Stewart-Peterson Market Commentary

Closing Commentary - November 15, 2018
Top Farmer Closing Commentary 11-15-18

CORN HIGHLIGHTS: It was another uneventful day for corn futures as they finished without much change. Nearby Dec gained a 1/2 cent closing at 3.67-1/2, but did slide from highs of 3.71-3/4. New crop Dec 19 closed unchanged at 3.99. New news was limited today as export sales will be released tomorrow due to the observance of Veteran's Day on Monday. Outside markets had beans closing a nickel higher and wheat finishing with small gains of 1 to 2-1/2 cents in Chi. Our general bias remains supportive of corn and the market continues to tread water awaiting news, time, or both for direction. It wouldn't be a shock if corn prices slipped over the next few weeks and this is not untypical. Yet, from the same perspective we don't expect farmer selling to pick up. Harvest continues to roll along and a generally cool but dry near-term forecast will likely allow farmers to continue to make progress. Historical data indicates that corn futures have a tendency to trade in a sideways pattern the next 30 days, with historical data indicating futures higher 5 out of 10 years and lower 5 out of the 10 years.

SOYBEAN HIGHLIGHTS: Soybean futures moved higher today gaining 1 to 5-1/2 cents as Mar led today's gains closing at 9.02-1/4, after reaching a daily high of 9.10-3/4. Today is the highest close for beans since mid-October. Continued either hopes or optimism that resolutions with China could be in the works is providing underlying support as is a lack of strong farmer selling. As harvest winds down, we expect basis levels to improve. Yet, with large projected carryout we're not necessarily arguing that prices need to move higher. It was rumored today that the Administration may put on hold another round of tariffs on Chinese imports as the two nations move to pursue talks. One can't help but believe that with African Swine Fever a potential problem for pork production in China, that trade negotiations may be active and strong. China may have to be an importer of pork products and consequently this import tariff of 62% may be on the chopping blocks.

WHEAT HIGHLIGHTS: Wheat futures gravitated higher gaining 1-1/2 to 2-3/4 cents today in another relatively quiet and range-bound trading day. Wheat prices continue to struggle and push along near contract lows which on the one hand may be a victory as downward momentum seems to have diminished. On the other hand, we were expecting by this time of year a more robust export market and that has yet to develop. Winter wheat plantings at 89% still trail the 5-year average of 94%. Is this a big deal? Probably not, yet at the same time, abnormally cold temperatures continue to swoop through the Midwest and considering it is now mid-November the likelihood of planting winter wheat in a state like Missouri, 81% planted, is becoming less and less. Yet, we're not quite prepared to go out on a limb and argue that late planted states will not yet be able to catch up. The likelihood however is becoming more challenging on a daily and weekly basis.

CATTLE HIGHLIGHTS: Cattle futures closed mixed to moderately higher today, finding some buying interest on positive trade news. The nearby Dec live cattle contract closed 55 cents higher to 115.15, Feb closed 50 cents higher to 119.10, and Apr closed 37 cents higher to 120.95. Nov feeders went off the board 35 cents lower to 148.62 and Jan feeders closed 87 cents higher to 147.85. Carcass cutout values were down 92 cents yesterday afternoon to 213.16, but were 21 cents higher this morning to 213.37. A firmer hog market and talk of trade progress with China were both supportive, while a seasonal slide in beef values and dry Plains conditions limited buying interest. In addition, Japan is apparently considering reducing import restrictions for U.S. beef products that have to do with how old the animal can be. Both the Dec and Feb live cattle contracts were stopped at overhead resistance at the 100-day moving average levels, while the Apr contract ran out of buyers about 40 cents short of its 10-day moving average resistance level. The best traded Jan contract fell below its 200-day moving average, but then rallied to close just below its 20-day moving average resistance.

LEAN HOG HIGHLIGHTS: Hog futures closed higher today on improving trade developments, as well as rallying pork values. The nearby Dec contract closed just 7 cents higher to 57.07, while Feb closed 1.40 higher to 63.75, and Apr closed 1.00 higher to 68.75. The CME Lean Hog Index was down 73 cents to 60.47. Carcass cutouts closed 1.67 lower yesterday afternoon to 69.02, but were up 59 cents this morning to 69.61. Bellies jumped 7.99 to 121.78, but picnics were down 9.54 to 40.65, limiting the carcass rally today. Much of today's bounce was due to talk of improving trade relations with China. China sent a formal letter responding to U.S. trade reform demands. Later this afternoon, reports surfaced that the next round of U.S. tariffs on Chinese imports were being put on hold, but this report was subsequently contradicted by U.S. Trade Representative Lighthizer. Technical price action was particularly strong in deferred contracts today. The Dec contract saw limited buyers as positive trade talk will likely benefit pork products down the road. Feb futures pushed past their 20 and 200-day moving average resistance levels making their highest close since November 5. The Apr contract closed directly at its 20-day moving average level, also its highest close since November 5.

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