Stewart-Peterson Market Commentary

Closing Commentary - August 16, 2019

Top Farmer Closing Commentary 8-16-19

CORN HIGHLIGHTS: Corn futures saw solid gains this afternoon as contracts were 8 to 10 cents higher. Front month Sep gained 10-1/4 to 3.71, while Dec was 9-3/4 cents higher to 3.80-3/4. Today was a bright spot in a difficult week for the market which saw the Sep contract lost 39-1/4 cents, while Dec dropped 37 cents in this week's trade. Yesterday's action did see selling slow, which may have helped lead to the gains in today's gains. Overall weather status is relatively favorable as we enter a window where we start to see industry analysts and their individual crop tours. Pro Farmer starts its crop tour next week, and today, DTN/Progressive Farmer released the results from their digital tour this week. They are posting U.S. corn yield at 163.2 bu per acre, which is below the USDA's projected 169.5 on Monday's USDA report. Despite today's strength, the key will be follow through next week as prices today rallied to short term resistance and held below on the close. Seasonally, this is a window for corn prices to have a tendency to build to a late summer or fall though, and with the technical picture in its current position, the possibility of testing the May contract low at 3.63 is still in the cards.

SOYBEAN HIGHLIGHTS: Soybean futures also saw moderate strength as prices were 9 cents higher across the board with the front month contract Sep up 9-1/4 to 8.67-1/4, and Nov beans gained 9 cents to 8.79-3/4. For the week, today's gains helped pair losses, but the Sep contract was still 11-3/4 lower, while the Nov contract was down 12 cents in trade. Demand news was supportive of the bean market early this morning as unknown destinations purchased 10.9 mil bu of soybeans for the 19/20 marketing year. This continues to give the market mixed signals regarding the involvement of U.S. and Chinese trade negotiations as news media states China will not be purchasing U.S. products, but with unconfirmed bean sales and strong pork sales next week still shows maybe they are still active in the marketplace in general. Like corn markets, market players will be closely watching individual firm's crop tours and yield projections over the next few weeks. Technical, the trend is overall lower in beans, like other grains, short term weather forecasts are non-threatening at this stage. Prices have been consolidating and trending lower the last couple of sessions.

WHEAT HIGHLIGHTS: Wheat futures saw mild gains today with contracts 1 to 4 cents higher in the Chi wheat futures. Front month Sep was 1-3/4 higher to 4.70-3/4, while Dec wheat gained 3 cents to 4.77-1/2. Strength was also seen in KC heard red winter wheat contracts gaining 4 to 5 cents with Sep up 4-1/2 to 3.94-1/4, and follow through to the spring wheat with the Sep contract up 3-1/2 to 5.06-1/4. Like the rest of the grains, it was a difficult day for the wheat market as the Sep Chi contract lost 24 cents and KC Sep dropped 24 cents as well in this week's trade. Since Monday's USDA Supply and Demand report, wheat futures have been in consolidation mode for the remainder of the week as prices traded relatively sideways. The market may have seen some support today with the strength seen in other grains, as wheat prices are looking for a direction in the short term. Longer term picture has the trend currently lower in the wheat futures. This is a window where historical weakness is seen as spring wheat harvest begins to ramp up. At this stage, world supplies are still ample, and global wheat pressure looks on trend by weather in most regions. Prices will likely stay choppy in the short term with the potential of drifting lower, especially influenced by other grains.

CATTLE HIGHLIGHTS: Cattle markets ended the week on a sour note with Aug lives down 27 cents to 99.92, Oct lives down 47 cents to 98.05, and Dec lives down 75 cents to 103.52. Aug feeders were down 1.20 to 134.57, and Sep feeders were down 92 to 132.37. Choice beef values closed 3.78 higher yesterday afternoon to 236.12, their highest value since June 2017. Choice beef was up another 1.73 this morning to 237.85. Cash trade so far this week in TX, NE, and KS has come in right around 105.00. This is 5.00 to 7.00 lower than last week. Given the lower slaughter capacity, packers are now in the driver's seat when it comes to pricing cattle, but due to the extremely high margins, packers are likely to keep chain speed moving very quickly. Daily slaughter has come in about 3,250 head per day lower than last week. Tomorrow's kill should be larger than normal and will likely pick up some of the slack. The best traded Oct live cattle contract again made lower highs and lower lows today, continuing their recent downtrend. Prices are deeply oversold according to stochastics. Sep feeders briefly tested their 10-day moving average resistance level early in the session, but sellers quickly pushed prices back lower to close near the lows of the day.

LEAN HOG HIGHLIGHTS: Hog markets closed sharply lower today in a very disappointing technical breakdown. Oct hogs closed 3.00 lower to 62.00, Dec hogs closed 2.97 lower to 60.77, and Feb hogs closed 2.25 lower to 68.02. The CME lean hog index was down 52 cents today to 79.34. China's spot pig prices were up 2.1% overnight and are now up 15.1% for the week, 22.85% for the month so far, and up 76.2% year to date. Carcass cutout values closed 67 cents lower yesterday afternoon to 88.23, and were down another 41 cents this morning to 87.82. While export sales this week were respectable and the sales to China were a good sign, the market does not appear confident that pork exports can retain that strength. The market will need to absorb a record supply in September and this gave sellers reason enough to push prices limit lower in the best traded Oct contract. Hogs are now oversold according to stochastics after briefly crossing out of oversold levels earlier in the week. Nearby support for Oct comes in at the August 5 low of 61.50, and with momentum indicators pointing lower, this appears to be the next target.

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