Stewart-Peterson Market Commentary

Closing Commentary - October 18, 2018

Top Farmer Closing Commentary 10-18-18

CORN HIGHLIGHTS: Corn futures lost 3-1/4 to 3-1/2 cents as nearby Dec led today's drop, closing at 3.70-3/4. This is the lowest close in four sessions. The 10-day moving average held as support, but prices closed under the 100-day moving average, not necessarily the friendliest signal. Sharp losses in beans with futures losing 21-22 cents, along with continued weakness in wheat, weighed on corn futures, as did clear weather for harvest in most of the Midwest. Yield results are about as expected, which means very good. We question whether or not 181 bushels per acre is feasible, as variability continues to be a highlight in conversations with producers. If you are behind, make catch up sales. Futures rallied near 10% the value of corn, and typically that will entice farmer selling.

SOYBEAN HIGHLIGHTS: Soybean futures suffered double-digit losses of 21-1/4 to 22-1/4 cents as Nov lead today's drop, closing at 8.63-1/2. Technical selling after prices ran into overhead resistance at the 100-day moving average, a drop below the 10-day moving average today, and weakness in soybean meal all contributed to losses, as did weakness in corn and wheat prices and a stronger U.S. dollar. The stock market was under pressure again today, which may have also created a liquidation issue as fund managers may be pulling in midweek on owning equities or commodities. In general, a wide basis continues to suggest that concerns over export activity and ample supplies due to expectations for a record crop continue to pressure prices. For the week, export sales were a disappointment at just under 11 million bushels.

WHEAT HIGHLIGHTS: Wheat prices finished lower with technical damage incurred today, as prices closed beneath the 10 and 21-day moving average. By day's end, Chi finished 2-3/4 to 4-1/2 lower with Nov leading today's drop. KC wheat closed 5 to 6-1/4 lower and Mpls 2-1/2 to 3-1/4 lower. Export sales at 17.5 million were termed neutral to bearish and did not help prices today. A rise in the U.S. dollar and weakness in corn and soybeans futures also spilled over into wheat, as did a sharp daily drop in the stock market. Without positive news domestically or worldwide, the wheat market is vulnerable to more consolidation, if not a sideways to lower pattern. We have been anticipating export business to increase to the U.S., but so far there has not been much evidence of this. We expect the availability of Russian exportable quality wheat will dwindle in the months ahead, and that business will come to the U.S.

CATTLE HIGHLIGHTS: Cattle futures put in mixed to lower finishes today, limiting heavy early session losses due to strength in the beef market. The nearby Oct live cattle contract closed 15 cents higher to 113.07, Dec closed 20 cents lower to 117.17, and Feb closed 10 cents lower to 121.37. Feeder contracts made impressive closes, with Oct up 1.17 to 155.25 and Nov up 1.07 to 154.42. Sellers were active early in the session after weekly export sales data was poor. U.S. beef export sales for the week ending last Thursday were reported at 13,100 tons, versus the previous 4-week average of 15,325 tons. This was a 6-week low and leaves cumulative sales for 2018 16.9% ahead of last year's pace, currently at 800,200 tons. A lot of cattle in Nebraska were sold today at 111, marking the fifth week in a row of steady cash trade. Boxed beef values were the greatest source of support today. Yesterday afternoon, choice cuts were down 5 cents to 204.56. This morning, choice cuts were up 2.20 to 206.76, and select cuts were up 25 to 192.44. Not only were the rallying beef values positive, but the widening spread between choice and select on a strong day is bullish as well. Price action was impressive today given the negative closes in live cattle markets. The Dec contract sold off to its lower Bollinger band support level and then found buying support to rally back up and close just shy of its 10-day moving average level. The Nov feeder cattle contract made a bullish key reversal, regaining its position above its 50-day moving average support level.

LEAN HOG HIGHLIGHTS: Hog futures closed sharply lower today on weakness in pork values and quickly accelerating production. The nearby Dec contract closed 2.40 lower to 52.30, Feb closed 2.35 lower to 60.22 and Apr closed 1.50 lower to 67.00. U.S. pork export sales for the week ending 10/11 were reported this morning at 20,700 tons, versus the previous 4-week average of 20,650 tons. This leaves cumulative sales for 2018 up 5.4% from last year's pace, currently at 1,057,300 tons. Over the recent weeks, many suspected that the slow slaughter pace recently has been adding weight to market-ready hogs. This was confirmed with average weights for Iowa and Minnesota hogs last week jumping to 282.8 pounds, up from 280.9 the previous week. Slaughter so far this week is up 3.8% from last year. This surge in production should begin to pressure pork prices and could overwhelm current demand. Yesterday, carcass cutout values closed 2.35 lower to 78.52 and were down another 16 cents this morning to 78.36. Today's price action was very ugly. The best traded Dec contract quickly fell through its 100-day moving average level for the first time since 9/17 and put in its lowest close since 10/24. The Feb contract had similar price action today, making its lowest close since 8/23.

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