Stewart-Peterson Market Commentary

Closing Commentary - May 24, 2018

Top Farmer Closing Commentary 5-24-18

CORN HIGHLIGHTS: Corn futures edged lower today losing 1-1/2 to 4-1/4 cents after pushing higher on overnight trade matching the contract high in Dec at 4.29-1/2, which occurred on July 11. We've debated that prices might run to this level, but then run into increased farmer selling. Your order today to sell 5% new crop if futures traded above 4.29 was triggered. A long weekend lies ahead of the market. Futures are closed on Monday, due to the Memorial Day holiday. Therefore, tomorrow may see position squaring, but as it currently rests, weather forecasts hold differing views with the only seemingly consistent pattern being above normal temperatures over the next 30 days. Rainfall totals will vary and in areas that don't need rain, more is in the forecast. In areas that need rain, amounts have been light and we view this as the biggest supporter for corn prices in recent days. Beans moved higher, as did wheat earlier in the day, but both finished in negative territory as traders likely began to take off long positions heading into the weekend on the sidelines.

SOYBEAN HIGHLIGHTS: Bean futures started the day with strong gains, retesting its contract high as Nov traded as high as 10.59-3/4, within 1/4 cent of the contract high established on April 2. Today's hook-reversal doesn't look all that positive, with prices eventually working lower, as Jul lost 3-1/2 closing at 10.35-3/4 and Nov at 10.47-1/2, down 1-1/4. Export sales were a disappointment reflecting a negative figure for old crop due to a cancellation of a net minus 5.1 million bushels. Old crop sales at 300,000 bushels were not supportive. With planting ahead of schedule and the market recovering nicely this week, we expect that hedge pressure, as well as farmer selling will keep the near-term rally in check. However, the market may be focusing well beyond the next week or two and concerning itself with a potential warm/dry summer. At least, the way prices made a turnaround this week, it appears to be the case. Renewed optimism due to positive trade talks also provided support but may have run its course with prices moving lower by today's close.

WHEAT HIGHLIGHTS: Wheat futures had a strong session going early on in the day, as it raced to its highest level for the calendar year. Jul Chi reached a high of 5.45-1/4, up 15 cents on the session, but managed to finish with a loss of 3/4 cent, closing at 5.30-1/4. KC wheat lost 2 to 4 cents and Mpls 4 to 7 cents. A reversal doesn't bode well, but not totally surprising when prices moved up as much as wheat has. There's a 3-day weekend ahead of the market after tomorrow, as it will be closed for Memorial Day. Export sales at a combined old and new crop 16.6 million were termed neutral. Harvest is creeping closer, but dry weather remains a big problem in parts of the hard red winter wheat belt and, therefore, we expect yield numbers to reflect this year's poor crop ratings. That should, by design, keep prices supported. Yet, the attention may focus more on weather elsewhere, in particular the Black Sea Region and Australia. If these regions stay generally dry, wheat prices may continue their uptrend.

CATTLE HIGHLIGHTS: Cattle futures gave back substantial portions of yesterday's gains, under pressure from instability in beef prices and fears of increasing slaughter in the near-term. The nearby Jun contract closed 1.05 lower to 104.40, Aug closed 1.02 lower to 101.77, and Oct closed 50 cents lower to 105.25. Weekly U.S. beef export sales for the week ending May 17 reported this morning at 9,900 metric tons versus their previous 4-week average of 14,250 metric tons. This is the lowest weekly sales total since March 15 and the third lowest of the year. This leaves 2018 sales at 446,000 tons, up 15.1% from last year's pace. Boxed beef values were negative for today's session. Choice cuts did rebound yesterday 73 cents to 230.08, but fell 1.07 this morning to 229.01. Some traders are concerned that the drought in the southern Plains could end up increasing cattle slaughter due to the quickly deteriorating pasture conditions. Cash trade today in the country was near nonexistent, with only a few scattered bids at $108. Price action was of course negative, with the three nearby contracts failing to hold their 20-day moving average levels. Losses weren't enormous, but not a surprise given the lack of cash support.

LEAN HOG HIGHLIGHTS: Hog futures made very moderate advances today, recovering after early losses with support from export sales data. The nearby Jun contract closed 22 cents higher to 74.82, Jul closed 55 cents higher to 76.77, and Aug closed 32 cents higher to 75.35. The CME Lean Hog Index was up 34 cents today to 69.03, its highest point since February 27. Packer margins are strong, but the higher trending index and lower pork values today are not supportive on the cash front. Carcass cutouts closed 1.33 lower to 74.81 yesterday afternoon, and lost another 85 cents today to 73.96. Bellies were up 1.45 to 112.07, normally enough to keep carcass values supported, but today ribs were down 23.31 to 123.65, pulling the carcass lower. U.S. weekly export sales were reported this morning at 20,600 tons versus the previous 4-week average of 20,575 tons. Cumulative sales for this year are running 4.2% ahead of last year's pace, currently at 627,600 metric tons. Price action today was fairly nondescript. Jun futures closed above their 20-day moving average, but below their 10-day moving average. Jul futures were unable to break through their 20-day moving average resistance level, and Aug made no real moves higher.

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