Stewart-Peterson Market Commentary

Closing Commentary - December 10, 2018
Top Farmer Closing Commentary 12-10-18

CORN HIGHLIGHTS: It was a quiet day for corn futures, as they traded mixed with nearby Dec closing 1/4 higher at 3.74-1/4 and Mar down 1-1/2 at 3.84. New crop Dec closed at 4.02-1/4, down 3/4. Export inspections at 34.5 million bushels was termed neutral to friendly and helped provide underlying support. So far this year, inspections are up 76% from last year and total 595 million bushels. As the holiday season approaches, look for a slowdown in farmer selling unless basis levels improve. While basis is improving throughout parts of the country, it is still wide enough to reflect ample near term inventory, as well as big enough supplies moving into the winter months. The market is anticipating an increase in corn acres for the year ahead, and that could be premature. Price movement in beans and corn over the next 90 days will be the biggest determinant toward price factoring for acreage. New crop Nov beans are trading near 9.60 per bushel, and for some who are higher yielding, beans may actually better pencil than corn.

SOYBEAN HIGHLIGHTS: Soybean futures moved lower today, losing 4-1/4 to 7 cents as nearby Jan led today's slide, closing at 9.09-3/4. Today's trading range was smaller than Friday; therefore, today was termed an inside day. Today's high in Jan beans was 9.16-1/2, while the low was 9.08-1/2. New crop Nov closed 4-1/4 lower at 4.57. Meal closed about 1.00 lower, while bean oil closed slightly higher. Bean export inspections at 33.9 were termed friendly. Prices failed to respond to this, as the overall year-to-date sales and inspections are expected to struggle. Nonetheless, we like this fall's activity, and this would suggest many other sales to countries that normally may not have taken place after the tariff to China was in place. This made U.S. beans cheaper. As for the tariff, there was a green light out of China for importers to begin to buy. We haven't found any evidence yet that they have in fact purchased. The purchases could add up close to 200 million bushels. A firmer dollar may have weighed on prices today as well, as it made a reversal upward, posting an outside day.

WHEAT HIGHLIGHTS: Wheat futures finished with losses of 2-1/2 to 6 cents, as Mar Chi led today's drop, closing at 5.25-1/4. In KC, small losses of 1-1/2 to 1-3/4 were noted, and in Mpls, losses of 5 to 6-1/4 cents were noted. The strong recovery on Friday gave way to overhead resistance in Chi wheat, in particular the 40 and 50-day moving average in which the May and Jul contracts were up against. While front months did finish weaker, they did finish above these critical moving averages. The good news is that prices moved higher on a Friday and did not fall apart much today. Sometimes over a weekend, prices are perhaps more reflective of fundamentals. With a lack of new positive news, we were surprised prices were as high as they were on Friday, and the market was vulnerable to a drop today. However, the lack of selling today also suggested there is not much of an appetite to be bearish wheat presently. Export inspections at 15.4 million were termed OK but not enough to give the market much of a boost. Year to date shows wheat export inspections down 16% from a year ago at this same time. In the end, what we are concerned about is a lack of rally on consecutive days. That is the case today after a strong close on Friday and lack of follow through today. It could signal more consolidation.

CATTLE HIGHLIGHTS: Cattle futures finished mixed with the lives mostly lower, and the feeder contracts higher. The nearby Dec live cattle contract closed 32 cents lower to 117.57, Feb closed 32 cents lower to 121.20 and Apr lives were down 2 cents to 123.60. Jan feeders were up 65 cents to 145.02, and Mar feeders were up 87 cents to 142.75. Choice beef values closed 1.62 higher on Friday afternoon to 214.29 and were up another 83 cents this morning to 215.12. A dry forecast for the central and southern Plains over the next week will aid weight gain and likely limit any major price bounces. Cash trade reported late Friday afternoon was seen as high as 118.50 to 119. This was steady to 1.00 higher than the previous week. Stock market instability likely kept selling pressure on the cattle today despite solid beef values and cash trade. Though closes in the live cattle markets were not necessarily bullish, most months made inside sessions and held major support levels. Feeder markets have continued their consolidation ranges nicely after stabilizing near recent lows.

LEAN HOG HIGHLIGHTS: Hog futures made mostly lower closes today, drifting under a lack of supportive China trade news. The nearby Dec contract closed 47 cents higher to 54.72. Feb closed 1.05 lower to 66.82, and Apr closed 25 cents lower to 72.07. The CME lean hog index was down 23 cents to 55.96. Carcass cutout values closed 1.51 higher on Friday afternoon to 73.63. This was the highest cutout value since 11/6. Cutout values fell 64 cents this morning to 72.99. Ribs were down 4.12 to 113.21, and hams were down 4.45 to 52.70. Picnics limited losses, up 3.22 to 55.73. Pork prices have stayed relatively strong despite record production levels. This, coupled with the relatively weak cash market, has kept packer margins strong. China reported two new cases of African swine fever over the weekend. If the situation develops, it could turn into somewhat of a bargaining chip in developing U.S./China trade talks. This could also attract a wave of fund buying. While the Feb contract closed just off its lows today, it was able to hold onto nearby support at the 10-day moving average. Deferred contracts also posted lower closes today, but a late surge of buyers pushed prices to close just off of their opening trades.

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