Stewart-Peterson Market Commentary

Closing Commentary - August 21, 2017

Top Farmer Closing Commentary 8-21-17

CORN HIGHLIGHTS:Corn futures edged lower, losing 2-1/2 to 3 cents to start the week, as Sep led today's drop closing at 3.49. Rain on the radar and expectations that early feedback from the Pro Farmer tour doesn't vary much with the USDA figures, suggests the market is destined to trade sideways to lower as harvest approaches. There is a lot of time between now and harvest and many results from field surveys to be gathered. Along with corn, soybeans, wheat, and energies got off to a weak start today as well. The stock market and the dollar index were down, as there just wasn't much strength in commodities other than metals. That being said, export inspections at 27.2 million bushels were viewed as supportive, as this brings year-to-date inspections to 2.175 billion bushels, up 25% from last year and still above the projected USDA increase of 17%.

SOYBEAN HIGHLIGHTS:Soybean futures finished mixed. Nearby Sep lost a nickel, closing at 9.32-1/2, while May closed steady and Jul up a penny at 9.67-3/4. Nov closed at 9.36-1/4, down 1-1/2 cents. Most contracts had an inside trading day, which suggests the range was smaller than Friday. Today's closes were uneventful as the market awaits more news to find direction. The Pro Farmer tour is starting today, and more results will be known by tomorrow. So far we're not hearing or seeing much that would indicate significant changes from the USDA. Yet, as more areas are surveyed and results published, there may be new, or different, information for the market to be aware of. Export inspections at 24.4 million bring the year-to-date total to 2.07 billion, which is up 14% from last year and above the 11% gain forecasted from the USDA. Rain on the radar was viewed as negative, as any rain in August is generally beneficial to pod-fill. However, a bigger theme in recent days has been the lack of rain that has been advertised, but just hasn't made it to dry areas. Those areas may be shrinking, but we're not necessarily convinced the yield is getting any bigger.

WHEAT HIGHLIGHTS:It was the same story, but just a different day. Wheat prices continue to lose ground starting this Monday with losses of 5 to 6-1/2 cents in Chi, as Sep led the way lower closing at 4.09-1/2, another new contract low. KC was down 6 to 7 and Mpls down 10 to 13-1/2 cents. The wheat market is like a bottomless pit and just can't find any traction at this point. It may take Chi reaching down to 4.00 or lower before finding long-term support. Our bias is that the wheat market, while well overbought due to a rally in spring wheat, is now in the under-valued category and is providing excellent long-term opportunity for end-users, in particular importing countries in which the dollar continues to offer a better opportunity to buy, than it did in the early part of winter. The dollar is hovering near 14-month lows. From a news-worthy perspective, the rally at mid-summer may have encouraged producers to sell ahead and plant more acres for next year. Yet, the rally disappeared so quickly that we're not necessarily convinced that will be the case. Bottom line, we're not convinced that wheat acres will be up in the year ahead, as the recent harsh selloff will likely keep producers second guessing and maybe leaning toward other crops.

CATTLE HIGHLIGHTS:Cattle futures attempted to stabilize during today's session after taking substantial losses last week. The nearby Aug contract closed 37 cents lower to 106.00, Oct closed a nickel lower to 105.85, and Dec closed 20 cents higher to 108.05. Feeder cattle contracts all closed lower, but limited losses to less than 1.00 per contract. Slaughter for the week ending August 19 was reported at 634,000 head versus 641,000 head the previous week and 602,000 head the same week last year. Weights were 3 pounds heavier than the previous week and 16 pounds lighter than the same week last year. Beef production was 3.4% higher than the same week last year and is currently running 4.3% ahead of last year. As expected, cash trade in the country was quiet, with bids and asks undeveloped. Beef cutouts were weaker Friday afternoon, with choice cuts closing 1.34 lower to 194.29 and select cuts closing 1.70 lower to 192.50. Boxed beef was down again this morning, with choice cuts down 78 cents to 193.51 and select cuts down 6 cents to 192.44. The Cold Storage report being released tomorrow afternoon, will likely give the cattle markets their first direction for the week prior to Wednesday's Fed Cattle Exchange and Friday afternoon's Cattle on Feed report. There were no major technical developments today, with very tight trading ranges and no major moves.

LEAN HOG HIGHLIGHTS:Lean hog futures took heavy losses today, following through on technical selling from last week. The nearby Oct contract closed 1.45 lower to 64.67, Dec closed 1.47 lower to 59.85, and Feb closed 1.27 lower to 64.62. The CME Lean Hog Index was 51 cents lower today to 83.19. For the week ending August 19, 2,332,000 head were slaughtered, 2.64% greater than the previous week and 1.61% greater than the same week last year. This brings cumulative slaughter 2.7% ahead of last year. Weights are down slightly, leaving pork production 2.2% ahead of last year. Friday afternoon, carcass cutouts closed 1.83 lower to 90.14, but rebounded by midday by 62 cents to 90.76. The increase in pork values today was led by picnics up 2.94, ribs up 1.86, and bellies up 2.98. The technical selling today was a continuation of the move lower after the bearish key reversal put in last Wednesday. The Oct contracts discount to cash will not be much support in the near-term as that contract does not expire until October 13.

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