Stewart-Peterson Market Commentary

Closing Commentary - December 12, 2019

Top Farmer Closing Commentary 12-12-19

CORN HIGHLIGHTS: Corn futures finished firmer with solid gains of 5-1/2 50 9-1/4 cents erasing yesterday’s losses. Dec led today’s gains closing at 3.67. Tomorrow is also the last trading day for Dec futures. As the Mar contract becomes the front month, the question is whether or not Mar will drift down to Dec or if in fact, the market is trying to probe for a low and Mar will lead the way higher. Basis levels would suggest farmers are not aggressive sellers and it will take either strength in futures, continued strength in cash, or both before they let grain move at current price levels, especially since futures are trading near 30 cents lower than they were in October. Yesterday’s market was a bit of a head-scratcher of funds for aggressive sellers adding an estimated short 15,000 or so contracts. Today may have sent a wake-up call or it may just be a one day up. However, funds are said to be short near 120,000 contracts. Giving prices a major boost today was a big export sale announcement of 1.6 mmt to Mexico. This is the fifth-largest daily sale of U.S. corn dating back to 1977. Another 110,000 tons were sold to unknown destinations. Confidence in the ratification of USMCA, along with improved optimism that a deal with China is close also prompted commodity prices higher today, as was the stock market sharply as well. Beans gained 4 to 5 cents and wheat 11 to 12 cents.

SOYBEAN HIGHLIGHTS: Soybean futures gained back most of yesterday’s losses finishing anywhere from 2-1/4 higher on Nov 2020 to 4-3/4 higher on Jan closing at 8.98-1/4. Prices followed corn and wheat prices which gained on the heels of very positive relationship issues with Mexico and a renewed optimism that something is close at hand with the U.S./China relations. Short covering was noted on corn, beans, and wheat. Beans, however, seemed to be more of a follower. While it can be argued that dryer weather in Argentina is a growing factor, we would have to argue that overall South American conditions are adequate and this will likely pencil out to record production. It is also likely that some time in Mar or Apr Brazilian beans will be available to the world market, in particular China, and with U.S. beans overpriced compared to southern hemisphere prices, there is a growing concern this week that purchases that occurred could be some of the last before China turns its business to South America. That’s speculation on our part, but it is a potential. The bean market certainly seemed to reflect that the last two sessions. Positive fundamental news did not lead to follow through buying this week. Yet, export sales at 38.6 mil were viewed as supportive.

WHEAT HIGHLIGHTS: Wheat prices skyrocketed earlier in the session with double-digit gains in both Chi and KC. Prices continued to hold gains throughout the session but gave some back late as Dec Chi gained 8-1/2 in the day closing at 5.39-1/4 after reaching a high of 5.44. Dec goes off the board tomorrow which means Mar becomes the lead month closing today 11 higher at 5.30-1/4, an impressive finish especially since prices held the 50-day moving average, but moved to the 21, 40, and 10-day moving average finishing at their highest level since December 3rd. KC led the way higher on continued dry weather concerns in the Plains states and an impressive technical picture as prices pushed through the 10, 21, 40, 50, and 100-day moving averages. If these moving averages can hold as support and prices manage to break above the previous high on November 29th then the stage is set for a potential rally to near 4.70. Chi wheat continues to look strong since bottoming in September but has flared out and moved sideways over the last 60 days. Should prices break above their high of 5.46 from November 29th, then a retest of the contract high of 5.73-1/2 is likely.

CATTLE HIGHLIGHTS: Cattle markets made mixed to mostly lower closes today with Dec lives down 15 cents to 120.42, Feb lives were down 22 cents to 125.10, and Apr lives were up 32 cents to 126.20. Jan and Mar feeders were down 22 cents to 142.55 and 143.45 respectively. Choice beef values closed 2.84 lower yesterday afternoon to 218.65. This is a drop of nearly 10% from the November 13 high. Choice beef was down another 2.04 this morning to 216.61. Cash cattle trade was quiet in the country today, though a few thousand head were sold in TX and KS at 119.00, steady with last week. Given the slide in beef values, as well as good weather in the Plains for weight gain, the resilience of the cash cattle market has been impressive and has likely been the main factor keeping futures supported. The best traded Feb live cattle contract closed back below its 10 and 20-day moving average levels after yesterday’s first close above those lines since December 3rd. Apr lives extended yesterday’s gains, making their highest close since December 3rd. Jan feeders tested support levels today but were able to find buyer interest into the close to limit losses and hold support.

LEAN HOG HIGHLIGHTS: Hog markets made some impressive technical closes today with Dec up 30 cents to 61.00, Feb hogs were up 92 to 68.65, and Apr hogs were up 37 cents to 74.62. The CME lean hog index was up 99 cents to 59.46. This is the largest daily gain in the cash market since October 17th. While a U.S./China trade deal has still not been signed, hog markets did get off on the right foot today on many reports of progress. Carcass cutout values closed 7 cents higher yesterday afternoon to 83.19 but were down 1.53 this morning to 81.66. Feb hog futures did not post enormous gains today but still posted an impressive close. Feb hogs tested nearby support early on the 10-day moving average and then found buyer interest to push prices up through resistance of the 20-day moving average. Feb and Apr hogs both made their first closes above the 20-day moving average resistance levels since November 13. The next resistance for Feb comes in at about 71.80, so traders should have some room to push prices higher in the near term.

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