Stewart-Peterson Market Commentary

Closing Commentary - February 20, 2019

Top Farmer Closing Commentary 2-20-19

CORN HIGHLIGHTS: Corn prices edged higher, recovering with small gains of 1 to 2-1/2 cents as Mar 20 led today's gains, closing at 4.08-1/2. Mar 2019 closed at 3.70-3/4, up 1 cent, and new crop Dec closed at 3.98-1/2, up 1-3/4. A small improvement in bean prices helped provide support, but another round of sharp losses in wheat prices again weighed on corn futures. Nearby Mar wheat futures have now dropped from a recent high of 5.31-1/4 on 2/6 to a low today of 4.75-3/4, a drop of over 55 cents. New news of consequence was lacking again today, and by day's end, prices gave away gains of 2-3 cents. While the market did finish firmer, the technical picture looks bleak, considering prices could have rebounded more significantly today. Weather in the Midwest is again a challenge to move grain, and yet we are not seeing the market take this into effect, either from a movement perspective nor from the perspective that feed usage will likely increase. The prices seemed to shrug this off, as they shrugged off the USDA supportive numbers on yield on 2/8.

SOYBEAN HIGHLIGHTS: Soybean futures traded both sides of steady, looking somewhat bleak with losses of 3-5 cents, but managed to rally back, finishing with gains of 1-1/2 to 2-3/4. New crop Nov led today's gains, closing at 9.48-1/2, well off the low of 9.38-3/4. For the second consecutive session, the 100-day moving average held as support. However, prices failed to move back above the upward channel line, which prices slid through yesterday. In other words, overhead resistance is at 9.52. If the market fails to break this upward channel line and pushes back above the 100-day moving average, then there is a likely downturn that would target near 9.00, retracing to the low of 8.97-1/2 from 10/31. From a longer term perspective, we are not necessarily convinced farmers are moving significant acres from beans to corn. Conventional wisdom would say likely 1-3 million acres go to corn, but with corn futures unable to rally much above 4.00, a late fall for many and higher fertilizer costs, soybeans still may be the choice, and consequently, the acres switched to corn may be minimal.

WHEAT HIGHLIGHTS: The collapse in wheat prices continues in another day of losses for the fourth consecutive session. Chi wheat finished 7-1/2 to 9 lower, KC 9 to 10-3/4 lower and Mpls 6-3/4 to 8-1/2 cents lower. On the last USDA report, the average farm price for the year ahead is expected to be 5.15 per bushel. Given that parameter, new crop prices are undervalued. New news of consequence seems to be difficult to come by, yet prices are likely falling apart on liquidation, as many traders were probably holding long positions, looking for increased export activity into the Feb/Mar window. Instead, a recovery in the U.S. dollar, drops in other exporting country currency and talk of declining milling wheat values in Europe have all weighed on prices, as has a lack of progress with China on tariff talk. It is possible the market simply grew impatient and began to liquidate out, and as prices drop and margin calls mount, more traders exit. Some are suggesting that a recent bout of snow storms throughout much of the wheat producing country over the last two weeks is providing enough cover that any worries about significant cold damage could be behind the market for the year. It is too early to judge this, but that might be the case.

CATTLE HIGHLIGHTS: Cattle futures closed moderately higher today, with Feb lives up 45 cents to 128.32, Apr lives were up 75 cents to 129.20 and Jun lives were up 72 cents to 119.32. Mar feeders were up 12 cents to 143.87, and Apr feeders were up 7 cents to 146.07. Choice beef values closed 12 cents lower yesterday afternoon to 217.27 and were down another 3 cents this morning to 217.24. Of the 785 head offered for sale on today's online fed cattle exchange, 399 head total were passed over at 125. Cold and snowy weather in the Plains forecasted for this week has been supportive, though maybe to a slightly more limited degree than was initially expected. The snowy weather will be centered over the northern Plains, versus previous expectations of more thorough coverage. Cash trade last week reached as high as 125, steady with the previous week. Given the futures strength and ability of beef prices to remain relatively steady, the market seems to be expecting at least steady to maybe even higher cash trade for this week. Price charts still look strong, though futures could also easily be sold, as we creep into overbought territory. Apr futures made a new high close, and Jun made a new high close and a new high trade today. Prices closed above their upper Bollinger bands, which could draw some technical selling action. However, other momentum indicators are still pointing higher.

LEAN HOG HIGHLIGHTS: Hog markets found even more capitulation selling today. The nearby Apr contract closed 3.55 lower to 52.97, Jun closed 97 cents lower to 72.75 and Jul closed 1.32 lower to 75.70. The CME lean hog index was down 31 cents to 54.43. Carcass cutouts closed 1.67 lower yesterday afternoon to 59.91. This is their lowest value since 11/23 of 2009. Pork cutouts did jump 1.15 higher this morning to 61.06. Production chain speed has been running quickly since the new year, a major reason for the very low pork prices. Snowy weather in Iowa and Minnesota this week could help slow that down a bit. African swine fever has negatively impacted pork demand in China recently, as the government tries to stop the spread of African swine fever. Todays was technically ugly, with the best traded Apr contract trading as low as 52.25. This was down 4.27 from yesterday's close was only possibly with the expanded limits in effect today. The Apr contract did gap lower and is now deeply oversold. The Jul contract traded as low today as 75.02, closing its gap from mid-August.

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