Stewart-Peterson Market Commentary

Closing Commentary - June 22, 2018

Top Farmer Closing Commentary 6-22-18

CORN HIGHLIGHTS: Corn futures had a quiet end to a volatile week, as prices finished mixed to unchanged. Front month Jul futures gained 1/4 cent to 3.57-1/4, while Dec corn lost 1/4 cent to 3.78. Despite this week's volatility, Jul corn rallied off of lows and finished 4 cents lower for the week, while Dec corn lost 4-3/4 cents. Despite corn futures rising above this week's lows and volatility associated with technical liquidation and trade war concerns, overall crop conditions keep buyers on the sidelines. Current rainfall across areas of the Corn Belt may have sellers cautious with news of excess rain across the tri-state area around northwestern Iowa into southern Minnesota, with the majority of US crop conditions above average for this time of year. Today also saw price consolidation, as corn prices are looking for some near term direction. With prices stabilizing, exporters did step back into the market with outside sales of 5.2 million bushels of corn to Mexico and 4.6 million bushels to Panama, with the majority of that for the 18/19 crop year. Next week will likely bring additional volatility, as the market prepares itself for a highly anticipated Grain Stocks and Acreage report at the end of the week.

SOYBEAN HIGHLIGHTS: Soybean futures finished with gains of 12-1/4 to 14-3/4 cents, as Sep and Nov beans led today's rally. Nearby Jul gained 14, closing at 8.94-1/2, while Nov gained 14-3/4, closing at 9.16-1/4. For the week, despite a significant sell-off on Tuesday, Nov soybeans lost 13-3/4 cents. Considering a week of good weather and a forecast for another week of good weather, a loss of near 15 cents might be considered minimal. Stay defensive. We were encouraged with the way the market ricocheted after reaching a low of 8.64-1/2 on Thursday, as heavy liquidation of managed money contracts, along with growing concerns of tariff and trade wars, along with good weather, pressured prices. Soymeal had a strong day, gaining 6.00 to 7.00, while oil remained mostly unchanged. For the week, Jul soymeal finished with slight gains.

WHEAT HIGHLIGHTS: Wheat futures finished down 2 to 4-1/2 cents in Chi and KC, with Mpls losing 3 to 3-3/4. It was a choppy day, as the last trading day for Jul options went off the board with Jul Chi closing at 4.91-1/4. For the week, Jul beans lost 8-1/4 cents. Harvest was delayed in areas due to rain, but otherwise, it does continue, and this is pressuring prices as areas are reporting better than anticipated yield. There are still significant yield reductions, however, as dry weather engulfed much of the southern and western Plains and, consequently, HRW wheat yields on average will be lower than in recent history. The 100-day moving average held prices in check for the second consecutive session, as prices tried to rebound early in the session but fell short. The dollar reversed losses earlier in the session, finishing slightly higher. This too may have dampened wheat's friendly enthusiasm from this morning. Rains this week, especially in SRW wheat regions, may heighten concerns over disease. We doubt, however, that disease issues will be a major factor, as we feel freeze damage and too much moisture have had minimal impact on yields as a whole in recent years.

CATTLE HIGHLIGHTS: Cattle futures finished mixed in tight trading ranges ahead of this afternoon's Cold Storage and Cattle on Feed reports. The nearby Jun live cattle contract closed 37 cents lower to 108.27, Aug closed 22 cents lower to 105.90 and Oct closed 40 cents higher to 109.40. Feeder cattle futures put in moderate gains today, up 40 to 75 cents. Beef values continued their recent slide with choice cuts down 88 cents at yesterday's close to 217.41 and down another 30 cents today to 217.11. Reported cash trade today centered on 109 to 110 was 1.00 to 3.00 lower than last week. This afternoon's Cold Storage report was mostly neutral for cattle. Total pounds of beef in freezers were down 1% from last month but up 13% from last year. Cattle on feed was seen as negative. Marketings were reported at 105%, steady with expectations. Placements came in at 100% versus the average expectation of 96%. On feed was slightly heavy, coming in at 104% versus the average market estimate of 103.5%. The heavy placements number is bearish because it shows that feedlots were replacing cattle at a much faster rate than what was expected, which could lead to excess future beef production. The heavy placements and slightly positive marketings number may in fact work to unwind the bear spread structure of live cattle markets and work toward bull spreads. Technically, today was mostly uneventful. Jun, Aug and Oct futures all respected their overhead resistance levels, trading within very tight ranges and without much direction. Direction for next week looks mixed to slightly lower.

LEAN HOG HIGHLIGHTS: Hog futures concluded a negative week with one last round of negative closes. The Jul contract closed 65 cents lower to 79.82, Aug closed 35 cents lower to 75.37 and Oct closed 22 cents lower to 61.30. The CME lean hog index closed 65 cents higher to 85.79. It is difficult to tell, but today's index movement may be indicating slowing momentum higher for cash hogs. Carcass cutout values closed 16 cents higher yesterday afternoon to 85.04, their highest value since 9/5. By mid-session today, cutouts have lost 19 cents to 84.85. This afternoon's Cold Storage report was viewed as a negative for the hog complex. Frozen pork supplies were down 2% from last month but up 6% from last year, and pork belly stocks were down 5% from last month but up 94% from last year. This may be leverage enough for packers to begin buying hogs at a lower price, especially in such an uncertain export environment. Hog futures were able to close well off of their lows for today's session and near the tops of the day's ranges. Recent lows were held, and new selling interest was tough to come by, but prices will likely drift lower if positive export news cannot surface.

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