Stewart-Peterson Market Commentary

Closing Commentary - August 16, 2017

Top Farmer Closing Commentary 8-16-17

CORN HIGHLIGHTS:Corn futures finished lower for the second consecutive session, with corn futures pushing into their lowest level since last August. By day's end, Dec corn futures finished 2 cents lower at 3.66-1/2 and Sep was down 2-3/4 cents closing at 3.52-1/2. Spillover weakness from wheat, as well as ideas that the near-term forecast which is offering rain, will add weight and quality to corn pressured prices again. Since the USDA report was released last week, futures have dropped 20 cents. The technical picture looks weak, and with today's downturn it may suggest that futures have the low from last August of 3.58-1/2 in its target. Yet, we believe there's healthy skepticism, and after a push down, end-user's will likely be more aggressive buying. This may have been the case today as prices did finish off their low by 3/4 cents.

SOYBEAN HIGHLIGHTS:Soybean futures ended uneventfully with Sep closing unchanged and Nov up a penny at 9.25-1/4. Today's trading range was rather subdued with Nov trading between 9.27-3/4 and 9.21. However, 9.21 was the lowest price for beans since the end of June. Ideas of too much to the downside too quickly may have spurred buying late in the session. However, weakness in corn and wheat provided little help for soybeans today. Meal finished down 1.20, while bean oil finished up 14 to 17 points. With rains on the radar and a poor looking technical picture, it was no surprise that beans were lower early in the session. However, by midday prices began to claw back as end-users are recognizing strong value. Nov beans have a target of the June low, which is 9.07-3/4. If prices exceed this, the next level support is the low from August 2, 2016 of 9.03-1/2. If prices breach this level, then futures may move toward the low established on March 2, 2016 of 8.71-1/4. With the potential for the bean crop to continue to add bushels, if weather remains as good as it has been as of late, go ahead and make catchup sales if behind.

WHEAT HIGHLIGHTS:Wheat futures continued their slide with another round of heavy losses of 5-1/4 to 10-1/4 cents, as Sep Chi led today's wheat market lower. KC finished 6-1/2 to 7 lower, while Mpls finished 7-1/4 to 15-1/4 higher, as Sep recovered today closing at 6.73-1/2. Sep Mpls wheat bottomed on April 11 and peaked on July 5. Since then, prices have been in a steady downtrend, but today's close at 6.73-1/2 was well above the recent low established two sessions ago at 6.38-1/4. While the KC and Chi contracts are considered heavily oversold, we believe the last 50 cents has been more of a give-up, or what many would term as liquidation. Trying to be long wheat against a steep downtrend could create a significant margin call. Therefore, traders are not willing to stick around very long, despite wheat being the best value to own in well over two years.

CATTLE HIGHLIGHTS:Live cattle futures moderately lower today, and feeders closed sharply lower today on further supply fears and likely a return to the lower trend. The nearby Aug live cattle contract closed 57 cents lower to 109.47, Oct closed 72 cents lower to 108.32, and Dec closed 117 lower to 110.30. For feeders, Aug closed 3.10 lower to 142.25, Sep closed 3.62 lower to 143.12, and Oct closed 3.52 lower to 142.77. Carcass cutouts were mixed at yesterday's close, with choice up just 3 cents to 1988.95 and select cuts down 57 cents to 195.87. By midday, both were softer with choice down 36 cents to 198.59 and select down 27 cents to 195.60. The weekly online fed cattle exchange was a dud today. Of only 1,184 head offered, not a single sale was made, and one lot of 167 head was passed over at a price of 112. This did not bode well for cash trade in the country, as bids were steady with yesterday at 110, and asking prices of 115 to 117 were unchanged as well. With today's lower price action, neither live or feeder contracts ended up pushing below nearby support levels. No technical damage was done today, but the wind was definitely taken out of the sales of those hoping for a more pronounced bounce.

LEAN HOG HIGHLIGHTS:Sharp losses and bearish key reversals in hog markets today left charts looking significantly sourer than they have since this rally began two weeks ago. The nearby Oct contract closed 1.75 lower to 68.77, Dec closed 1.22 lower to 63.47, and Feb closed 82 cents lower to 67.70. The CME lean hog index was down 40 cents to 84.38. Though slaughter numbers this week are running essentially even with last week and thus behind projections, oversupply fears are starting to creep into the market. Average weights for Iowa/Minnesota hogs this week jumped to 276.6 lbs, up 1.1 lbs on the week and 2 lbs from a year ago. The pleasant weather recently was likely responsible for the weight increase, but if feedlots start to fall behind on marketing, the heavier hog weights could more than make up for current slaughter numbers. In addition, carcass cutout values were 26 cents lower at yesterday's close to 93.85 and were down 2.12 by midday to 91.73. This was led by a decrease in belly values of 15.54 to 180.59. Many market analysts are expecting belly stocks to increase quickly once new pork processing plants go online this September. Prices this morning opened mostly steady with yesterday's closes, traded higher than yesterday's high but then fell to close lower than yesterday's lows. Major support levels were held, but this kind of price action can signal the end of a trend. Pork and cash values will need to firm soon in order to avoid a reversal.

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