Stewart-Peterson Market Commentary

Closing Commentary - January 15, 2019

Top Farmer Closing Commentary 1-15-19

CORN HIGHLIGHTS: Corn futures had one of its worst looking days in multiple months with futures closing down 5-1/4 to 7-1/4 cents as front months led the way lower. Mar closed at 3.71-1/4 and May 3.79-3/4. Today's close in Mar was the lowest since November 27. Recent trading ranges have been very minor and with today's slide through not only critical moving averages, but the most recent low of 3.76, it appeared the floodgates were opened as sell stops were likely triggered and long traders headed for the sidelines. Double-digit losses in soybeans and weakness in wheat, along with a firmer U.S. dollar showing stronger gains today, all seem to weigh on futures. However, perhaps the bigger catalyst was mid-morning news that one of the key negotiators for the U.S. seemed to indicate that recent talks with China basically went nowhere.

SOYBEAN HIGHLIGHTS: Soybean futures suffered losses of 9 to 10-1/2 cents as May led today's drop closing at 9.06-3/4. Nearby Mar lost ground losing 10-1/4 closing at 8.93-1/4, while new crop lost 9 closing at 9.37-1/2. While today was a poor technical-looking day with prices closing decisively below the 21, 40, and 50-day moving averages, the 100-day moving average held as did the upward channel line in tact since September. Recent reports out of South America seem to be downplaying dry weather concerns suggesting a crop is somewhere close to 118 million metric tons, lower than the USDA estimate of 122 million but well above private estimates of somewhere between 105 and 115 million metric tons. Word this morning that progress with China seems to be stalling was enough to send prices on the defensive. A lack of fresh new USDA news as far as export sales are concerned also seems to be enough to keep traders on the sideline. South American weather continues to be a focal point as generally net drying is occurring in larger areas than usual this year and, consequently, it may be easier than not to still pencil in declining crop conditions and potentially lower yield.

WHEAT HIGHLIGHTS: Wheat futures ended softer with losses of 2-3/4 to 4 cents which encompassed the closing ranges for all three exchanges, Chi, KC, and Mpls. A general melee in the grain markets today had prices on the defensive. The melee was a lack of positive news and technical selling. What news there was seemed to have a negative perspective as talk that the negotiation team that was in China recently may not have accomplished much if anything. Whatever the case, the trade just didn't want to buy grains today and with the dollar firmer as well as equities higher it appeared money flow was elsewhere and out of row crops. There was no technical damage done on charts as prices remain entrenched in a range-bound pattern. However, today's drop and decisive close under a host of moving averages may have been enough to untrigger sell stops and add selling pressure to prices. However, late in the session wheat prices did bounce off their low by 3 or more cents in most futures contracts, this was unlike the soybean and corn markets which finished at or near the day's low. Without positive news, prices continue to bump near contract lows. On the one hand, we can call this base-building at a price level where demand should be strong. On the other hand, it's reflective of lack of good export activity and now that mid-January is here, it will have to pick up soon to meet USDA projections, otherwise the market is in risk of seeing downward adjustments to export sales expectations. Our bias is the market will find better export activity in the months ahead as our biggest competitor, Russia, runs low on high quality wheat.

CATTLE HIGHLIGHTS: Cattle futures showed impressive strength today, with both the Feb and Apr live cattle contracts making new highs. Feb lives closed 1.52 higher to 126.95, Apr lives closed 75 cents higher to 127.42, and Jun lives closed 12 cents lower to 117.05. Jan feeders were down 10 cents to 144.75 and Mar feeders also closed at 144.75, up 35 cents on the day. Choice beef values closed 44 cents lower yesterday afternoon to 212.02 but were up 56 cents this morning to 212.58. Cash bids in IA this morning were already noted at $124, steady with last week. Tuesday morning is very early to see such offers, but wide-spread published bids were quiet. The higher stock market was likely supportive today, up about 130 points at the time of this writing. With today's sharp rally, futures prices are likely overbought in the short term. Both the Feb and Apr live cattle contracts made new contract highs. Both closes were above the upper Bollinger band range and Stochastics are in overbought territory as well. Meanwhile, the Jun contract made a bearish key reversal but held onto its 10-day moving average support level.

LEAN HOG HIGHLIGHTS: Without any official word of large-scale Chinese purchases of U.S. pork products, hog futures markets continue to drift with stagnant long liquidation. The nearby Feb contract closed 80 cents lower to 61.85, Apr closed 52 cents lower to 66.82, and Jun closed 97 cents lower to 78.92. The CME Lean Hog Index was up 70 cents today to 56.69, the highest level since November 29. Carcass cutouts closed 50 cents higher on Friday afternoon to 70.96, their highest value since December 18. Cutout values jumped 2.03 this morning to 72.99. Bellies were up 10.02 to 152.27 and butts were up 3.19 to 75.79. Pork production last week was up 4.6% over last year, a big reason for today's selling. Meanwhile, African swine fever has continued to spread in China, and without official sales data to gauge what U.S. pork, if any, China has been buying, their buying interest on ASF fears recently has been thin. However, this morning during a speech at the American Farm Bureau Federation, President Trump made comments indicating that China has agreed to open its market to buy U.S. pork. Further details regarding this statement are thin. Technically, we are expecting the near-term contracts to remain relatively supported. The Feb contract is holding about a normal premium to the cash market for this time of year, so with fundamentals improving domestically, this should be supportive. In deferred contracts, we could see some more speculative liquidation. Without confirmation of large scale Chinese purchases, traders may want to take money out of the market.

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