Stewart-Peterson Market Commentary

Closing Commentary - October 23, 2018

Top Farmer Closing Commentary 10-23-18

CORN HIGHLIGHTS: Corn futures finished with slight gains in a narrow trading range. Front month Dec corn was 3/4 cent higher to 3.70-1/4, while Mar was up 3/4 cent to 3.82-1/2. Ongoing harvest pressure kept any gains from staying established, as corn futures failed to find traction in today's trade. The USDA weekly Crop Progress report showed harvest at 49%, which is 2% ahead of the 5-year average. Producers are pushing harvest pace before potential rainfall moves in. Ongoing harvest will likely keep pressure in cash markets with producer selling, keeping a lid on rallies in the short term. Today's close was slightly disappointing, as one time during the trading session, corn futures looked to push above key resistance levels, only to soften toward the end of the trading day.

SOYBEAN HIGHLIGHTS: Soybean futures saw choppy, two-sided trade today before finishing with marginal losses. Front month Nov beans finished down 1 cent to 8.57-1/2; Jan beans finished 1-1/2 lower to 8.71. Like corn, soybean futures failed to hold onto midday trading highs, as the Nov contract had an 11-1/2 cent trading range. After testing key support at 8.51 this morning, bean futures rallied to an intraday high of 8.62-3/4 before giving back a nickel at the close. The USDA put crop harvest at 53%, which is 14% behind the 5-year average. Producers did ramp up bean harvest over concerns over field loss in the western Corn Belt. Ongoing harvest will likely maintain pressure in the bean market, and concerns regarding demand that surfaced last week will likely limit rallies in the short term. U.S. export sales and shipments were lackluster and may bring future concerns of overstated demand levels to the marketplace. Carryout projections may need to go higher. Currently, supplies are more than plentiful and will limit any short term rallies.

WHEAT HIGHLIGHTS: Wheat futures finished with small gains. Front month Dec was 1 higher to 5.09, and Mar was up 1-3/4 to 5.29-1/4. Strength was seen as mixed through all three wheat markets, as the front month HRW wheat contract lost 1/4 cent to 5.07 for Dec KC, and Dec Mpls spring wheat was down 1/2 cent to 5.85. After a difficult day of trade yesterday, wheat futures looked for stability in today's session. The USDA reported modest gains in winter wheat planting with 72% of next year's crop now in the ground, just below 5-year averages. Forecasts are turning wetter across those regions, which may further delay planting. Wheat futures have been consolidating, looking for potential improvement of demand, which has still been lacking, keeping the trend sideways overall. The market will be closely watching export shipments from global leader, Russia, which seems to be holding at high levels despite potentially tighter crops overall. U.S. demand is currently running behind expectations as yesterday's weekly export inspections and last week's sales totals continue to show.

CATTLE HIGHLIGHTS: Cattle futures closed lower, succumbing to selling pressure overflowing from sharp losses in the stock market. The nearby live cattle contract closed 2 cents lower to 112.77, Dec closed 92 cents lower to 117.15, and Feb closed 55 cents lower to 121.92. Oct feeders were down 57 cents to 155.07, and Nov feeders were down 1.05 to 155.87. At the time of this writing, the Dec e-mini Dow futures were down 100 points but were showing losses of as much as 5444 points earlier in the day. With sharp losses in the stock market comes decreased consumer confidence and shrinking retail beef demand. Choice beef was able to buck this trend today. On Friday afternoon, choice cuts were up 1.35 to 209.28 and were up another 1.27 this morning to 210.55. Afternoon cutout values may be more indicative of the day's price action, but the strong open is impressive nonetheless. Friday's Cattle on Feed report was relatively supportive against expectations but does still support the USDA's expectation for large production for quarter 4. Yesterday's Cattle on Feed report was relatively neutral with a third month in a row of increasing beef supplies, but the smallest increase of the past three months. The Dec live cattle futures contract pushed below its 20-day moving average levels today but was able to hold onto its 10-day by the close. Feeder cattle futures traded sharply lower early in the session but rallied back to close above soft moving average support as well.

LEAN HOG HIGHLIGHTS: Hog futures made a solid bounce today, finding buyer support on yesterday's strong recovery out of oversold levels. The nearby Dec contract closed 1.35 higher to 54.52, Feb closed 1.12 higher to 61.42 and Apr closed 1.47 higher to 67.62. The CME lean hog index was down 1.33 to 66.43, and carcass cutout values were about steady with Friday's close at 78.43. China imported over 94,000 pork in October, up 8.4% from last year. While not a massive jump, it may be indicative of a growing need for pork products, given the current swine fever outbreak. This is especially supportive, given the discount of futures to cash. Cold storage was seen as supportive with just a 1.3% gain in pork stocks, versus the 4.8% average over the past 10 years. The Dec futures contract closed back above its 100-dy moving average level today. Prices initially fell below this level last Thursday and were able to break through today after unsuccessful tests on Friday and Monday. The Feb contract showed similar price action, making an unsuccessful test of its 10-day moving average resistance level. Given the jump out of oversold levels last week, short covering may give prices a quick jump.

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