Stewart-Peterson Market Commentary

Closing Commentary - November 21, 2017

Top Farmer Closing Commentary 11-21-17

CORN HIGHLIGHTS: Corn futures were mixed in light, two-sided trade. Dec finished unchanged at 3.45. Mar was down 1/4 cent to 3.56-1/4. USDA weekly crop progress reported this year's harvest at 90% complete, still 5% behind the 5-year average and likely to conclude with the exception of areas experiencing recent rain. Today's news was quiet, as prices have been consolidating after Friday's push higher. As trade moves closer to the Thanksgiving holiday, activity will likely be minimized due to lack of players and interest in the market. Dec options expiration is this Friday, and futures prices have a tendency to drift toward the largest area of open interest, which is near 3.45 to 3.50 option strike values for Dec corn. Any short term rallies will stay burdened by the large supply picture evident in the countryside and the potential concerns regarding demand if prices were to elevate given the global competition.

SOYBEAN HIGHLIGHTS: Soybean futures finished softer as contracts posted small losses. Front month Jan beans were down 1 cent to 9.89. Mar beans were down 1 cent to 10.00-1/4. Like the rest of the grains, soybean futures are looking for some direction this afternoon, as prices stay choppy in a 5-cent trading range. Yesterday afternoon's weekly Crop Progress report posted this year's bean crop at 96% complete, 1% behind 5-year averages as producers near completion. Demand has been quiet for most of November, but the USDA did announce today a posted sales of 4.7 million bushels of soybeans to China this morning. Moving into winter months, South American weather will likely become the main news story, while Brazil may be seeing some improved chances of rain. Argentine forecasts have stayed dry. It is still early in the crop development, but with the potential forecast for a La Nina developing in the months ahead, the dryness pattern will be closely monitored.

WHEAT HIGHLIGHTS: Wheat futures were the strength of grain markets today as contracts finished 2 to 3 cents higher. Front month Dec wheat was up 2-3/4 cents to 4.24-3/4, while Mar finished 2-3/4 higher to 4.41-1/4. Strength was also seen in HRW wheat prices finishing 3-4 cents higher and mild gains in spring wheat, finishing with slight gains. Strength in the HRW wheat market helped support other wheat classes this afternoon after weekly crop conditions declined by 2% to 52% good to excellent and 11% poor to very poor. Weekly drought monitors showed potential growth and dryness across the southwestern Corn Belt, and dry forecasts are what led to the decrease in crop ratings. This helped provide some short covering into the wheat market, but it is still early, and weather will be more of a concern when wheat breaks dormancy later this spring. For now, rallies will stay limited with global supplies and competition the focus of traders. The US dollar index was softer today, which provided additional support to wheat futures.

CATTLE HIGHLIGHTS: Cattle futures closed moderately higher today as traders bounced prices out of oversold levels on steady cash-trade news. The nearby Dec contract closed 87 cents higher to 117.97, Feb closed 1.02 higher to 14.05, and Apr closed 1.10 higher to 124.80. Cash trade in the country today was noted at 118.00, mostly steady with last week. This is also a friendly factor, because we normally don't see cash trade this early in the week. Beef values were mixed yesterday afternoon, with choice cuts closing 1.06 lower to 206.18, and select cuts closing 20 cents higher to 188.05. By midday today though, both cuts of beef jumped, choice up 1.63 to 207.81, and select cuts up 73 cents to 188.78. Good weather for weight gain coming the next 2 weeks was likely a limiting factor today, though technicals were the main source of buying interest. The Stochastic Oscillator momentum indicator gave an oversold reading for the past few sessions, particularly after yesterday's heavy losses. Especially considering the recent downtrend, the acceleration seen yesterday was a little too much too soon. Buying interest for today was unable to push the Dec contract to a close above its 50-day moving average. Dec cattle has not closed below this moving average for 2 sessions in a row since the beginning of September. Another tidbit to be aware of this week is that the sharp drop in prices starting at the beginning of November has not been met with managed money selling. As of last Tuesday, funds were still long almost 132,000 contracts, so with light volume for the remainder of the week, long liquidation could cause heavy losses.

LEAN HOG HIGHLIGHTS: Hog futures posted triple-digit losses today in light, but volatile trade. The nearby Dec contract closed 1.32 lower to 60.70, Feb closed 1.52 lower to 66.95, and Apr closed 1.00 lower to 71.37. Prices initially traded higher this morning, trying to make up ground above their 10-day moving average level. However, this advance is met by heavy selling, pushing prices lower. Weakness in pork values this afternoon was not helpful either. After a 1.31 advance in carcass cutout values yesterday afternoon to 82.27, cutouts fell 59 cents to 81.68 this afternoon. Bellies have gained almost 9.00 in the past week, but weakness in loins and hams today pulled the cutouts lower. Weather in the near future looks conducive to solid weight gain for hogs in the country, and past Hogs and Pigs reports have implied that we have a plentiful supply of hogs to slaughter. Technical price action was bearish today, especially for the 2 near-month contracts. Due to low volume and high volatility, bearish key-reversals were put in and closes were made below major support levels. However, prices are still within recent consolidation ranges despite the technical damage.

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