Stewart-Peterson Market Commentary

Closing Commentary - August 21, 2018

Top Farmer Closing Commentary 8-21-18

CORN HIGHLIGHTS: Corn futures edged lower in a rather lifeless day as futures lost 2-1/4 to 2-1/2 cents. Nearby Sep closed at 3.59-3/4 down 2-1/4 and Dec also lost 2-1/4 closing at 3.74-1/4. Today's trading range was between 5 and 6 cents. Futures were tugged lower on soybeans which lost 6 to 7 and wheat which lost 13 to 15 cents. The dollar was weaker, but this failed to make much support. Yesterday's Crop Ratings report indicated 68% of the corn crop in good to excellent shape, down 2% from last week, but above last year's 62%. The poor to very poor category increased to 12% from 10% last week and now is the same as a year ago. The Progress report indicated the crop remains ahead of schedule with 44% in the dent stage vs a 5-year average of 26%. Without developments on the trade war front and the impending harvest prices consolidating with a bias, they may grind lower. The good news is technical support held today with prices again respecting the 50-day moving average.

SOYBEAN HIGHLIGHTS: Soybean futures edged lower losing 6-1/4 to 7-1/4 cents despite what was viewed as a supportive Crop Progress and Ratings report. The ratings of soybeans again slid this past week with 65% rated good to excellent, down 1% from last week. The poor to very poor category gained 1% at 11%, up 1% from last week and down 1% from a year ago. Without positive news on the tariff front, we were hopeful that strong demand might yet pull prices higher. However, as harvest approaches recent rains of the last two weeks are viewed as net beneficial as compared to areas that didn't receive moisture and consequently have to believe that the yield number may be on the rise. Whether or not it reaches the aggressive figure the USDA released this month at 51.6 bushels an acre may still be questionable, but for now it does look like from a week-to-week basis the crop has improved the last two.

WHEAT HIGHLIGHTS: For the second-consecutive session, wheat prices came under heavy selling pressure finishing at their lowest level in nearly a month. Sep Chi lost 15 cents closing at 5.27-1/4, while KC lost from between 11 and 12-3/4, and Mpls down 5-3/4 to 6-1/4 with Sep leading its drop closing at 5.88. Sep and KC charts look somewhat healthier than Chi which did not have a good close today. Yet, all three exchanges are at a critical point where the market is trying to determine whether this is a buy opportunity or time to unload long futures. Today and yesterday with the closes as weak as they were, it looks like the money is moving out of long wheat for now. Yet, volatility has remained high since January and while the downturn the last two sessions is disappointing it may not define the market as ready to move lower. On the contrary, with harvest winding down we expect farmer selling to be minimal.

CATTLE HIGHLIGHTS: Cattle futures put in mixed closes today, with the lives tracking slightly higher and feeders drifting slightly lower. The spot month Aug live contract closed 20 cents higher to 109.27, Oct closed 2 cents higher to 110.47, and Dec closed 10 cents higher to 114.67. Aug feeders closed 45 cents lower to 149.17 and Sep feeders closed a dime lower to 151.00. Beef demand has been very impressive and is showing up in retail prices. Choice beef put in its highest close yesterday afternoon since June 27, up 2.60 to 213.98. Choice beef was down a nickel at midday today to 213.93. At this time last week, choice beef was at 209.64. Though cash trade for this week has yet to get started, considering the current beef demand, the cash tone is expected to come in relatively steady with last week. However, most of the support from demand should be relatively short term in nature, as heavy fourth quarter production looks poised to pull prices lower over the longer term. Technically, today's session did not bring much in the way of new developments. No major support on the feeder charts was broken, and no major resistance was penetrated on the live charts.

LEAN HOG HIGHLIGHTS: Hog futures put in mixed closes today, unwilling to push much higher after the recent strength, but also holding onto much of those gains. The nearby Oct contract closed 25 cents lower to 56.22, Dec closed 32 cents lower to 53.90, and Feb closed 70 cents higher to 61.55. The CME Lean Hog Index was down 1.43 to 51.51, its lowest value since December 6, 2016. Carcass cutouts were down 32 cents this morning to 66.86 and fell another 99 cents this afternoon to 66.19. Bellies were down 92 cents today to 76.85 vs 86.18 last week. With the stiff premium of futures prices to the cash index, and increased pork exports to Mexico and China likely priced in, fundamentals look neutral to negative. Technically, though prices have begun to pull out of overbought levels technical indicators are not necessarily pointing higher. Open interest has declined significantly over the past week or so, confirming suspicions that a sizeable portion of this bounce was due to short covering.

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