Stewart-Peterson Market Commentary

Closing Commentary - June 18, 2018

Top Farmer Closing Commentary 6-18-18

CORN HIGHLIGHTS: It was the same story but a different day as corn prices again lost footing with losses of 5-1/4 to 5-1/2 cents as Dec led today's drop, closing at 3.77-1/4, a new contract low close. Today's low in Dec corn was 3.75-1/2, slightly below the contract low of 3.76-1/4 established on 8/31/16. The precipitous drop in corn prices has come from three areas: weather, tariff talk and technicals. What took prices five months to work higher, the market has taken away in less than four weeks. Export inspections at 65.7 million bushels were termed supportive, yet this mattered little to the market that is in a freefall. Sharp losses in soybeans and weaker wheat prices in the morning session also weighed on corn futures, as traders continue to liquidate long positions. Friday's Commitment of traders report indicated that, through last Tuesday, the net long position for managed money was 36,216 down from the previous week's 113,599. With the market now down four additional consecutive sessions, we think funds are somewhere close to even or net short.

SOYBEAN HIGHLIGHTS: Soybean futures traded both sides of steady and showed some life today, finishing in positive territory as Nov gained 1 cent, and closing at 9.31-1/2 and nearby Jul 3 higher at 9.08-1/2. After losing more than 13%, it appeared the trade may have run out of selling interest this morning when prices broke into new contract lows with Nov reaching 9.22-1/2. The previous low was 9.23-1/2 on 6/23/17. A potential double bottom? Perhaps. The weather season is more critical for bean production in July and August, and as weather goes during that time, so will yield potential. As it is now, the mentality of rain makes grain, along with tariff concerns and poor technicals continue to weigh on prices. Today's market, however, may have indicated that the trade is viewing beans as good value and that, if there is any hope tariff concerns end, prices could quickly zoom back to the topside.

WHEAT HIGHLIGHTS: Wheat futures were again hammered today with sharp losses mounting as the session wore on. By day's end, Jul Chi lost 9-1/2, while deferred months lost 12-14 cents. KC lost 2-1/4 cents in Jul and near 20 cents on Dec, while Mpls lost 7 to 9-1/2. Harvest pressure seemed to be the catalyst behind a push in the KC wheat, where combines are running full steam. Weekly export inspections at 13.7 million were termed bearish and helped accentuate the downturn in prices today. Sell stops were also likely triggered, as wheat prices reached their lowest level in close to two months. A head-and-shoulders is forming as well, and with today's decisive close of Jul Chi wheat under the 100-day moving average, it looks as though there may be more downside potential down to the 12/8 low of 4.37. This is a ways away, but the way grain markets have been falling apart rapidly, bullish traders are losing confidence.

CATTLE HIGHLIGHTS: Cattle futures put in mixed closes, still trying to find support from the discount of deferred futures to cash. The spot month Jun contract closed 15 cents lower to 108.30, Aug closed 40 cents higher to 105.17, and Oct closed 55 cents higher to 107.57. Cash markets only traded as high as 110 last week, which was a drop of 4.00 to 5.00 for the week. This was a negative factor for the Jun contract because cash weakness will be felt much more immediately in the spot month contract. The negative cash tone was a bearish factor for Jun, but the Aug contract is currently trading at a wider than normal discount to cash, which was supportive. On Friday, choice beef values put in their lowest close since 4/26 at 221.59. By midsession today, choice values had bounced 1.49 higher to 223.08. Cattle markets were postured negatively for today's session due to beef being included on the list of ag products that China is intending to put tariffs on July 6. However, the market seems to be disregarding this news for now and still moving futures higher. Technical price action today was mostly positive, though relatively quiet. Jun futures made an inside day lower close but were still able to finish above their 10-day moving average support. Both the Aug and Oct contracts put in closes above Friday's highs. Overhead resistance for the Aug and Oct contracts is at the 100-day moving average levels, 2.00 to 3.00 above today's closes.

LEAN HOG HIGHLIGHTS: Hog futures surged higher today, putting in strong closes and taking advantage of improving cash fundamentals. The nearby Jul contract closed 2.00 higher to 83.72, Aug closed 1.17 higher to 79.42, and Oct closed 65 cents higher to 64.92. The CME continued its rally today, up 1.35 to 81.44. This was its highest value since 8/23/17. Carcass cutout values closed 1.69 higher on Friday to 84.09. This was the cutouts highest value since 12/5. Cutouts were down 25 cents this morning to 83.84. Loins and hams led the way lower today, down 1.01 and 1.21 respectively. At this point, though Mexico and China are positioned to enact increased tariffs on US pork imports, the markets are currently discounting the immediate negative effects of the proposed duties. The US can still export up to 350,000 tons of pork duty free to Mexico, and China is not a large buyer of US pork muscle cuts, which should limit the effects of their tariff. Jul futures put in their highest close today since 2/23 and above all significant moving average levels. The Aug and Oct contracts are still within their recent range but are rallying as well.




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