Stewart-Peterson Market Commentary

Closing Commentary - July 25, 2017

Top Farmer Closing Commentary 7-25-17

CORN HIGHLIGHTS:Corn futures ended with losses of 8-1/4 to 8-1/2 cents, as all futures contracts from Sep through next Jul moved down about the same. Dec corn closed at 3.82-1/4, its lowest close since June 29. Expectations for rain to fall in copious amounts in a band from southern SD and eastern NE all the way to Indianapolis over the next 24 hours is expected to help alleviate significantly dry conditions. Despite crop ratings declining more than expected, and 2% weaker in the good to excellent category, and an increase in the poor to very poor category to 12% from 11% last week, wasn't enough to help provide underlying support today. Weakness in all three row crops suggested significant liquidation. Traders may have been heading for the sidelines as grain prices, as well as beans, just can't find follow-through buying. Bean ratings dropped significantly last night, and the market responded initially but soon sold off with double-digit losses today.

SOYBEAN HIGHLIGHTS:Soybean futures posted a very negative and large reversal today as prices raced higher on the overnight trade when crop progress figures showed a bigger decline than anticipated. Most analysts were looking for a 1% decline in the good to excellent category, but instead the category showed a 4% decline. The good to excellent category now is reported at 57%, compared to 71% a year ago. The poor to very poor category also increased to 14% versus 11% last week. Nonetheless, after racing higher with Nov futures reaching a high of 10.35-1/2, a level it hadn't been to since July 12, futures began to erode and continued to lose ground throughout the session. Eventually, they finished with sharp losses of 16 to 17-1/4 cents with Nov leading today's drop, closing 9.92-3/4. A rainy outlook for the central Midwest, in particular areas that are very dry, seem to be the catalyst behind today's turnaround. Weakness in other commodities also weighed on futures. All this despite the U.S. dollar continuing to slide, making another new low today. Bottom line, it looks like traders may be starting to bail on the idea of a weather market for 2017. If in fact rain does fall as advertised, it will cover a large portion of the Midwest that has been particularly dry over the last 30 days, and in much need of crop-saving moisture.

WHEAT HIGHLIGHTS:Wheat futures continued their plunge with another round of sharp losses of 14 to 14-3/4 cents as Dec led today's drop closing at 4.74. Prices closed just slightly under the 50-day moving average for the first time since early June. Prices not only busted through the 50% and 62% retracement, but now look poised to retrace down to the 100-day moving averages, which is at 4.68 Sep Chi. A lack of new positive news and expectations that wheat prices probably overdid it to the topside following spring wheat higher, was the catalyst behind the recent selloff in Chi and KC. We also believe farmer selling out of the field was heavy. While not bearish wheat from current price levels, we do respect the idea that the near-term rally ended abruptly, and that we will stick with hedges.

CATTLE HIGHLIGHTS:After trading mostly sideways for the majority of the trading session, cattle futures succumbed to an influx of selling pressure after bearish results from yesterday afternoon's Cold Storage report. The nearby Aug live contract closed 70 cents lower to 113.17, Oct closed 1.62 lower to 112.77, and Dec closed 1.55 lower to 113.62. On the feeder side, nearby Aug closed 1.92 lower to 146.52, Sep closed 1.52 lower to 147.15, and Oct closed 1.17 lower to 146.42. Bucking the trend, boxed beef values actually closed positive yesterday afternoon. Choice cuts were 55 cents higher to 207.46 and select cuts were up 3.09 to 197.89. By midday today, choice cuts were softer by 20 cents to 207.26 and select cuts were up another 1.44 to 199.33. For much of the trading session today, the market was trying to decide if the limit down, or near limit down, closes on Monday were too-much-too-soon after Friday's bearish reports. However, near the end of the session, bearish cold storage numbers from yesterday afternoon were eventually enough to push prices lower. Beef stocks were up 1% from last month, but down 10% from last year. This, coupled with the Cattle on Feed and Cattle Inventory reports from Friday imply that both the national cattle herd and national beef stocks have begun to grow. In addition, cattle are getting heavier, only increasing future beef supply. The Aug contract was able to respect the nearby low from July 6 at 112.42, while the Oct and Dec live futures closed on their 100-day moving averages.

LEAN HOG HIGHLIGHTS:After creeping into oversold territory and a supportive cold storage number yesterday afternoon, hog futures closed moderately higher to take back some of yesterday's losses. The nearby Aug contract closed 1.07 higher to 81.45, Oct closed 40 cents higher to 66.85, and Dec closed 37 cents higher to 61.55. Carcass cutouts closed 57 cents lower yesterday afternoon to 102.21, but were back up 1.53 by midday today to 103.74. This is still a very strong carcass cutout value for this time of year. In addition, the CME Lean Hog Index currently at 91.13 is still almost 10.00 higher than the Aug futures and is currently over 24.00 above the Oct futures. Thus, even if carcass cutouts and cash value continue to fall, the extremely wide discount of futures to cash should keep a fair amount of support in the futures markets. Yesterday afternoon's Cold Storage report was bullish. Frozen pork supplies were down 5% from last month and down 4% from last year. In addition, pork belly supplies were down 29% from last month and down 65% from last year. Both the Aug and Dec futures closed back above some technical resistance levels, the 10 and 50-day moving averages for the Aug and the 200-day moving average for the Dec. The Oct contract closed a topside gap created between Friday's session and yesterday's session. This should support prices tomorrow.

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