Stewart-Peterson Market Commentary

Closing Commentary - December 08, 2017

Top Farmer Closing Commentary 12-8-17

CORN HIGHLIGHTS: Corn futures edged higher today gaining 3/4 to 1-1/4 cents, with nearby Dec closing at 3.40 and Mar at 3.52-3/4. New crop Dec closed at 3.85, up 1 cent. Corn continues to mark time, marching in a sideways pattern awaiting further news to provide direction. For the week, Dec corn finished down 3-3/4 cents. With export sales running behind USDA estimates, at least year-to-date, one has to be concerned that the USDA could lower demand on 12/12, when the next Supply/Demand report is released. We doubt that will be the case, as it's too early in the year to conclude that exports will remain sluggish. In fact, end-user buying in big crop years usually is slow during the harvest season, as there's no rush or urgency to buy. As the season wears on and weather around the world, as well as other variables, may dictate otherwise. Buying methods may be altered, as well.

SOYBEAN HIGHLIGHTS: Soybean futures finished with small losses of 1/2 to 2-3/4 cents, as prices edged lower, closing weaker for the third consecutive session. After strong gains on Monday, with new crop Nov reaching a high of 10.24, futures finished softly, but held support for the week. Jan beans closed 2-1/4 lower at 9.89-3/4, while new crop Nov closed 1/2 lower at 10.04-3/4. By mid-week, forecasters added moisture in the long-range forecast for drying regions of southern Brazil and northern Argentina. Next week could be an interesting week. If conditions remain on the dry side, we wouldn't be surprised to see prices move back to the topside, challenging the high from this week. On the other hand, if forecasters continue to push the envelope for more moisture, new crop beans could close back under 10.00. This, in part, is why we've rewarded the bean market this week with additional sales. We want to guard against a quick dropout, as wheat and corn prices continue to struggle. It could be just a matter of time before beans come under selling pressure, if weather in South America improves.

WHEAT HIGHLIGHTS: It was another down-week for wheat prices, as most contracts pushed into new contract lows. Both Chi and KC lost between 2-1/4 and 3-3/4 today, while Mpls finished mixed. Mar Chi closed 2-1/2 lower at 4.19, a new contract low close. Nearby Dec lost 2-1/4, closing at 3.92. Dec Chi wheat had a small recovery, after bottoming in late-August, and peaked at 4.62. The market has now dropped 70 cents. The long-term trend remains down and ample world inventories, along with expected big supplies out of the Black Sea Region from Russia, have weighed on the market in recent weeks. The U.S. dollar has recovered some in the last 10 days, but not enough to show up on the radar as significant. Nonetheless, when wheat prices are trending lower, and the dollar is trending higher, that too is a problem for traders to buy into wheat. From a long-term perspective wheat futures can move lower when looking at continuous charts, but it is unlikely there's any significant downside in front of this market. New crop Jul, however, at 4.46 Chi should be used as a contract to make catch-up sales if behind. We've continued to sell call options, and will look for additional opportunities, as collecting premium against the downtrend has been a strong place to be the last few months.

CATTLE HIGHLIGHTS: Cattle futures finished up the week with large weekly losses and mixed session closes. The nearby Dec contract closed 1.65 lower on the week and a nickel lower on the day to 115.57, Feb closed 3.67 lower on the week and 37 cents lower on the day to 118.30, and Apr closed 2.82 lower on the week and a dime higher today to 120.20. Cash trade came in late yesterday afternoon at 118.00, and no major sales were noted today. This leaves cash for this week 2.00 to 3.00 lower than last week, just as the market was expecting. Beef prices were soft yesterday afternoon, with choice cuts closing 1.32 lower to 205.08, and select cuts closing 28 cents lower to 183.83. Beef values did bounce this morning, though. Choice cuts were up 47 cents at mid-session to 205.55, and select cuts were up 1.92 to 185.75. The strengthening of select cuts is friendly for futures prices. The recent widening of the choice select spread was due to a severe lack of demand for select meats, so the bounce in value is friendly. As of last Tuesday, November 28, large fund traders were net-long over 120,000 contracts. Data released later this afternoon is likely to show a sizable reduction in that position, as speculative traders have been exiting the market due to fears of heavy supply and waning demand. The best traded Feb contract broke through its 50% retracement level of the August to November rally on Tuesday's session, and today held its 38.2% retracement of the same rally. A break below this level next week would open up another 2.00 to 4.00 of potential downside on further long liquidation. However, prices are currently oversold on a short-term base, and may bounce on short covering.

LEAN HOG HIGHLIGHTS: Hog futures retook some late-week losses today, closing moderately higher. The nearby Dec contract closed 1.60 lower on the week and a dime higher on the session to 63.67, Feb closed 1.87 lower on the week and 37 cents higher on the day to 68.85, and Apr closed 1.32 lower on the week and 72 cents higher on the day to 73.12. Pork values were the main source of buying interest today. Carcass cutouts closed 43 cents higher yesterday afternoon to 83.18, and were up another 1.38 at mid-session to 84.56. Hams bounced 1.05 to 67.24, and bellies were up 3.94 to 147.16. Buying action today, though, was relatively subdued on reports that slaughter this week is currently running 5.9% ahead of the same week last year. If production does stay closer to these levels, heavier hog weights will result in quickly growing pork supplies. Closes for the Feb and Apr contracts were near the day's highs, but upward mobility seems limited for next week, as ham demand for the holiday season has been mostly satisfied by this point.

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