Stewart-Peterson Market Commentary

Closing Commentary - March 22, 2018

Top Farmer Closing Commentary 3-22-18

CORN HIGHLIGHTS: Corn futures finished quietly in positive territory, as prices clawed to small gains by the close. Jul lead the move higher, gaining 1-1/4 cent to 3.84-1/4. New crop gained 1-1/4 at 3.98 Dec. Trade activity the past three sessions has been slow, and that has been mostly the trade activity the last several months with the exception of a downturn in prices on Friday and Monday this past week, when prices dropped sharply. Consolidation is the key, and the market is holding a 50% retracement of its low in early winter to its recent high. In addition, the 50-day moving average is holding as support as well. Large managed money positions seem to be mostly quiet in recent sessions after liquidating some contracts late last week and early this week. Some estimate the net long corn position near 180,000 contracts, which is down over 50,000 from its recent high. Export sales, due for release today, were postponed due to a winter storm system on the East Coast.

SOYBEAN HIGHLIGHTS: Soybean futures finished quietly with nearby May unchanged at 10.29-3/4, while new crop Nov gained 1/2, closing at 10.26-3/4. Prices had a relatively slow trade day but did claw back off their lows, as Nov reached a near term low of 10.18-3/4, a price that has not been seen since mid-February. Expectations that trade wars could be a concern, as the Trump Administration announced tariffs with China. The market does not seem to know what to do with this news and likely is on hold until it can further digest its potential impact. In other news, the Argentine soybean crop has been downgraded by the Buenos Aires exchange and is forecasting harvest at 39.5 million tons. Their previous estimate was 42 with the USDA's estimate at 47. Bean prices are likely indicating a shift to beans from corn for some farmers, as the bean/corn ratio remains near 2.58.

WHEAT HIGHLIGHTS: Wheat futures rebounded with small gains in Mpls and Chi of 1-3 cents and stronger gains in KC of 5 to 6-3/4. May Chi closed 2-1/4 higher at 4.55-3/4 with prices hovering near the 100-day moving average the last four sessions. This after a harsh sell-off on Monday, which followed a very weak looking Friday. With ample inventories, we expect prices to continue to consolidate. Concern over general net dry in the Plains States, despite some recent rains, is the supportive factor. Overseas, it was reported that India is cancelling plans to raise wheat import taxes, which could be a sign that internal supplies are tightening due to less than ideal conditions.

CATTLE HIGHLIGHTS: Cattle markets were finally able to stem some of the recent losses, finding support on short covering and position taking ahead of tomorrow's Cattle on Feed report. The nearby Apr contract closed 45 cents higher to 118.15, Jun closed 1.02 higher to 108.40, and Aug closed 1.10 higher to 106.37. Choice boxed beef values were 1.03 higher yesterday afternoon to 224.38, and another 1.33 higher this morning to 225.71. Trade in the country today was quiet, so the stronger beef prices and already wide discount of futures to cash was a major supportive point for today. For today's Cold Storage report, total lbs of beef in freezers in February were down 8% from January and down 8% from last February. This is supportive and reflects the recent strength in demand. For tomorrow's Cattle on Feed report, the market average guess for placements is at 104.4%, marketings at 101.2% and on feed at 108.2%. Coming into today, cattle futures were deeply oversold after breaking through technical support levels earlier this week. Even with today's bounce, futures could still be oversold and vulnerable to technical bounces. The market is still expecting an influx of market-ready cattle for quarter two, and tomorrow's Cattle on Feed report will be telling.

LEAN HOG HIGHLIGHTS: Hog futures sold off sharply again today, posting triple-digit losses amid a technical breakdown. Nearby Apr futures closed 1.25 lower to 61.32, May closed 2.17 lower to 68.15, and Jun closed 1.75 lower to 75.47. The CME lean hog index was down 1.34 to 63.63. Carcass cutouts closed 62 cents lower yesterday to 71.45 and were down another 32 cents this morning to 71.13. Bellies were down 1.00 to 102.23, ribs down 1.45 to 129.85, and loins were down 1.05 to 71.99. Much of the selling today was due to fears of Chinese retaliation on newly levied tariffs today. Tariffs against China of up to $60 billion could draw retaliation from the Chinese government, and pork could be an easy target. Cold storage numbers released after the close today were not friendly either. Frozen pork supplies in February were up 6% from January and up 8% from last February. Pork belly stocks were up 6% from January and up 188% from last February. Technically, hog futures are deeply oversold, but fundamentals may weigh enough to keep the pressure on. Short covering bounces will likely be extinguished quickly.

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