Stewart-Peterson Market Commentary

Closing Commentary - March 16, 2018

Top Farmer Closing Commentary 3-16-18

CORN HIGHLIGHTS: Corn futures ended the week on a soft note, losing 2-1/2 to 4 cents, as May led today's drop closing at 3.82-3/4. This compares to last week's close of 3.90-1/2. New crop Dec closed at 4.-3-3/4, down 2-1/2, but did hold support at the 21-day moving average. The high this week was 4.12, established on Wednesday. Weak closes the last three sessions would suggest farmer selling has increased, while speculative buying has remained somewhat neutral. An outstanding export sales number this week continues to suggest that world demand is excellent and will continue to look toward the U.S. for supply. With conditions declining in both Argentina and Brazil's corn crop expectations, the world will likely need to come to the U.S. That being said, the market ran out of news late in the week, particularly following wheat prices lower, which went on a significant price slide as forecasts for beneficial moisture in the Plain states surfaced. Technical support gave way at the first support level, but did hold at the 21-day. In addition, a near-term correction would suggest that Dec corn could easily move to 4.00 before potentially finding new buying interest.

SOYBEAN HIGHLIGHTS: Unlike corn, beans had a very solid day closing, with gains of 7-1/2 to 9 cents, as Jul led today's rally closing at 10.60-1/4. New crop Nov closed 7-1/2 higher at 10.41, near the day's high of 10.41-1/4 and near the contract high of 10.48 established on March 7. Today's close above the 10-day moving average is encouraging, and after a somewhat bleak morning session yesterday in which prices seemed to come under additional selling pressure from a very weak close on Wednesday, the market has made a significant turnaround and is somewhat flexing its muscle. Various reports out of South America suggest that recent dry weather may be more critical, and that yield may actually be lower than the USDA estimate of 46 million metric tons, with private estimates potentially down to 40 to 44 million. Yet, other reports seem to counter the damage and suggest that it is overblown. The market seemed to vote at the end of the week on general concerns that conditions have been worse. Weekend rains and rain into Monday should alleviate some concern, but once again, we have to remember that weekend rains have been nothing but disappointing for Argentine producers over the last several weeks. Good export sales and technical support yesterday, provided a boost to prices today, as did spreading between traders selling wheat and buying beans, and perhaps selling corn and buying beans.

WHEAT HIGHLIGHTS: Wheat futures had another rough session with both technical, as well as likely fundamental reasons for selling. Jul Chi closed 11 lower at 4.85, its lowest level in a month, as prices sliced through yesterday's low likely intriguing further sell stops. KC wheat was the big loser today, losing 13 to 14-1/2 cents as Sep led its drop lower on long liquidation and expectation that rain in the forecast will be beneficial, at least to some degree for winter wheat crops. Yesterday, the Jul KC wheat found support at the 21-day moving average. But, with that level not holding today, it didn't take long for traders to unload contracts. A dismal export sales number this week didn't help the cause for wheat either.

CATTLE HIGHLIGHTS: Cattle futures fell back again today, capping off a week of triple-digit losses. The nearby Apr contract closed 60 cents lower on the day and 1.87 lower on the week to 121.25, Jun closed 55 cents lower on the day and 2.55 lower on the week to 111.75, and Aug closed 67 cents lower today and 2.52 lower on the week to 109.12. Cash trade in Kansas and Texas was noted today at $127, a positive market force. Cash reached as high as $128 on Tuesday afternoon. Beef values were again supportive today, with choice cuts up 88 cents yesterday afternoon to 224.99, and up another 73 cents today to 225.72. The market is still nervous looking forward to a large quarter of beef production, though demand somehow is still pushing retail beef prices to their highest levels since June. The Apr futures continued to drift lower and lower from the cash market, but real front month pressure will likely not be seen until cash markets begin to erode. Apr futures remain above their 200-day moving average support level, while the Jun and Aug contracts were not able to push above their 200-day moving average levels today. Prices could be considered oversold using some technical indicators, but fundamentals appear bearish enough at this point to warrant the weakening prices.

LEAN HOG HIGHLIGHTS: Hog futures tried and failed to end the week with green numbers, succumbing to both supply and demand concerns. The nearby Apr contract closed 27 cents lower to 65.45, May closed steady at 72.75, and Jun closed a nickel lower to 79.12. Apr futures lost 2.40 this week. Carcass cutouts were up 51 cents yesterday afternoon to 72.80, but lost 30 cents this morning to 72.50. Bellies were up 4.48 today to 108.65, providing some much needed stability, but hams were down 3.09 to 53.17, causing most of the carcass softness today. Demand questions remain due to inclement weather on the East Coast, but more importantly hog weights are heavy and there is no shortage of market-ready supply. The CME Lean Hog Index was down 74 cents for today to 65.93, showing weakness in cash markets. From a technical perspective, hog futures, particularly Apr futures, are oversold. However, without confidence in a pork value rebound, new buying interest will likely be relatively thin. In addition, short covering bounces will be limited by heavy cash hog supply.

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