Stewart-Peterson Market Commentary

Closing Commentary - October 22, 2018

Top Farmer Closing Commentary 10-22-18

CORN HIGHLIGHTS: After a soft landing at the end of last week, which futures lost ground Tuesday through Thursday, prices posted a hook reversal upward today, closing with small but modest gains of 1-3/4 to 2-1/2 cents, as Dec lead today's rally. It appeared once prices failed to push beneath the 50-day moving average, traders took this as a cue to buy back short positions or establish new longs. Prices then climbed above the 21-day moving average, and this may have uncovered buy stops. Corn had an impressive day, considering wheat prices were down 6 or more cents in Chi, and beans only finished with small gains of 2 cents. In addition, the U.S. dollar was 37 points higher. Solid export inspections were supportive at 37.4 million and continue to suggest that the current pace could potentially mean more sales. While it is early in the marketing year, inspections are running 72% ahead of last year's figure for the same time. Harvest weather continues to be conducive, and while it was likely factored into last week's prices, there will be more corn availability. Consequently, we expect prices may have trouble moving upward. All technicals continue to point to the topside with a very simplistic view suggesting resistance exists near 3.75, 3.85 and 3.95.

SOYBEAN HIGHLIGHTS: Soybean futures traded higher most of the session and finished with small gains of 1-3/4 to 2-1/2 cents, as May lead today's rally. It was a very subdued trade session with a tight trading range in light volume. Most futures contracts had a trading range of about 7 cents. Soymeal finished mixed, and soybean oil mostly unchanged. Good harvest weather is keeping rally potential in check, and while prices did try to rally this morning on ideas that export activity could pick up and rain delays could occur toward the end of the week, good harvest progress this week will likely keep a cap on rally potential. Our concern to the downside is if prices slip through the 50-day moving average, a level that has held the last two sessions. Should prices slip below this support area, a move to the low from last week of 8.47 is likely on the Nov contract. A drop below that could potentially suggest a move to 8.25, and then down to the contract lows of 8.12-1/4. Much would depend on yield results. They have been very solid to date, but a lot of shattering has been reported, as well as other issues that are associated with harvest delays. Export inspections were solid at 42.2 million bushels, but less than 1/2 what they were a year ago at this time. To date, export inspections are running nearly 40% below a year ago at this time.

WHEAT HIGHLIGHTS: Wheat futures had another down session today without even trading to the positive side throughout the session. By day's end, Chi finished 4-1/2 to 6-3/4 lower with Dec leading the way down, closing at 5.08. KC lost 7-1/4 to 8-1/2, with Dec leading the drop, closing at 5.07-3/4. Mpls closed 3-1/4 to 4 cents lower. Most wheat contracts are on the lower end of their sideways trading range, and after posting slight gains on Friday, today reflects the fourth out of the last 5 sessions in which prices finished lower, and in each session, near the low end of the day. There is not much news to provide support, and prices drift as traders either add sell positions late in the session or exit longs. Export inspections at 14.1 million bushels were termed neutral to negative. Year to date has inspections well behind last year at a decline of 24%.

CATTLE HIGHLIGHTS: Cattle futures saw triple-digit gains in deferred contracts, as the market responded favorably to Friday's Cattle on Feed report. Front month Oct cattle gained 55 cents to 112.80, while Dec Cattle were 30 higher to 118.07-1/2. Front month Oct feeders gained 1.00 to 155.65, and Nov feeders finished at 2.82-1/2 higher to 156.92-1/2. Short covering after Friday's cattle on feed numbers saw total cattle on feed at 5.4% above last year's levels, but below expectations, helped fuel today's move higher. Dec cattle futures challenged the 118 level, finishing above that key mark in today's trade. This could bring additional follow through buying tomorrow, but in digging into numbers, cattle available for the end of third/start of fourth quarter were still running at large percentages over last year. This may limit any short term rallies, as the market continues to digest supplies of readily available cattle. Cash trade on the week stayed firm with the previous week. Most trade was 110 to 111.50. Today, retail values saw additional support after a strong close on last week's trade. At midday, choice carcasses gained 88 cents to 208.81, while select carcasses jumped 2.65 higher to 196.89.

LEAN HOG HIGHLIGHTS: Hog futures rebounded after a difficult week last week. Dec hog futures gained 1.57-1/2 to 53.17-1/2, followed by Feb up 1.27-1/2 to 60.30. Dec hog futures holding about a $14 discount to the lean hog index, as well as strength in retail values, provided support in the hog markets today. At midday, pork carcass cutout value was 1.75 higher to 80.17, which helped provide buying momentum to an oversold hog market. Hog futures benefited from short covering and strength seen in the cattle market, which may have helped prices solidify in today's trade after last week's aggressive sell-off.

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