Stewart-Peterson Market Commentary

Closing Commentary - August 29, 2014

Stewart-Peterson Closing Commentary 8-29-14

CORN HIGHLIGHTS: Corn futures finished 2 to 4 lower this afternoon as Sept posted a 2-3/4 cent loss to 3.59, followed by Dec down 4-1/2 to 3.64-3/4. For the week, the Sept corn contract posted a 6-1/2 cent loss while Dec posted a 6-3/4 cent loss. After experiencing some profit taking and some risk off trade going into the three-day weekend and concerns in the Ukraine, this afternoon the market continued its bearish down trend pattern. Fundamentally, the market continues to stay bearish with projections for a 14 plus billion bu crop and continued favorable weather in the forecast. Trade may be looking towards September's USDA Supply and Demand numbers which is expecting this year's yield and crop size to grow off the Aug USDA projections. If those numbers do continue to grow, will the carryout number get back over the 2 billion bu mark? The Dec corn contract continues its downtrend as we see it is going to be the easier path of least resistance for prices to move lower than higher over the next few weeks.

SOYBEAN HIGHLIGHTS: Soybean futures, with the exception of the Sept contract finishing 15-3/4 cents higher to 10.89-3/4, finished 3 to 5 lower today. Nov beans were down 4-1/2 to 10.24-1/4. For the week, the Sept contract saw a lot of volatility and posted a 76-1/2 cent lower move, while the Nov contract dropped 17-3/4 cents. Much like corn, bean prices continue to suffer as the weight of bearish expectations for record harvest this fall continues to loom. Nov bean prices pushed to their lowest prices in nearly 4 years this week with prospects of them moving lower and continue to weigh as weather stays favorable for this crop. The biggest factors that could be slowing this decline to lower prices is continued demand for US beans. New crop sales are at 46% of USDA estimates for next year. If prices continue to slide, more buyers may be stepping up to the plate. Today, the USDA added 4.8 mil bu of new crop soybean sales to unknown destinations. In addition, crush premiums are still at all-time highs, and the demand for soybean meal continue to be strong.

WHEAT HIGHLIGHTS: Wheat futures reversed course after yesterday's strength given the Ukrainian tensions as contracts posted 6 to 8 cent losses. Nearby Sept wheat was down 6-1/4 to 5.50-1/4, and Dec was down 8-1/4 to 5.63. For the week, the Dec Chi wheat contract posted 1-1/4 cent gain while Sept moved 1-3/4 cent lower. After a strong double-digit rally yesterday after the tensions in the Ukraine seemed to escalate, profit taking going into the three-day weekend was the measure of the day. The Ukraine unrest continues to be a possible bullish trigger to watch for moving forward in the wheat market, but the prospects of a global supply picture being extremely flush with wheat continues to keep things in check. One concern in the market that has been giving us some support is continued concerns regarding quality due to persistent rains in Europe as well as the US. The five-day forecast is showing lighter rain amounts in the north central US which should help with the wheat harvest.

CATTLE HIGHLIGHTS: Live cattle futures posted strong gains this afternoon as nearby contracts finished triple-digits higher. Aug cattle, on their last trading day, finished 1.25 higher to 155.90, followed by Oct up 1.32-1/2 to 151.42-1/2. Cattle futures rallied today which was promoted by some strength seen in prices paid by processors on the cash market. Cattle owners picked up bids at 1.56 per pound for cattle in sales in Nebraska on Friday. This was above last week's and nearly 5.00 higher than the Oct futures price. With that premium over cash futures, the cattle market has stepped in on some technical buying as well as prices broke through nearby resistance levels. The demand front continues to be a question, as we are moving into a seasonal time frame when red meat consumption tends to drop after Labor Day weekend. This is the "unofficial" end of the grilling season. Carcass cutout values did slide this afternoon. At mid-day, select was 49 cents lower, and choice was 90 cents lower. The combination of retail demand and cash trade will be closely watched in the near future. Feeders took support from the live cattle pits and finished with strong triple-digit gains this afternoon. Nearby Sept feeders were up 1.50 to 218.65, followed by Oct up 1.95 to 216.725. In addition to the strength in the live cattle pits, feeders also responded to a pull back in grain prices again this afternoon.

LEAN HOG HIGHLIGHTS: Hog futures showed strength this afternoon as the meat complex in general seemed to catch a bit of a bid this afternoon. Nearby Oct hogs were up 2.65 to 98.12-1/2, followed by Dec up 1.62-1/2 to 92.00. Hog prices have tumbled the past few weeks as wholesale pork prices have fallen nearly 48.00 since peaking at a record late last month. As prices are now seeming to become cheap, especially in competition with beef, buying interest has stepped back into the market with the prospects that we could be seeing some seasonal strength coming back into retail cuts. In addition, today's move was technical as well some short covering of those short positions that have been running for a long period of time. This afternoon, wholesale cutout values rose 82 cents, also fueling some speculation that buying interest may be picking up at the retail level. Cash prices continue to stay weak which could limit gains as we move forward. If retail prices can continue to get some legs, cash prices could firm up as packers will be more willing to pay up for hogs. The big thing still to focus on is wholesale demand, as well as where we are in terms of total pounds of pork being produced moving forward. 


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