Stewart-Peterson Market Commentary

Closing Commentary - September 19, 2017

Top Farmer Closing Commentary 9-19-17

CORN HIGHLIGHTS:Corn futures edged lower today losing 3 to 3-1/4 cents, as Dec led today's drop closing at 3.48-1/4, its lowest close since August 30. The contract low of 3.44-1/4 from August 31 continues to hold in place, with today's low reaching 3.46-1/2. Good harvest results from the earlier harvested crop, little change to crop ratings, and a good weather forecast suggesting warmer temperatures into the weekend, all prove to be enough to pressure prices today, despite a weaker U.S. dollar and a lack of strong farmer selling. It's not unusual for prices to drift at this time of year, and with the strong reversal posted on August 31 and lack of follow-through, the market is now in a consolidation phase. Funds are said to be net short, near 120,000 contracts, which is a fairly substantial position but have been as much as 200,000+ short in previous years. We're not arguing they'll go shorter. A lack of news typically allows prices to drift, and that is likely the case in corn.

SOYBEAN HIGHLIGHTS:Soybean futures traded both sides of steady and managed to finish with small losses of 1-3/4 to 2-1/4 cents in what was otherwise a very range-bound day. Overhead resistance at the 50-day moving average kept Nov soybeans in check, which was near today's high of 9.71-3/4. The 50% retracement of the June low to July high at 9.76 is holding the near-term recovery in check as the market has challenged that area in 6 out of the last 12 sessions. Our overall bias, however, is that prices are poised to remain choppy but could show firming, as we believe dry weather in the Midwest could be something that turns yield from near 49 bushels an acre to potentially 48. With solid demand, the market seems to be issuing this concern as well, buying dips.

WHEAT HIGHLIGHTS:Wheat futures finished quietly with Dec Chi losing 1/2 cent and closing at 4.43, but well off its low of 4.35-3/4. Mar Chi closed up 1/4 cent at 4.64, KC finished mixed, and Mpls was down a nickel. As we've stated in the past, a likely scenario for wheat prices is more of a sideways pattern. After a significant drop out shortly after prices peaked in early July, the market is now poised to consolidate and move higher. The likely scenario is consolidation, as there's not a significant forecast for tightening world inventories. As of Sunday, winter wheat planting is at 13% complete, versus a 15% average. We're not convinced current prices will buy acres.

CATTLE HIGHLIGHTS:The nearby Oct contract closed 40 cents higher to 107.97, Dec closed 45 cents higher to 113.40, and Feb closed 67 cents higher to 117.17. With cash trade totally undeveloped in the country today, some traders are fearful that we may not see sufficiently high cash trade to give the market a positive direction, while others remain hopeful. Boxed beef values were strong yesterday afternoon, with choice closing 1.20 higher to 192.62, and select closing 1.85 higher to 187.70. Choice cuts were up another 21 cents at mid-day today to 192.83, and select up another 1.13 to 188.83 on relatively light movement of 81 loads. Slaughter today was heavy at 118,000 head, versus 117,000 head a week ago, and 114,000 head a year ago. Weight gain the next couple of weeks will be difficult, as a large portion of the country shows heat in the 6-10 day forecast. Technical resistance today was tough, keeping trading ranges very tight. Both the Dec and Feb contracts traded up to overhead-channel-resistance lines. Both contract's stochastic oscillators are also reading overbought, but the recent uptrend could be more appropriately judged by the relative strength index reading growing momentum.

LEAN HOG HIGHLIGHTS:Hog futures finished the day today with small to moderate gains, in spite of weaker pork and cash prices. The nearby Oct contract closed 12 cents higher to 60.12, Dec closed 1.67 higher to 59.72, and Feb closed 72 cents higher to 64.37. The CME Lean Hog Index was down 1.27 to 62.80, leaving basis at near normal seasonal levels. Advances were made early in the session on strong pork closes yesterday afternoon. Carcass cutouts were up 33 cents yesterday afternoon, but had fallen 1.97 by midday today to 76.12. This was due to an 8.26 drop in belly values, down to 94.39. Bellies were over 200.00 in July. Despite the weakness today, pork values should find seasonal price support very soon. At the very least, if pork prices continue to fall, this should spur demand. On the technical side, downside momentum does appear to be waning. Prices are growing out of oversold levels in the Oct contract, while solid pops in the deferred contracts could attract speculative buying. Support levels at the 10 and 20-day moving averages for the Dec and Feb contracts were traded off nicely.

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