Stewart-Peterson Market Commentary

Closing Commentary - July 20, 2018

Top Farmer Closing Commentary 7-20-18

CORN HIGHLIGHTS: Corn futures ended near the high of the day and with solid gains of 3-1/4 to 4 cents as futures closed higher for the fifth consecutive session. The bullish key-reversal established last week on July 12, the day of the USDA report, looms larger as the potential bottom, with prices closing back above the 21-day moving average today for the first time since May 29. Thoughts that crop ratings may have peaked and could decline again next week, in particular in areas that are hot and dry, along with growing concerns that crops could be diminished in Europe and the Black Sea Region due to warm and dry conditions, help provide for a turnaround this week. In addition, technical traders would argue that this week's trade activity had prices closing back above a downward channel line, suggests that a low may be in place, if not for the long-term at least in the near-term. With Dec corn closing at 3.59, this indicates a gain of 14-1/4 cents for the week.

SOYBEAN HIGHLIGHTS: Soybean futures edged higher today, gaining 3 to 3-1/4 cents with Nov closing at 8.64-3/4, after reaching a high today of 8.68-3/4. Prices finished near the high end of today's trading range which was close to 12 cents on most futures contracts. For the week, Nov soybeans finished 34-1/2 cents higher and well off the most recent low of 8.26-1/4, which occurred on Monday, July 16. A lack of farmer selling, good demand, and expectations that the crop ratings may have peaked helped provide underlying support. The backdrop to supportive prices may also be the idea that U.S. beans, with a tariff in place, are priced similar to Brazilian beans available for export. In other words, nothing new to drive prices lower.

WHEAT HIGHLIGHTS: Wheat futures had another day of solid gains with Chi gaining 11 to 12-3/4, KC 11 to 12-1/4, and Mpls the big winner at 14 to 18 higher as Sep led today's rally closing at 5.55. Heavy technical short-covering in all three markets were noted as reports continue to surface by the end of this week of continued hot/dry expectations in Europe and the Black Sea Region, in which wheat production is expected to be lower. Parts of Russia are also looking at a down year for production and now are hampered by areas of too wet for harvest. Some harvest delays are occurring in the U.S., but overall, we expect to continue to hear good soft red winter wheat results. Sep Chi closed at 5.16, above the 100, 40, and 50-day moving averages, something that has not occurred since mid-June. Prices also closed at their highest level today since June 14. Short-covering was a primary feature, but the catalyst behind the recent turnaround continues to be weather concerns and harvest delays in the U.S. Lastly, growing concern that a dry weather pattern in eastern Australia this past year will continue for at least a couple more months, which could affect upcoming production. Spring wheat, however, the big winner today on higher prices, may be more reflective of dry weather concerns in the Northwest, specifically parts of Oregon.

CATTLE HIGHLIGHTS: Cattle futures ended the week with a mixed session, but weekly gains were impressive. The nearby Aug contract closed 2 cents higher and 4.37 higher on the week to 108.92, Oct closed 40 cents lower today and 2.87 higher on the week to 110.25, and Dec closed 22 cents lower today and 2.80 higher on the week to 114.20. Traders were concerned today that despite cash trade at 110.50 today, trade in the country next week could turn negative. Choice beef values closed 31 cents lower yesterday afternoon to 204.49 and were down another 57 cents today to 203.92. The choice/select spread is currently at 7.17, a bearish factor. Today's Cattle on Feed report was in line with expectations, though still heavy. Placements at 101%, marketings at 101%, and on feed at 104% were all even with expectations. Technically, today's price action was not necessarily bearish, but the setup does not look friendly for next week. The Aug and Oct contracts tried and failed again to close above their 200-day moving average levels for the third session in a row. With the heavy Cattle on Feed report, cattle futures look likely to trade lower for the beginning part of next week.

LEAN HOG HIGHLIGHTS: Hog futures made yet another round of new lows today, with the Aug contract down 80 cents to 66.45, Oct down 95 cents to 51.27, and Dec down 95 cents to 45.92. The 3-near month hog contracts lost between 3.70 and 4.50 this week. Carcass cutout values were up 34 cents yesterday afternoon to 82.69, but lost 1.83 this morning to 80.86. Hams were down 2.10 to 51.93, and bellies were down 11.11 to 162.38. It is somewhat interesting that grain traders seem to have some optimism about the current U.S./China trade spat, while those trading hogs cannot seem to build an ounce of optimism. On the other hand, there is still much uncertainty about trade issues with Mexico and Canada that worries hog producers. In addition, pork production is ramping up, along with the seasonal tendencies and hog numbers are enormous. Technically, the new lows are unfortunately nothing new. The Dec contract has not been able to close above the 50-day mark since last Friday, and short-covering remains one of the only hopes for a bounce barring trade news.

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