGHTS:Wheat futures gained 9 cents in Dec Chi, which closed at 4.39-1/2, its highest close in a week. KC gained 9-10 cents and Mpls 3-4. Short covering and a lack of selling interest helped provide underlying support as wheat futures began to generate buying interest after corn and soybeans moved higher. Broad-based commodity buying seemed to be a positive for the wheat market today. Unfortunately, export sales at 6.4 million were a disappointment and considered bearish. We are not convinced wheat prices have enough news to find much follow through buying unless there is broad-based speculative interest in commodities, and wheat is part of this event. News is just not positive. Wet conditions may prevent winter wheat planting, as will a late harvest for some bean producers who would like to push wheat after beans. We did not view this week's USDA reports as supportive, as US carryout increased 27 million bushels, and world stocks increased 5 million metric tons.

CATTLE HIGHLIGHTS:Cattle futures set back today in light trade activity and relatively narrow trading ranges. The nearby Oct contract closed 1.10 lower to 111.72, Dec closed 30 cents lower to 116.82, and Feb closed 15 cents lower to 120.92. Cash trade this week is expected to be steady with last week's trade at 111.00, or possibly a little softer if packers do not need as many cattle as last week. Choice cut values closed at their highest level on Friday afternoon since August 15. Choice cuts were up another 51 cents by mid-session today, to 198.73. Last week's slaughter totaled 622,000 head, vs 632,000 head the previous week, and just 601,000 head for the same week last year. 2017 slaughter is currently running 5.8% ahead of last year's pace. Slaughter totals around this level are not outrageously heavy, but considering the projections for heavy Q4 production, the supply picture does not seem to be lightening up. Price action was fairly non-descript today. The nearby Oct contract did close below its 100-day moving average, though still held its 10-day moving average. The best traded Dec contract briefly traded below its 10-day moving average, but still closed above. Feb futures held their 10-day moving average as well. The low trade volume today was indicative of a lack of significant fundamental developments.

LEAN HOG HIGHLIGHTS:Hog prices were able to capitalize on stabilizing cash and pork values today, with all contracts out to Jul of 2018 showing gains. The nearby Dec contract closed 1.50 higher to 63.70, Feb closed 85 cents higher to 68.30, and Apr closed 7 cents higher to 72.02. Carcass cutouts surged 62 cents on Friday afternoon to 74.44. This was their highest value since September 20. By mid-session today, pork values were another 61 cents higher to 75.05. Loin prices jumped 4.86 to 77.05 and rib values jumped 2.81 to 116.85, the two main drivers of better pork prices. Bellies slumped 2.92 to 95.19. Slaughter today was relatively light, with 446,000 head killed, vs 463,000 head killed last Monday, and 441,000 head killed a year ago. This, coupled with the market's perception that demand will stay strong in the coming weeks, was enough to make for higher closes today. On price charts, near-term technicals should become very important. The Dec contract was able to close outside of its most recent consolidation level. There is a fair amount of technical resistance at today's close of 63.70, and any close higher should open the door to challenge contract highs in the 65.00 range. The Feb and Apr contracts matched the highs of their most recent consolidation levels, and should follow Dec futures on a move higher.

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