Stewart-Peterson Market Commentary

Closing Commentary - October 21, 2019

Top Farmer Closing Commentary 10-21-19

CORN HIGHLIGHTS: Corn futures finished 1-1/4 to 3-3/4 cents lower, as Dec led today’s drop, closing at 3.87-1/4. Prices did trade on both sides of steady but mostly lower throughout the session and weakened toward the close, as prices likely uncovered sell stops once a channel line support was violated. The 21-day moving average did hold at support. A head-and-shoulders has formed, and this might project a downside objective of near 3.75, an area where better support may be had, as the 40 and 50-day moving averages are at these levels. A lack of new positive news, particularly on the export front, seems to be enough to keep pressure on prices, as harvest continues to move forward. Weather has been less than ideal for harvest, yet farmers will continue to pick away. The interesting part of this year’s harvest will likely be that last third of the crop that got in very late and just how long it may take for it to dry down and what the quality of the crop will be. Yield results from producers remain mixed, some better than expected, while others generally as expected which means a likely 5-20% from expectations.

SOYBEAN HIGHLIGHTS: Soybean futures finished quietly, with bear spreading noted. Nearby Nov closed 3/4 cent lower at 9.33-1/4, while Nov 2020 closed 1/2 higher at 9.73-1/4. We would term the trend for soybean prices over the last several sessions as consolidation. The 10-day moving average has acted as strong support and did so again today with Nov bouncing off of the 9.30-1/4 level. Weekly export inspections at just under 48 million bushels were termed supportive and well above the 34.5 million needed on a weekly pace to meet USDA projections. Harvest pressure will be delayed again this week due to wet weather. However, the 6-10 day forecast does seem to give a window of opportunity for producers to make big progress, as generally below normal precipitation is forecast. Beyond that stretch, another wet forecast looms larger. The weekly Crop Progress report is expected to show somewhere between 35 and 45% harvested.

WHEAT HIGHLIGHTS: Wheat futures on all three exchanges moved to the downside, losing 7 to 8-3/4 cents as Dec Chi led today’s drop, closing at 5.23-1/2. A recovery in the U.S. dollar today, the first time in four sessions, and perhaps a lack of follow through buying by wheat traders led to today’s hook reversal on charts. While this signal is not necessarily a strong one in and of itself, it is something to be monitored closely. We would argue that today’s technical activity after a substantial rally of over 80 cents in Chi wheat warrants a sale. The world has ample inventory according to the most recent USDA report. Concerns of downgrading conditions in Australia are certainly to be respected but not necessarily enough to sustain a near term rally. As we look further into the future, we want to make sure that we do not get overly optimistic if only one region of the world is struggling. We believe the case is made that there is ample wheat for draw down in supply, and price may not have to reflect that through higher levels.

CATTLE HIGHLIGHTS: Cattle markets had a quiet and mixed session today, with lives making positive closes and feeders choppy to lower. Oct lives closed 47 cents higher to 110.95, Dec lives were up 25 cents to 113.87 and Feb lives were up 15 cents to 119.22. Oct feeders were down 7 cents to 143.42, and Nov feeders were steady at 142.85. Export sales data released on Friday was disappointing, with just 13,000 metric tons of beef reported sold for the week ending October 10. Cash markets were disappointing on Friday, with trade in Texas, Kansas and Nebraska coming in steady to 2.00 lower than the previous week. The 6-10 day forecasts are showing cold temperatures and above normal precipitation, which is supportive, but forecasts look dry afterward. Choice beef values closed 7 cents lower on Friday afternoon to 218.04 but were up 1.50 this morning to 219.54. Dec live cattle closed below their 200-day moving average support level on Friday and opened below today. Though trading ranges were very tight today, Dec live cattle were able to close above their 200-day moving average level. Nov feeders tested and held their nearby 20-day moving average support level and choppy, two-sided trade.

LEAN HOG HIGHLIGHTS: Lean hog futures finished mixed to mostly higher, with Dec down 12 cents to 67.82, Feb up 70 cents to 78.17 and Apr hogs up 95 cents to 84.40. The CME lean hog index was up 74 cents this morning to 65.64. China’s spot pig index was up 8% overnight and is now up 36% for the month and up 190% year to date. Friday’s export sales report was the source of much confusion. The report indicated that over 292,000 tons of pork were reported sold for the week ending October 10, but then the USDA put out a notice later in the day saying that total was not accurate but instead included some sales from previous weeks that were not previously included on export sales reports. While this isn’t necessarily bearish, the lack of faith in the data caused some long liquidation Friday and likely limited any advances today. Traders are still optimistic regarding U.S. / China trade negotiations but will need to see further progress before more buying. The Dec premium to the cash index is also a limiting factor. Carcass cutout values were up 75 cents on Friday afternoon to 77.03 and were up another 1.61 this morning to 78.64. The best traded Dec contract tested and failed to break through its 10 and 20-day moving average resistance levels and put in a disappointing close near the lower end of the day’s range. Feb hogs tested and held nearby support at the 10-day moving average level and closed in the upper third of the day’s range. Feb and Apr hogs are still overbought after the recent rally.




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