Stewart-Peterson Market Commentary

Closing Commentary - January 18, 2019

Top Farmer Closing Commentary 1-18-19

CORN HIGHLIGHTS: Corn futures finished steady to 2 cents higher in today's trade. Front month Mar corn was up 1-3/4 cents to 3.81-3/4, while Dec corn futures finished 1/2 cent higher to 4.03-3/4. For the week, Mar corn futures finished 3-1/2 cents higher despite a difficult start to the week and posted a reversal on those weekly charts. Dec corn futures likewise was 2-1/4 cents higher and posted an outside trading week to the positive side. Both are improved technical pictures after markets looked dismal after Tuesday's strong selloff. Yesterday, prices held key trend line support before rumors regarding improved U.S. and Chinese trade stances caused strength across the grain complex. That strength continued into today's session as markets saw additional short covering, as well as additional rumors regarding U.S. and Chinese trade stances. In a Bloomberg article this morning, China proposed a 6-year plan of buying U.S. products that would eliminate the trade deficit between the two countries by 2024. This would involve over a trillion dollars worth of agricultural and industrial purchases. Again, these are only rumors, and nothing concrete has come out of the negotiations which will start again at the end of the month here in the U.S. South American weather also stays active in the markets as recent weather patterns are seeing a combination of improved rain chances for some regions, but excessive dryness in others. As we are in a key window for crop development in South America, the next few weeks could pose to be a mover in the marketplace.

SOYBEAN HIGHLIGHTS: Soybean futures were the strength of grain markets today as contracts finished from 7 to 9 cents higher. Front month Mar beans gained 9 cents to 9.16-3/4, while Nov beans gained 7-1/2 cents to 9.55-3/4. For the week, the Mar soybean contract finished 6-1/2 cents higher while Nov beans posted a 3-3/4 cent gain. Strength in the bean market for the second-straight day were linked to positive rumors about Chinese and U.S. trade negotiations with the suggestion that China could be aggressively buying U.S. products over the next handful of years. China's goal is to reduce the trade surplus between China and the U.S. by 2024 with the increasing purchase of over 1 trillion dollars worth of U.S. exports. In addition, rumors that Chinese importers stepped into the soybean market to purchase U.S. beans helped provide support to the overall price. Again, these are rumors that are not confirmed, and are good headline news, but provide risk within the marketplace. South American weather will now stay strongly in focus as we're in the key-development stage of the Brazilian soybean crop. Argentina is seeing excessive wetness, which may limit acreage and overall production. Brazil's crop is experiencing hot/dry conditions in certain regions, and while weather forecasts have improved, some damage may be done. Overall, the South American crop will still be plentiful despite areas of disappointment. Technically, soybean futures have rallied to the top-end of the trading range and a tightening wedge-pattern formation which may be poised for a breakout. Bearish fundamentals would limit prices to the upside, but potential trade and improvement in bringing the Chinese importers back online could give us a breakout to the upside.

WHEAT HIGHLIGHTS: Wheat futures saw two-sided trade today as front month Chi contracts finished mixed. Front month Mar wheat finished unchanged to 5.17-3/4, while the May contract was up 1/2 cent to 5.23-1/2. Mar KC hard red winter wheat contract posted a 2-cent gain to 5.06, and the Mar Mpls spring wheat contract finished 2-1/4 cents higher to 5.74-1/4. For the week, Mar Chi lost 1-3/4, while Mar KC was 1-1/2 cents higher. The wheat market saw some push yesterday with the possibility of a sale of wheat to China causing the market to aggressively short cover. Today saw two-sided choppy trade as the market was looking for direction. KC wheat contracts saw support again today with those rumors of Chinese wheat purchases, as the spread between KC and Chi recently has begun to narrow. KC wheat would be the likely source for those sales, but unfortunately nothing can be confirmed with the partial government shutout regarding export news. Weather across the Plains looks to be turning colder, and this year's winter wheat crop does have some snow cover. Weather is not a short-term concern but may come into play as we move closer to dormancy in the weeks ahead.

CATTLE HIGHLIGHTS: Cattle futures finished mixed as front month Feb was down 57 cents to 126.52 and deferred contracts all showed positive gains. Apr cattle was 47 cents higher to 127.37, while Jun cattle finished 62 cents higher to 117.45. For the week, Feb cattle finished 1.55 higher, while Apr cattle posted a 1.00 gain. Front month contracts saw some pullback as cash trade stayed relatively undeveloped, but earlier bids did see some softening from mid-week. Cash trade stayed undeveloped at the time of this writing with most bids at $123 and asking prices from $127-$130. Cash trade will likely develop late this week and will likely stay steady to firm with last week's $124 levels. Overall, the market is seeing solid support this week as weather conditions in feed lot regions have been very difficult and the prospects of another storm coming through this weekend only added to those poor lot conditions. Cattle weight gains have been limited, and feed lot performance has been slowed as cattle are dealing with muddy/wet conditions mixed with snow and now cold temperatures, which will freeze lots solid. Retail boxed beef trade was firm at midday with choice carcasses 37 cents higher and select carcasses 1.95 higher. Direction next week will likely be based on cash trade with Feb holding a value of 126.50 at a premium over last week's 124.00 cash values.

LEAN HOG HIGHLIGHTS: Hog futures posted strong triple-digit gains in today's trade as front month Feb was up 37 cents to 61.22 and Apr hogs finished 1.65 higher to 66.27. That triple-digit strength moved all the way through the summer into next fall's positions. For the week, Feb hogs lost 1.42, while Apr pigs lost 1.07. Hog futures have been trying to etch out a bottom of this most recent selloff, and the strong push lower on Tuesday may have been that early indication. Summer month hogs hit the 50% retracement level on the Fibonacci sequence from last summer's low to the most recent highs. This provided a nice technical support point; which prices have bounced since. Improved relations between U.S. and China, with the prospects of China making commitments to buy U.S. products, especially pork, helped bring short covering into the market quickly on today's session. Before softening at the close, Apr futures challenged limit-higher trade today. Strength in today's market has been more on the technical side with prices holding those key support and then showing some upside follow through. Cash prices trended higher in today's trade, providing support to front month and retail carcass values were softer at midday, down 51 cents.

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