Stewart-Peterson Market Commentary

Closing Commentary - January 18, 2018

Top Farmer Closing Commentary 01-18-18

CORN HIGHLIGHTS: Corn futures posted small losses this afternoon as the Mar contract lost 1-1/2 to 3.51-1/2, while May was also down a 1-1/2 to 3.59-1/2. News on both sides of the equation, whether supportive or negative, seem to be lacking today, as corn futures had a narrow trading range of 3-1/2 cents from intra-day high to low. The key focus may have been more on the technical side this afternoon, as corn futures tried to push above the 50-day moving average and trade there for the first time since October. Unfortunately, corn prices did soften below this key-resistance point, but did hold within the 40-day moving average as a support point and final trade. The National Corn Index has been showing its highest cash prices in 5 months, as basis levels may be tightening due to producers holding onto supplies. While cash corn prices are still not profitable for many, improvement in overall price, or basis appreciation, may have some tempted to lighten supplies out of their bins. This may weigh on corn prices while that stays high, as we're now trading 8 cents off the report day low last Friday. South American weather will stay in focus as we move towards the development of their crop, as forecasters are looking at a drier central Brazil and Argentina, while southern Brazil has chances for moderate showers. Dry conditions in Argentina continue to offer some minor support in the grains, but at this stage any effect on yield and crop size are still very minimal.

SOYBEAN HIGHLIGHTS: Soybean futures pushed 4 to 5 cents higher this afternoon as front month Mar contract gained 4-1/4 cents to 9.73, while May was ahead 4-1/4 cents to 9.84-3/4. South American weather will stay clearly in focus, as Argentina's dry weather is unsure regarding the seriousness for crops and yield, there's still enough concern to keep selling activity limited in bean markets. In addition, a fourth consecutive day of strength in the soybean meal market, which saw the Mar contract push to its highest price level since mid-December, brings some carryover support in soybean futures. The upcoming South American forecasts will stay mostly dry for Argentina, while southern Brazil has chances for moderate showers. At this stage, some Brazilian weather is looking supportive of another strong soybean crop, while Argentina is still a question at this time. Another strong crop in the South American harvest, in the weeks and months ahead, may continue to make things difficult for U.S. exporters to compete against Brazilian and Argentinian beans. The bean market is currently searching for some direction, a combination of fundamentals and technicals battling for dominance as prices may be staying range-bound.

WHEAT HIGHLIGHTS: Since posting nearby post-report day lows, wheat futures saw a second consecutive day of gains this afternoon, as Chi contracts were 3 to 5 cents higher. Front month Mar was up 3-3/4 to 4.25-1/4, while May was up 3-3/4 to 4.38-1/4. Hard red winter wheat Mar contract gained 2-1/2 cents to 4.29-1/2, while spring wheat trailed, losing 1-1/4 in Mar to 6.10-1/2. Commercial buying may have stepped into the wheat market, as end-users are looking to find good value at these lower level prices. This year's winter wheat crop has dealt with bouts of cold temperatures and dry conditions across the western southern Plains. Today's U.S. Drought Monitor showed slightly drier conditions continuing to grow across this region, and 7-day forecasts are staying in a drier pattern. In this timeframe, it's still too early to determine any impact on the hard red winter wheat crop, but some weather premium may move in the market given limited acreage planted again for this year. Unfortunately, with the burdensome supply picture globally, wheat futures will stay limited in rallies, with the fear of the U.S. pricing itself out of the international market if price moves are too strong.

CATTLE HIGHLIGHTS: Cattle futures made moderate advances today, finding buying interest from yesterday's strong gains. The nearby Feb contract closed 97 cents higher to 121.95, Apr closed 70 cents higher to 123.47, and Jun closed 90 cents higher to 115.35. Yesterday's Fed Cattle Exchange sales at 119.75 drew some support today, and cash trade yesterday in Texas at 119.25 was supportive as well. Boxed beef values were shaky to start the session, with both choice and select cuts closing 28 cents lower yesterday afternoon to 205.30 and 199.61, respectively. By mid-session, choice cuts jumped 34 cents to 205.64, and select cuts were up 1.38 to 200.99. While no doubt supportive, the market would rather see choice cut values leading the way higher than the lower grade select cuts. Technicals were a bright spot in the cattle markets today. The live cattle closes above the 100-day moving averages yesterday afternoon were a good sign, and prices held those levels all day today. The Feb and Jun contracts were unable to break their 50-day moving averages, but the Apr contract was able to break that moving average and close above it.

LEAN HOG HIGHLIGHTS: Hog futures closed mixed to higher today, attempting to consolidate near these contract highs. The nearby Feb contract closed 32 cents higher to 73.05, Apr closed 37 cents higher to 75.90, and May closed 42 cents lower to 80.12. As of late, pork values and cash hog prices have been the main source of fundamental support, and nothing was new there today. The CME Lean Hog Index was 1.07 higher to 72.99, this is up 4.53 for the week and up over 11.00 since the beginning of the year. Carcass cutouts closed 24 cents higher yesterday afternoon to 80.95, but slipped 9 cents at mid-session today to 80.86. The U.S. dollar index traded at its lowest point today since December 2014, definitely a supportive factor for hog futures when you consider the amount of pork that the U.S. exports. Price action was fairly non-descript today. The Feb contract was able to hold onto its 10-day moving average support level. The Apr contract closed below its 10-day moving average yesterday, but rallied back to close above it this afternoon.

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