Stewart-Peterson Market Commentary

Closing Commentary - August 23, 2017

Top Farmer Closing Commentary 8-23-17

CORN HIGHLIGHTS:Corn futures slid for the sixth time in the past seven sessions as contracts lost from 2 to 4 cents. Front month Sep traded 4 cents lower to 3.42, while Dec traded to a new contract low of 3.55-3/4 down 4-1/4 cents. Negative bias continues in the corn market as continued weakness on the charts technically and large supply pictures weigh on prices. Despite the anticipation that U.S. corn yields will move lower as we move into the fall months, and that this year's corn crop is smaller than last year's, current carryout of 2.37 billion bushels, with old crop still mixed in, makes it difficult for prices to rally. For end-users, prices continue to slide lower in the harvest, and have more room to go before buyers start taking advantage of these lower corn prices in general. Focus overall in the marketplace continues to stay on weather, as forecasts show mostly dry and cool across the Midwest. These weather conditions will stay favorable for any late-developing corn. Due to the variability seen in cornfields, maturity issues could happen if an early frost were to develop ahead of typical forecasted dates. For now, with Sep and Dec contracts posting new contract lows, and Sep breaking through the lows for the year on continuous charts yesterday, the path-of-least-resistance is lower.

SOYBEAN HIGHLIGHTS:Soybean futures traded two-sided during the course of the day as contracts finished slightly firmer. Front month Sep beans were up 1-1/4 cents to 9.35, while Nov finished a 1/2 cent higher to 9.38. Bean futures had to weigh a combination of both bullish and bearish news in today's trading session, as late yesterday afternoon the U.S. Commerce Department announced a duty against biodiesel imports from Argentina and Indonesia that would promote more domestic use of the biofuel. This provided strong support early in the session, as bean futures and soybean oil futures jumped on overnight trade with the Nov contract touching its high at 9.47. Last evening's bullish news was quickly offset this morning as China cancelled 23.6 million bushels of old crop soybean sales, which were likely rolled into the 2017/18 crop year. Some of that movement was evident in a sale of new crop beans for 10.4 million bushels to unknown destinations for the next crop year. This cancellation was deemed bearish in the marketplace, but with export sales exceeding USDA estimates by nearly 100 million bushels, prices maintained despite this negative news. Weather forecasts continue to stay favorable for development of this year's bean crop, as cool temperatures are predominant across the Midwest. Although, portions of the eastern Corn Belt are looking for some moisture to help finish up this crop. With a large supply picture still forecasted, bean futures are staying under bearish pressure and may be looking to challenge to the June low of 9.07 on the Nov contract.

WHEAT HIGHLIGHTS:Chi wheat futures finished today with slight gains as the front month Sep contract was 1 cent higher to 4.03-1/4, and Dec was 1 cent higher to 4.30. Wheat futures struggled to stay in positive territory as large global supplies, fueled by increases in Europe and Russia wheat crops, made it difficult for this market to muster any rally. A surge in global supplies comes despite expected U.S. production being down 25% from last year, and Canadian production to be approximately 16% lower due to reduced acreage and difficult weather. With that in mind, wheat futures look undervalued at this moment, but price rallies would be difficult without the development of further bullish news. KC hard red winter wheat prices closed below the 4.00 barrier and the Sep contract down 1-1/4 cents in this afternoon's trade, just key break of the psychological 4.00 support zone. Prices can carve out a bit of a turn, or a bottom, given the global supplies. A sideways trading range may be established for the rest of the year as the market digests the overall current supply picture.

CATTLE HIGHLIGHTS:A lower today, but staying within their recent trading range. The nearby Aug contract closed 1.07 lower to 105.65, Oct closed 1.55 lower to 106.17, and Dec closed 97 cents lower to 109.10. Yesterday's Cold Storage report wasn't able to draw any support today, with cattle never trading higher than their opening price. Today's Fed Cattle Exchange results resulted in much of the pressure today, with only 1,067 head offered with not a single actual sale. Cash trade was seen today in the country at 106.00, 4.00 below last week's trade and 10.00 below cash trade from two weeks ago. Carcass cutouts closed lower yesterday afternoon, choice cuts were down 6 cents to 193.03 and select cuts were down 73 cents to 190.89. Beef values were softer again today, with choice cuts down 12 cents at midday to 192.91 and select cuts down 1.45 to 189.44. These are the lowest values since mid-February. Though prices stayed within recent consolidation ranges, both the Oct and Dec futures were unable to hold their 10-day moving averages. The Oct contract also closed below its 200-day moving average, while the Dec contract closed above. Barring even lower cash trade later this week, prices will likely remain relatively steady until Friday's Cattle on Feed report.

LEAN HOG HIGHLIGHTS:Hog futures sold off sharply this morning, but were able to bounce back late in the day to close with very limited losses. The nearby Oct contract closed 32 cents lower to 63.55, Dec closed 20 cents lower to 58.85, and Feb closed 42 cents lower to 63.32. Hog markets have been under a bearish mentality due to the seasonal increase in pork supply and weakening pork values. Yesterday afternoon, carcass cutouts closed 1.42 lower to 89.14 and were down another 51 cents at midday today to 88.63. This was led by a 6.14 decrease in belly values to 151.47. This is somewhat surprising considering the dramatically lower pork belly stocks reported in yesterday's Cold Storage report. Chinese pork imports for July were down 2.7% from last month and down 52.2% from last year. Technical buying was likely the source of support late this afternoon. Prices pushed lower all day, approaching the lows made on April 21 at 62.42 for the Oct contract. Prices today reached as low as 62.77, then were bought up as the market drew support from the technical support level. Markets are on the cusp of being oversold and would appear to be primed for a bounce sometime soon, likely on some short-covering profit taking.

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