Stewart-Peterson Market Commentary

Closing Commentary - August 15, 2018

Top Farmer Closing Commentary 8-15-18

CORN HIGHLIGHTS: Corn futures finished quietly, down 3/4 in Sep at 3.61-1/2 and May unchanged at 3.94-3/4. New crop Dec closed at 3.76, down 1/2. Prices are stuck at the 50-day moving average as well as the 50% retracement of the Jul low at 3.50-1/4 Dec futures on the 12th, compared to the high of 3.88-1/2 on the 31st. The market is searching for direction. The near term weather forecast does not look threatening, as most of the Midwest should see above normal precipitation and below normal temperatures. This could add weight, particularly in the northern tier states where the crop is further behind than the central and southern states. News of consequence was lacking today, which allowed prices to trade in a tight range of near 4 cents. Expectations are that harvest will be 1 to 2 weeks ahead of schedule this year, and with farmers selling old crop corn, this could limit topside potential for prices now.

SOYBEAN HIGHLIGHTS: After finishing with gains the last two sessions, futures were weaker today, losing 8-1/2 and 10-3/4 on another favorable forecast. The most recent 6-10 day forecast suggests above normal precipitation and below normal temperatures, near ideal for this year's bean crop, in particular where areas are parched. Should significant rainfall accumulate, this could confirm, or at least lead us to believe that the USDA's figure of close to 52 bushels per acre, is likely accurate. Late Jul and August weather is most critical for beans, and while some areas of the Midwest remain hot and dry, meaningful rainfall could be a game changer. A firmer dollar and a broad sell-off in commodities may have aided today's weaker prices. We expect that, if rainfall does accumulate, prices have an easier time moving lower than higher; therefore, we will stick with our defensive posture. If you are behind on sales or put purchases, get current with recommendations.

WHEAT HIGHLIGHTS: Fund liquidation continued in the wheat market as futures dropped on all three exchanges with Mpls leading today's declines, closing 11-3/4 to 12-3/4 cents lower. KC closed 9 to 10-1/2 lower, and Chi closed 8 to 9-1/2 lower with Sep leading today's drop, closing at 5.32-1/4, its lowest close since 7/27. Prices are nearing support, yet today's close under the 21-day moving average for the second out of the last three sessions does look concerning. After bouncing yesterday, prices declined again today for the fourth out of the last five sessions and are now well off the most recent high of 5.93 Sep Chi. Yet, the market is still in a corrective phase on a bigger up move that occurred from early July through late July. This move has a fundamental force behind it, and that is declining world inventories, in particular exporting countries. Therefore, while the drop in prices the last week and a half has been concerning, others may argue it is nothing more than an overdue correction. We agree with this, as expect farmer selling with harvest becoming more behind the market than in front, along with expectations there will be another wind-down of European supplies on the next USDA report.

CATTLE HIGHLIGHTS: Cattle futures closed higher, well off the day's highs but still respecting uptrend channel support. The nearby Aug live cattle contract closed 35 cents higher to 108.32, Oct closed 27 cents higher to 109, and Dec closed 37 cents higher to 112.80. Feeder cattle were up as well, with Aug up 12 cents to 149.05 and Sep up 47 cents to 149.15. Much of today's buying interest was based on feelings of firmer demand. Yesterday afternoon, choice beef put in its highest close since 7/3, up 1.21 to 209.64. Beef values were up another 74 cents this morning to 210.38. Limiting the cash strength was cash trade. Yesterday afternoon, cash cattle traded in Nebraska at 119.50, versus 110 to 111 last week. Today's online fed cattle exchange had zero sales with only 438 head offered. Technically, though today's price action didn't exactly produce a breakout, it was somewhat supportive. The Oct live cattle contract closed back above its 50-day moving average level, though prices did test and failed to break through their 10 and 20-day moving average levels. After holding trend line support on Monday and Tuesday, traders felt better about owning cattle, especially considering the stability in beef prices. After beginning a relatively quick sell-off early last week, momentum indicators are starting to turn higher, which could pull prices up in the near term.

LEAN HOG HIGHLIGHTS: Hog futures made solid gains today, closing near the highs of the day and showing impressive technical strength. The Oct contract gained 62 cents to 52.47, Dec gained 80 cents to 49.45, and Feb closed 1.12 higher to 56.35. Carcass cutout values closed 1.27 lower yesterday to 69.74, their lowest value since 5/4. Cutouts were down another 1.09 to 68.65, led lower by loins down 1.68, hams down 1.54 and bellies down 2.27 to 85.33. The nearby Oct contract fell slightly lower early in the session to meet support at the 20-day moving average but then traded choppy for the rest of the day and was able to close just off the highs. Deferred contracts had even more impressive price action today, with Feb putting in its highest close since 7/13. Some contract months are now outside of their Bollinger band ranges, which may cause a pullback, but prices appear to have made a nice turn.

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