Stewart-Peterson Market Commentary

Closing Commentary - October 15, 2019

Top Farmer Closing Commentary 10-15-19

CORN HIGHLIGHTS: The corn prices sagged today with bear spreading noted as futures closed 1/4 to 4-1/2 cents lower, as Dec led today’s drop closing at 3.93-1/4, 9 cents from yesterday’s high of 4.02-1/2. New crop Dec closed 3/4 lower at 4.08-3/4, while Sep closed 1/4 lower at 4.06-1/4. Harvest is going to pick up in the near term despite a rainy forecast for the entire Midwest 4-5 days out. We believe farmer selling is picked up as well. Yield results to date are mixed with some pleasantly surprised, but most suggesting their crop is what they expected which is down anywhere from 5%-20% from a year ago. Therefore, while not a train wreck, certainly not a bumper yield for all farmers. We also like to believe that the earlier harvested was the first planted corn and has a better chance of yielding at a higher level than late-planted corn. The true test and direction for prices will likely come as farmers dig into the last 30%-40% of harvest which represents June planted corn.

SOYBEAN HIGHLIGHTS: Soybean futures ended the day on a soft note, finishing 6-1/2 lower Nov at 9.34 and only a penny lower on Nov 2020 closing at 9.72-1/2. After a strong surge in recent sessions, prices seemed to take a breather today finishing lower as traders likely began to take some gains from lower purchases. Harvest should pick up at a faster pace over the next 1-5 days, but then the 6-10 day forecast indicates above-normal precipitation with temperatures now turning colder with most of the Midwest below normal temperatures. Therefore, while there will be a warm up and a dry out in the short term, it looks like more of the same where wet conditions and now cold weather limiting drying will keep fields a sloppy mess. This could mean prolonged harvest and the likelihood that yield numbers could edge downward. Yet, the recent rally should be viewed as an opportunity to sell.

WHEAT HIGHLIGHTS: Wheat futures ended the day weaker on all three exchanges, losing anywhere from 3 to 6-1/2 cents as Dec Mpls led today’s drop closing at 5.45-1/2. Dec KC lost 4-1/2 closing at 4.21-1/4, while Dec Chi lost 4 closing at 5.07. It was a somewhat quiet session in the wheat market after closing higher two consecutive sessions. We would argue the market consolidated today with futures prices closing within pennies of where they have the last three sessions. Most impressive was the rally on Friday in which prices closed decisively above the 100-day moving average in Dec Chi and have stayed above that technical level. An inverted head and shoulders formation could point to about another 15 cents higher targeting the area near 5.25 Dec. As we look ahead to new crop, we can’t help but reflect on the most recent USDA report which again confirms ample world inventory. This despite some challenges in growing regions this past year. Consequently, we are beginning to become a little more concerned that the recovery and reprices could quickly end. We will take a more defensive posture anticipating there will not be much new friendly news.

CATTLE HIGHLIGHTS: Cattle markets had a choppy session today capped off with mixed closes. Oct lives closed 37 cents higher to 111.00, Dec lives were steady at 113.45, and Feb lives were up 27 cents to 119.55. Oct feeders were down 55 cents to 145.00 and Nov feeders were steady at 146.07. Choice beef values closed 1.56 higher yesterday afternoon to 217.22, their highest value since September 19. Choice beef was up another 52 cents this morning to 217.74. Cash cattle traded higher last week, but Oct live cattle futures will be going off the board in two weeks and the premium futures to the cash might be a little too wide. Technically, the cattle markets are sharply overbought and the Dec live cattle contract unsuccessfully tested its 200-day moving average resistance level for the second session in a row. This is the best traded contract and can serve as our main contract to determine direction. Nov feeders were steady today after testing and holding their nearby 200-day moving average support level.

LEAN HOG HIGHLIGHTS: Hog markets ended the day with triple-digit gains, with Dec up limit 3.00 to 72.12, Feb hogs are up 1.90 to 79.15, and Apr hogs are up 1.32 to 84.90. The CME Lean Hog Index up 93 cents to 62.11 and China’s spot pig price was down 0.25% overnight but is still up 23.9% for the month so far. Carcass cutout values were up 42 cents at yesterday’s close to 77.94 and were up another 1.29 today to 79.23. This is more than 3.00 higher than the same time last week. China retail pork prices were up 84% from a year ago as of October 2. Dec lean hogs closed above their 200-day moving average resistance level for just the fourth time since falling below this level on August 1. This is a positive technical development and prices have picked up almost 5.00 over the past two weeks. Feb hogs made their highest close today since July 29 though Feb and Apr may be trending higher into overbought levels.

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