Stewart-Peterson Market Commentary

Closing Commentary - September 22, 2017

Top Farmer Closing Commentary 9-22-17

CORN HIGHLIGHTS:Despite a lack of new news, corn futures moved higher today gaining 3 to 3-1/2 cents. Dec gained 3-1/4 closing at 3.53-1/2, its highest close since September 15. For the week, Dec corn lost 1-1/4 cents. Perhaps more importantly, prices managed to climb through the 21-day moving average early this morning, gaining 5 to 6 cents on most contracts. Prices eventually slid back to this key-resistance level, and closed exactly on the 21-day moving average. From a longer term perspective, we continue to see consolidation. Support today came from spillover strength in soybeans and soybean meal, which pushed to their highest levels in 6 weeks. Short-covering was likely noted in the corn market after pushing through the 21-day moving average. As far as longer term outlook, there's not much to move the market in the very near-term, at least not for the next week. The Quarterly Stocks report will be out on September 30, and harvest pressure will grow in the days and weeks ahead. Yield results will likely provide a tone for price direction. In some cases we've heard outstanding numbers, and in other cases we've heard mixed results. Good weather for the weekend will likely encourage additional and more aggressive harvesting.

SOYBEAN HIGHLIGHTS:Soybean futures experienced strong gains today with solid closes in futures in both beans and meal. Soybean oil finished in negative territory. Nearby Oct meal gained 6.00 closing at 315.00 a ton, its highest close since July 31. Nov beans closed 13-1/2 higher at 9.84-1/4, closing at its highest level since August 1. Solid export sales, a lack of farmer selling, and technical buying today all helped push prices higher. Our bias is also that farmer selling has been light and end-users have had to more aggressively buy the futures to cover themselves, or because of the strong demand while waiting for more beans to enter the pipeline before processors can actually use inventory. Whatever the case, futures had a strong week finishing with 15-1/2 on Nov, or a gain of 1.6% in value. More importantly, the rally appears to be coming on the heels of harvest. We've argued in recent weeks that dry weather in the Midwest could hamper yield potential, and perhaps the market is trying to factor some of this concern in as well, as recent rainfalls were again isolated and disappointing for many. Today's move above the 50% retracement from the June low to the July high, now sets the stage for Nov beans to target 9.93, a 62% retracement. Should the market build upward momentum, a move through 10.00, with an eventual push to 10.19-3/4 (the high from July 28), could be in its sights.

WHEAT HIGHLIGHTS:Traders appeared comfortable buying beans and corn, and selling wheat, as wheat futures lost ground compared to these two commodities, which saw strong to very strong gains. Chi wheat finished down 3 at 4.49-1/2, KC finished steady to 1 higher, and Mpls, the winner, at 10 higher. Expectations for ample world supplies to keep wheat prices in check seem to prevail today. Yet, we continue to see a growing trend of drier conditions in Australia, Argentina, and in areas of Russia. Bottom line, there doesn't appear to be much negative news either. Consequently, we're not bearish, but it's difficult to be bullish. Look for more sideways trade. Rallies should be viewed as opportunities to take a more aggressive approach to selling cash, selling call options to challenge the market to move higher, collect premium, or collect premium and are hedged at a higher level. With positive news lacking, the market may focus on future events. Next week's Quarterly Stocks and Small Grains reports could shed some light on spring wheat harvested acres, which is a number that has been in debate since hot/dry weather conditions may have taken their toll on larger portions of the northern Plains.

CATTLE HIGHLIGHTS:Cattle futures closed moderately higher in anticipation of a bullish Cattle on Feed report released after the close today. The nearby Oct contract closed 1.47 higher to 111.57, Dec closed 1.22 higher to 117.42, and Feb closed 80 cents higher to 120.05. On this afternoon's report, placements came in at 103% vs estimates of just 97%, marketings came in at 104% vs estimates of 106%, and on feed came in at 104% vs estimates of 103%. These numbers are considered bullish, especially the high placements number, which will add production later down the road. Extended periods of very cheap feed are likely a factor in this number. There was a fair amount of movement in the country today at 108, as packers tried to secure cattle before taking the risk of a bullish Cattle on Feed report. The feedlots that took the 108 trade luckily got a good deal today. Weights are also increasing, and combined with futures running premium to cash, there is not much incentive to keep current with marketings, which is a bearish force. Boxed beef values were slightly negative yesterday afternoon with choice cuts 53 cents lower to 191.51, and select cuts closing 11 cents lower to 188.41. At mid-session today, choice cuts were unchanged, and select cuts were 9 cents higher to 188.50. On today's Cold Storage report, total red meat supplies were up 7% from last month but down 3% from last year. Beef stocks were up 10% from last month but down just slightly from last year. Technical action today was impressive, but again likely due to bullish report expectations. The Oct contract traded down to its 50-day moving average support level and closed with its highest price since 8/4. The Dec contract showed comparable strength, trading down to yesterday's lows, then surging higher to close at its highest price since 7/21, also closing the corresponding gap.

LEAN HOG HIGHLIGHTS:Hog futures closed sharply lower again today, gapping down with the Oct contract making new lows for the second session in a row. Oct closed 1.62 lower to 55.70, Dec closed 1.17 lower to 56.62, and Feb closed 97 cents lower to 61.90. Yesterday afternoon, carcass cutouts posted their lowest close since 12/2/2016 at 72.78. Cutouts did try to stabilize at midsession today, up 59 cents to 73.63, led by hams up 1.54 and bellies up 2.54. Frozen pork supplies are reported this afternoon up 4% from last month but down 5% from last year, mostly neutral numbers. Technical price action was ugly to say the least. Prices gapped down around 70 cents on the open and were only able to close 30-50 cents of that gap through the rest of the session. Closes were near the lows. The only positive development technically was that prices are now deep into oversold territory and should be primed for a rebound.

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