Stewart-Peterson Market Commentary

Closing Commentary - May 21, 2018
Top Farmer Closing Commentary 5-21-18

CORN HIGHLIGHTS: Corn futures finished uneventful with small gains of 1/4 cent in Jul, closing at 4.02-3/4 to 3/4 cents higher in Dec, closing at 4.21. Dec reached a new high for the calendar year, when overnight trade hit 4.24-3/4. Today's range was near 6 cents. Support came from a sharp gain in soybean futures, but wheat, on the other hand, acted as an anchor as it finished with losses of 8 to 11 cents. Beans finished with gains of 25 or more cents on front months, as talk that the U.S. and China would be working toward an agreement, and that the trade war may currently be on hold. This provided a boost for beans and corn, yet 4.25, or just under it, new crop acted as overhead resistance. Our thoughts are that there were plenty of producers who had orders to sell corn if futures reached 4.24. Expectations are that 80% of the crop will be planted. This would be a nearly 20% increase from last week. A continued wet corridor, however, in northern Iowa, as well as southern Minnesota and Wisconsin, could provide underlying support for prices. Yet, forecasters are suggesting a planting window over the next 3-4 days before rain returns. If you're in a more wet area, however, it's not looking great.

SOYBEAN HIGHLIGHTS: Soybean futures had one of their more impressive days in recent weeks, with gains of 18-1/2 to 26-3/4 as Jul futures led today's gains, closing 10.25-1/4. After a sluggish showing last week, and concern that prices were on the verge of falling apart, futures gapped higher as the overnight trade reflected renewed optimism that the trade war between China and the U.S. is not only being worked toward a resolution, but is currently labeled as on hold. Both sides are said to be working in conjunction to reduce the trade deficit, and the general feel is that there will be a focus on increasing the flow of agriculture and energy products to China. Traders wasted little time taking advantage of last week's selloff to establish long positions, and prices closed near the high of the day. Soybean meal gained near 5.00/ton, and soybean oil also experienced solid gains of 40 or more cents. A potential limiting factor in today's higher prices is that some farmers in the northern Midwest will remain on the sidelines due to saturated soils, and could potentially plant more bean acres.

WHEAT HIGHLIGHTS: Wheat futures came under pressure today as increased chances for rain and actual rainfall was viewed as beneficial for crop conditions, in particular the winter wheats. By day's end, Chi finished anywhere from 7 to 11 lower, as Jul led the way downward, after prices failed to hold onto gains from the overnight trade. KC lost 10 to 12, while Mpls lost 5 to 7. Wheat prices have been very sporadically trying to factor, not only in weather both domestically as well as worldwide, but also the impact of trade wars in the U.S. dollar. With what appears to be a more optimistic atmosphere that trade wars will be resolved had beans on the offensive, and it appeared traders were aggressively buying beans and selling wheat spreads. Wheat finished near the low of its daily trading range, while beans finished near the top of its trading range. A firming U.S. dollar is not beneficial to wheat prices as the dollar is now trading at its highest level since mid-December, gaining nearly 4.5% in a little over one month. Spring wheat plantings are expected to be more than 75% complete.

CATTLE HIGHLIGHTS: Cattle futures closed sharply higher today, finding speculative buying interest on news that China has plans to buy a massive amount of U.S. agricultural products. The nearby Jun live cattle contract closed 2.52 higher to 104.92, Aug closed 2.40 higher to 100.62, and Oct closed 2.02 higher to 103.72. Feeder cattle contracts were up sharply as well, with May up 1.70 and all other contracts to May 19 up over 2.50. The cattle market has been waiting since early 2017 for news that China could become an active buyer of U.S. beef, so today's buying was not surprising. Currently, the U.S. does not sell very much beef, at all, to China. Other fundamentals were decidedly mixed today. Last week, steer carcass weights were 17 pounds heavier than a year ago. If weights increase with the normal seasonal trend, and cattle slaughter increases as many expect into the fall, cattle prices should move lower. Rumor has it that packers have kills bought for the second week of June, but this will at least keep lines moving at full speed. Choice cut values were negative for today's session. Beef values were down 47 cents on Friday afternoon to 232.21, and were down another 1.01 at mid-session today to 231.20. From a technical standpoint, the selloff last week in cattle prices left futures in oversold levels coming into today. The Jun contract was able to close above its 10-day moving average level and briefly touched its limit-higher today at 105.40.

LEAN HOG HIGHLIGHTS: Despite the higher trending cash market and enormous jump in pork values today, lean hog futures took moderate losses to begin the week. Jun hogs were down 70 cents to 74.00, Jul hogs were down 40 cents to 76.85, and Aug hogs were down 57 cents to 76.05. The CME Lean Hog Index was up 73 cents to 67.74. Cash hogs have now moved 14.77 off of the most recent lows put in on April 13. Despite the higher cash values, Jun futures are still trading at a wider-than-normal premium to cash for this time of year, especially considering the production forecast for Quarter 2. Carcass cutout values closed 1.59 lower on Friday afternoon to 73.91, but jumped a whopping 4.09 at mid-session today to 78.00. The sharp increase was led by bellies, up 9.87 to 118.34, and hams, up 6.30 to 52.79. The increase in pork values likely limited much more serious losses in futures markets. Jun futures traded as low as 72.97, and Jul as low as 75.35. The unexpected strength in fundamentals today likely limited technical damage.


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