Stewart-Peterson Market Commentary

Closing Commentary - April 24, 2018

Top Farmer Closing Commentary 4-24-18

CORN HIGHLIGHTS: Corn prices recovered for the second consecutive session, finishing with gains of 2-1/4 to 2-3/4 cents, as May led today's rally closing at 3.81-1/4, its highest close in three sessions. A lack of farmer selling, as well as speculative selling interest after a weak close on Friday, helped to give prices a boost early this week, as did firmer wheat prices today which made a significant reversal in both Chi and KC. New crop Dec closed 2-1/4 higher at 4.06-1/2, holding the 50-day moving average and closing back above the 40-day. A somewhat rainy 6-10 day forecast would suggest that the central to southern Midwest could lag in planting progress. While temperatures and lack of snow this week were viewed as both beneficial, rain in the forecast would suggest farmers may struggle to move forward in a meaningful manner. That being said, it's too early to put too much credence in those concerns. Yet, our general bias is that prices have plenty of room to recover, but it will likely take more summer-type weather before this occurs. News otherwise was lacking.

SOYBEAN HIGHLIGHTS: Soybean futures traded both sides of steady, eventually finishing with gains of 1/2 in Nov to 1-3/4 in Jul, closing at 10.34. Today's trade had very little impact on technical activity, other than prices did slide lower than yesterday's low, and managed to finish slightly higher. Export sales to Argentina for both old and new crop were viewed as supportive. With planting season just around the corner, it's unlikely that prices are poised to move much higher or lower in the very short term. We've argued the market looks tired, and we believe that farmers have been fairly aggressive sellers of soybeans this year and have little on hand. That could be a friendly factor. The export front remains a question mark with trade war and tariff talk continuing, but at the same time, there's also some potential resolution on the horizon as President Trump has sent a trade delegation to China. We don't see farmers aggressively selling old crop, but we could see new crop sales, especially hedges pick up if prices break support, which at this point will peg at 10.20 (Nov), 10.13, and then below the low of April 4 of 9.97-3/4 (Nov).

WHEAT HIGHLIGHTS: Wheat futures had a very impressive turnaround today, gaining 7-1/4 to 11 in Chi as May led today's rally closing at 4.72-1/4, indicating a very solid reversal upward. The same was true for KC, which finished 7-1/2 to 9-1/4 cents higher. Mpls did eke out positive territory, gaining 3-1/4 to 4-3/4 late in the session, following both Chi and KC. On the one hand, rain will help parts of the winter wheat belt. Yet, not enough if you look at just crop ratings in which over 60% of the crop is poor to very poor in two key growing states, TX and KS. Both states have more than 60% of the crop rated poor to very poor. KS is at 49% poor to very poor. Yet, the wet blanket over the wheat market is large world inventories as indicated in last month's USDA report. Once again, there was an upgrade to world predicted carryout to what we would term an adequate or burdensome level. Excellent world wheat crops the last four seasons have built inventories, and this is the problem with getting too optimistic on wheat prices, or at least expecting continued rallies. Nonetheless, we like the entire commodity complex, and wheat, as well as other commodities, seem to drop off in price but come right back. That's a good sign.

CATTLE HIGHLIGHTS: Cattle futures ended the day with mixed to negative closes, running into technical selling after initial strength on solid beef values. The nearby Apr contract closed 62 cents lower to 121.10, Jun closed 17 cents higher to 105.05, and Aug closed 15 cents lower to 104.92. With the weather warming up, retail beef values have gained some significant strength. Yesterday afternoon, choice cuts closed 3.13 higher to 215.11, and select cuts were up 1.59 to 201.72. By midday today, select cuts were up another 39 cents to 202.11, and choice cuts were up 1.88 to 216.99. Cash trade for today was undeveloped, though tomorrow's Online Fed Cattle Exchange will likely give us some idea of what to expect later this week. The overall feeling of fundamental strength was met with strong technical selling. The nearby Apr contracts have been technically overbought for a number of sessions in a row, and yesterday's close above the 100-day moving average level for the first time since late-February drew increased selling pressure today. Jun live cattle futures were approaching overbought levels, touched their upper Bollinger Band, and subsequently sold off.

LEAN HOG HIGHLIGHTS: Hog futures put in negative closes today under more fundamental selling pressure from a negative Cold Storage report. The nearby May futures closed 55 cents lower to 67.45, Jun closed 1.55 lower to 74.82, and Jul closed 90 cents lower to 78.00. The CME Lean Hog Index was up 1.08 today to 57.88. Carcass cutout values were 58 cents higher today to 68.45. Loins were up 2.16, butts up 98 cents, ribs were up 1.17, and bellies were up 2.37 to 89.61. This is somewhat surprising considering pork belly stocks were up 21% from last month, and 188% from last year on yesterday's Cold Storage Report. The heavier pork stocks on yesterday's Cold Storage report was likely a large reason for selling pressure today. Pork production is expected to increase this year, so compounding that with already heavy stocks is a bearish formula. The Jun futures gapped lower yesterday to close below their 10 day moving average for the first time since 4/6, and today the Jun contract closed below its 20-day moving average support level. With Jun and Jul down over 2.00 already this week, these markets look shaky at best.

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