Stewart-Peterson Market Commentary

Closing Commentary - July 24, 2017

Top Farmer Closing Commentary 7-24-17

CORN HIGHLIGHTS:Corn futures finished with losses of 2-1/4 to 2-3/4 cents as Dec led today's slide, closing at 3.90-3/4. Prices gapped lower on the overnight trade as traders were quick to sell due to better-than-expected rainfall totals over the weekend, as well as a rather benign forecast, at least from a temperature perspective. The sizzling heat of last week will likely give way to more normal temperatures, at least according to the 6-10 day outlook. In addition, there are chances of rain at mid-week for parts of the Midwest that missed the rain last week. Overall, crop ratings are expected to decline for last week, but with good rains we can't help but think that crop yield potential, compared to the previous week, may have actually increased. Rainfall totals for the past week basically tell a story of the haves and have-nots. Much needed rain fell in some areas, too much rain in other areas, and in other areas no rain. For many, welcomed rains during the third and fourth week of July will help set the stage for a crop. Dryer regions, in particular parts of the western Corn Belt, could continue to struggle in the days and weeks ahead.

SOYBEAN HIGHLIGHTS:Soybean futures finished with losses of 10-3/4 to 12-1/4 cents with Nov leading the way down, closing at 10.10. Nov had a low today of 9.98-1/4. Prices did gap lower on the opening, but managed to crawl back throughout much of the session, with futures finishing within 3 cents of the daily high. Expectations for crop ratings to decline 1%, or possibly 2%, were viewed as supportive. Export inspections were termed supportive at near 22 million.

WHEAT HIGHLIGHTS:Despite what was termed supportive, weekly export inspections at near 16 million bushels, prices slid on technical selling and followed corn and beans weaker, as weekend rains were viewed as beneficial for those crops. Technical selling pushed Sep Chi wheat down 10-1/2 by the close at 4.80-3/4. Today completes a 62% retracement of the rally in wheat from April to the peak on July 5. Losses of 13 to 15 cents in Mpls were noted, and 7 to 8 cents in KC. A spring wheat tour will be underway tomorrow, and this could provide some information. Expectations are for the Dakotas to show extremely stressed crop. A weaker dollar will help provide underlying support.

CATTLE HIGHLIGHTS:Cattle futures closed sharply lower today after two bearish reports after the close on Friday afternoon. The nearby Aug contract closed 2.55 lower to 113.87, Oct closed limit lower to 114.40, and Dec closed limit lower to 115.17. On Friday's Cattle on Feed report, the placements number at 116 was a full 10% above the market estimate of 106%. The weight breakdown showed active placements of heavier weight cattle, also bearish. Cattle inventory was up 4% from 2015 and the calf crop was up 3% from 2016, both bearish developments. Choice cuts closed at 206.91 on Friday afternoon, the lowest since March 1, but were back up 53 cents at midday today to 207.44. This is very slightly positive, but considering the recent long liquidation trend of managed money traders and the report data, the weakness today is no surprise. For the Aug contract, today's close was the first below the 100-day moving average since December 9, 2016. And, though the trading ranges today were very tight, the heavy gap lower session is a bearish technical sign.

LEAN HOG HIGHLIGHTS:Hog futures closed just moderately lower today as the futures to cash spread has trouble tightening up. The nearby Aug contract closed 72 cents lower to 80.37, Oct closed 77 cents lower to 66.45, and Dec closed 80 cents lower to 61.17. Aug hogs, currently at an 11.00 discount to cash, are normally at a 3.50 discount to cash, keeping futures supported. This may be suggesting that the anticipated weakness in pork values may already be priced in, or at least close to priced in. For the month of June, China imports amounted to just 90,070 tons, down 24.7% from the month of May and down 53.6% from last year. This was the lowest monthly total since March 2016 and may be a symptom of enormous Chinese hog populations. Carcass cutouts closed 1.24 lower on Friday afternoon to 102.78 and were down another 67 cents at midday today to 102.11. The CME Lean Hog Index was down 33 cents today to 91.67. The Aug contract was unable to hold the 50-day moving average support levels today, closing about 40 cents lower, while the Oct contract fell below but closed back above its 200-day moving average. It still seems as though the seasonal high has been put in, but it will be tough to attract new sellers if pork prices don't fall apart quickly.

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