Stewart-Peterson Market Commentary

Closing Commentary - December 07, 2018

Top Farmer Closing Commentary 12-7-18

CORN HIGHLIGHTS: For the second week in a row, corn futures finished on a strong note. Last Friday, futures gained 6-1/4, closing at 3.66-1/2, and today closed two higher, finishing the week at 3.74. A favorable looking technical chart may suggest prices may be poised to make a move to the topside if overhead resistance can be breached. The first target for March futures is 3.95-1/2, the 50% retracement from the summer high to the fall low. A gap left on charts this week, as prices gapped higher on Sunday night and did not trade down to last week Friday's high, indicates strength. That is, traders tried to push prices down to fill a gap both on Tuesday and yesterday, and the market failed to move through moving averages and low enough to meet the gap objective. News this week was rather scarce, but what news there was had a generally supportive tone. Export sales today at 46.4 million were termed supportive and puts year to date sales at 1.053 billion. This compares to 901.5 million a year ago. Good demand continues to underpin prices. Support also came today from higher soybean and sharply higher wheat prices. Another sharp drop in the equity markets may be suggesting that money could be moving out of stocks and into commodities.

SOYBEAN HIGHLIGHTS: Soybean futures started the week with sharply higher overnight trade, consolidated in a sideways to lower pattern on Tuesday, Wednesday and Thursday and finished on a firm note today with its highest close in Jan soybeans since the first week of August. Jan beans closed up 7-1/4 at 9.16-3/4. New crop Nov closed up 6-3/4 to 9.61-1/4. Today was the highest close in new crop Nov since mid June. Nov 19 beans bottomed on July 16 at 8.65, and with today's trade up to 9.61-1/2, a rally of nearly 95 cents, it certainly bears watching. Maybe just as impressive was a pullback in bean prices yesterday during the session, but futures did not move low enough to fill a price gap left from a higher trade on Monday. Next week's Supply and Demand report is expected to show carr5yout at 945 million, a record amount and a potentially overwhelming number. Yet, bean prices are moving higher on prospects that trade with China will resume and that China could be a buyer soon, at least if one is to believe recent comments by President Trump.

WHEAT HIGHLIGHTS: Wheat futures had good export sales, a very strong reaction in futures trade and what appears to be significant short covering. By day's end, wheat futures led the row crop commodity complex upward, gaining 14-1/4 to 15-3/4 in Chi, 16-1/2 higher in Mar KC and Mar Mpls 12-1/4 higher. All wheat sales at 26.2 million were supportive and may suggest the export market is beginning to find additional business, as has been anticipated for some time. More importantly, tensions between Ukraine and Russia may have turned other countries' interest toward the U.S., avoiding this part of the world, at least for now. Nonetheless, expect that next week's report will show what we would term adequate world carryout but a decline from a year ago. With the U.S. likely to find export activity, we see little farmer selling pressuring prices. The question is whether or not this activity today was just a one day event with the beginning of something bigger. From a technical perspective, Mar Chi closed decisively above the 50-day moving average, something that has not occurred since August. A 1-2-3 bottom also could be signaling a low for wheat prices. If you are behind on sales, we might now suggest being patient and waiting to see if there is follow through next week.

CATTLE HIGHLIGHTS: Cattle futures finished mixed though well off of the day's lows. The nearby Dec contract closed 5 cents lower to 117.90, Feb closed 27 cents lower to 121.52 and Apr lives were up 15 cents to 123.62. Dec lives picked up 97 cents on the week, Feb lives picked up 1.02 and Apr added 1.62. Jan feeders closed 17 cents higher today to 144.37, and Mar was down 7 cents to 141.87. Jan feeders were down 85 cents this week, and Mar feeders were down 97 cents. Cash trade today has been quiet, but many are expecting trade to come in above 118. That would be steady to higher from last week. Choice beef closed down 59 cents yesterday afternoon to 212.67 but bounced 90 cents higher this morning to 213.57. U.S. beef export sales for the week ending 11/29 came in at a net of negative 100 tons. This is compared with the previous 4-week average of 11,600 tons. Cumulative beef sales for 2018 are at 886,500 tons, 15.1% ahead of last year's pace. This is the lowest net sales total for the week since 12/8/2016. Weakness in the stock market today was another pressure point. Technically, though most of today's closes were lower, buyers entered the market after early sell-offs and limited losses nicely. All of the nearby live cattle contracts were able to hold onto nearby support, and the feeder contracts that closed lower are still holding near term support levels as well.

LEAN HOG HIGHLIGHTS: With a renewed sense of optimism about U.S./China trade talks, hog markets found buyers again to cap off the week with mostly higher closes. The nearby Dec contract closed 27 cents lower on the day and 3.62 lower on the week to 54.25. Feb closed 97 cents higher today 32 cents higher on the week to 67.87, and Apr closed 1.05 higher today and 35 cents higher on the week to 72.35. The CME lean hog index was down 21 cents today and 37 cents on the week to 56.19. The move lower in the cash index is somewhat disappointing considering the stabilizing action seen earlier this week. Carcass cutout values closed 42 cents higher yesterday afternoon to 72.12 and jumped 3.26 today to 75.38. Loins were up 2.23 to 65.75, picnics were up 4.49 to 52.75 and bellies were up 11.92 to 136.06. U.S. pork export sales for the week ending 11/29 were reported this morning at 20,000 metric tons. This was just slightly higher than the average of the previous 4 weeks with 19,300 tons. China bought pork again with purchases totaling 2400 tons. While this is not an enormous amount of pork, the fact that China is purchasing U.S. products despite a 62% tariff is very supportive and could be hinting at large purchases down the road if trade progress continues. Price action was lower for most of the day despite positive cash fundamentals. Sluggish cattle markets were also to blame. However late in the session, hog markets made a nice recovery to put in positive closes for the day.

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