Stewart-Peterson Market Commentary

Closing Commentary - December 11, 2017

Top Farmer Closing Commentary 12-11-17

CORN HIGHLIGHTS: Corn prices weakened again finishing with losses of 3-1/2 to 3-3/4 cents, as new contract lows were established on many futures. Nearby Dec lost 3-1/2 closing at 3.36-1/2. Mar closed at 3.49 down 3-3/4 after reaching a low of 3.48-1/4, which is below the previous low from November 17 at 3.48-3/4. New crop Dec finished at 3.81-1/2, similar to where it was in mid-September. Weakness in wheat and beans, again weighed on corn, as did a lack of positive new news, as well as position squaring before tomorrow's Supply/Demand report. Many believe that the corn market is likely to see some type of negative numbers again, as it could come in the form of a lower export expectation. Whatever the case, corn prices continue to scrape the bottom of their trading range. Therefore, we'll stay defensive.

SOYBEAN HIGHLIGHTS: Soybean futures finished with losses of 5-1/2 to 7-1/2 cents, as Mar led today's drop closing at 9.94. Today was the fourth consecutive lower close for futures, but more importantly prices closed under the 50-day moving average for the first time since mid-November. Expectations for chances of rain on the 6-10 day forecast for Brazil and northern Argentina, weighed on futures, as did technical selling. Interestingly enough, rainfall over the weekend was said to be lighter than anticipated. Nonetheless, the forecast continues to suggest rain, and if in fact this does fall and is timely, the recent dry stretch may have little bearing. On the other hand, it could significantly suggest that futures could move higher in a more dramatic fashion, should rainfall return but be lighter than anticipated. Bottom line however, as we've been preaching for the last several sessions to get current with cash sales, we will continue to recommend that today, especially with today's weaker futures trade and technical signals. Export inspections at 45 million bushels were termed neutral to negative, but from our view are supportive. This figure was well below the week a year ago, and year-to-date numbers continue to run behind, but this is in part due to low export sales early in the summer. Sales have since picked up. Year-to-date total inspections are 885 million, down 14% from last year and behind the projected 3% gain the USDA is forecasting.

WHEAT HIGHLIGHTS: It's much of the same story, but just a different day, as wheat futures pushed into another new round of contract lows with losses of 3 to 5 cents in Chi and KC and Mpls losing 1 to 2-1/2. Dec Chi lost 4-1/4 closing at 3.87-3/4, while Mar lost 5-1/2 closing at 4.13-1/2. The most recent high is 4.82, which would suggest that the downturn since early October is now seeing most futures contracts losing 70 cents or more. A lack of positive news, technical weakness as managed money continues to add short positions, and expectations that tomorrow's Supply/Demand report will show an increase in Russian wheat exports and a likely decline in U.S. Nonetheless, world projected carry-out is mostly unchanged.

CATTLE HIGHLIGHTS: Cattle futures started the week off with negative finishes today, falling below significant support levels. The nearby Dec contract closed 40 cents lower to 115.17, Feb closed 57 cents lower to 117.72, and Apr closed 57 cents lower to 119.62. Selling pressure was noted on the open, as slaughter last week was up 4.1% from last year and production was up 3.4% from last year. In addition, average weights for the week ending November 25 were 2 lbs higher from the previous week. This is a counter-seasonal weight shift, and coupled with the significantly higher slaughter numbers will add to beef production very quickly if the trend continues. In addition, 6-10 day and 8-14 day weather forecasts still show warm temperatures and below-normal precipitation in the central Plains, which will aid weight gain. The bearish fundamental factors led to additional long liquidation today. The best traded Feb contract closed below its 38.2% retracement of the August to November rally. This leaves the next support level at the 200-day moving average, 1.35 below today's close. The Apr contract showed similar weakness, closing below its 100-day moving average for the first time since September 5.

LEAN HOG HIGHLIGHTS: Hog futures fell to triple-digit losses today, just able to hold onto some major support levels. The nearby Dec contract closed 7 cents lower to 63.60, Feb closed 1.82 lower to 67.02, and Apr closed 1.30 lower to 71.82. Production data from last week caught some long liquidation selling today. Slaughter, last week, was up 4.2% from the same week last year, and weights are running heavier than last year, so production is very heavy. Carcass cutouts were up slightly at mid-session today, up a nickel to 83.75. As of last Tuesday, speculative fund traders were not long over 68,000 contracts, and with heavy production, many are likely exiting the market. The Feb contract closed just above its 100-day moving average. Feb futures have not closed below this level since September 29. Significant movement below the 100-day and then 200-day moving average will likely leave futures in oversold territory, but long liquidation could easily push futures lower without an immediate rebound.

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