Stewart-Peterson Market Commentary

Closing Commentary - November 13, 2018

Top Farmer Closing Commentary 11-13-18

CORN HIGHLIGHTS: Corn futures moved lower today, losing 3-3/4 to 4-3/4 cents, as Dec led today's drop, closing at 3.66-1/2. Prices are still consolidating but near the bottom end of the recent range with prices trading to their lowest level since 11/2. A significant drop out in energy prices over the last two weeks and heavy losses in the wheat market may have weighed on corn futures today. We also expect farmer selling may have picked up as harvest this week is moving at a faster clip due to better weather. Concerns about declining ethanol margins and a lack of new positive news is likely keeping speculators from aggressively buying as well. Today's poor finish sets the stage for a potential retest of 3.60-1/2, the low from 10/25. Should prices slip below this, look for a retest of the low established on 9/28 at 3.54-1/2. From a long term perspective, our bias remains friendly. We do expect acres to go up in the year ahead, but we are talking at least ten months before any new crop corn would be available.

SOYBEAN HIGHLIGHTS: Soybean futures lost 4-1/2 to 5 cents as prices sagged into the close following the stock market, corn and wheat prices lower. Energy continues to implode as well, and that seemed to be enough to weigh on commodities. Better harvest weather this week could allow farmers to rapidly try and finish beans. However, it has been a long fall, and many are struggling with areas that have not seen enough dry down. Supporting beans is a good crush factor, as demand for meal remains solid. Export inspections were supportive, and beans are continuing to move through the pipeline. The potential positive out of this is the pipeline could become empty, and if export sales would pick up, basis levels could improve.

WHEAT HIGHLIGHTS: The wheat market gave yesterday and took it away today, as sharp losses were posted. Dec Chi lost 12, closing at 5.07-3/4. Remaining contracts were down 6 to 8-3/4 cents. KC was down 4-1/4 to 7 cents, and Mpls down 4-6 cents. Export inspections at 12.6 million bushels were termed neutral to negative. Therein lies the problem with wheat prices. Export sales and inspections just aren't strong enough to make us believe the export expectations are going to be met. It is still plenty early in the marketing year for things to change, and general thoughts are that high quality wheat out of the Black Sea region will diminish into the winter months, and the U.S. will pick up additional business. While that is still likely the case, it just hasn't shown up. Consequently, prices seem to be growing tired of waiting. Look for continued consolidation as world supplies do narrow in this year, but unfortunately are probably still termed adequate. Add to that recent strength in the U.S. dollar, and the wheat market has had a tough row to hoe.

CATTLE HIGHLIGHTS: Cattle futures closed moderately higher, springing back after trading in oversold levels earlier this week. The nearby Dec live cattle contract closed 45 cents higher to 115.37, and Feb lives closed 75 cents higher to 118.75. Nov feeders were up 60 cents to 148.97, and Jan feeders surged 3.25 higher to 146.97. Choice beef values closed 35 cents higher yesterday afternoon, eliminating the recent losses to 215.55. Choice beef was down 19 cents this morning to 215.36. Show lists this week are expected to be smaller, but this may not be as supportive as usual due to the abbreviated kill week next week. Beef production is still running at a very fast pace, and beef prices may be attempting to stabilize, but the major force today was likely short covering. Fed cattle managed to hold above the key support line at the 50% correction of the Apr to Oct rally. With this level holding, many shorts likely took profits, especially heading into a week of low trade volume. The live markets and many of the feeder cattle months put in bullish key reversals today, but given the seasonal tendency for futures to drift, today was again likely short covering-fueled.

LEAN HOG HIGHLIGHTS: Hog futures closed moderately higher today, but the Dec contract broke through some key resistance for a solid close. The nearby Dec contract closed 75 cents higher to 57.30, Feb closed 65 cents higher to 62.17, and Apr closed 40 cents higher to 67.72. Pressure was seen early in the session, as news broke that the China feed producer previously reported to have been infected with ASF actually did not test positive for ASF and has since resumed production. The CME lean hog index was down 90 cents today, its largest drop since late August. This was another bearish force this morning, but selling was limited due to December's discount to the cash market. Yesterday afternoon, carcass cutout values were down 14 cents to 70.69. By mid-morning, cutout values had bounced 85 cents to 71.68, led by a jump in picnic values of 3.45 to 55.53. Loins were also up 1.97 to 67.47. As we draw closer to the Thanksgiving holiday, pork demand should remain strong, but the record production pace recently could mute the positive price effects. The Dec futures contract rallied and closed above its 200-day moving average for the first time since 11/2, a positive technical development. The Feb contract was unable to close above its 10-day moving average resistance level, while the Apr contract made its first close above its 200-day moving average since 11/5.

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