Stewart-Peterson Market Commentary

Closing Commentary - December 02, 2016

Top Farmer Closing Commentary 12-2-16

CORN HIGHLIGHTS:Corn futures bounced 2-5 cents on short covering and profit taking. Front month Dec was up 5-3/4 to 3.375, while Mar was up 4-3/4 to 3.4725. Today was the sole bright spot in a difficult week for corn futures. The Mar contract posted an 11 cent drop this week, and July corn was down 11-1/4 cents. Technicals look weak as corn futures broke through trend line support this week, challenging that level as resistance today before falling just short. Weekly charts posted bearish outside weeks to the downside, taking out both this week and last week's high and low. The news front was relatively quiet as traders continue to digest the large supply of available grain. Export sales numbers were solid but within expectations, which failed to bring many buyers forward. Into the end of the year the focus will stay on demand in the short term, but then focus will shift to the crops developing in Brazil and Argentina. Outside markets were also supportive today, as the US dollar softened this afternoon. Crude oil continued its strength after this week's OPEC agreement, which brought strong buying into that marketplace.

SOYBEAN HIGHLIGHTS:Soybean futures finished 1-2 cents lower. Jan beans were down 2-1/4 cents to 10.27. Mar was down 1-3/4 to 10.3725. For the week, Jan soybeans dropped 18 cents, while Jul beans were down 15-1/4 cents after posting highs on Monday. Prices puts in a 4-month high on Monday afternoon's trade, and prices have been softer the remainder of the week as the market continues to digest this year's record bean harvest in the US. Despite the strength in demand, which has been the key support underneath this market, there are many questions on whether that demand will continue into 2017. Today's price action saw bean futures close under the 10-day moving average under the Jan contract for the first time since prices traded below it on 11/18. This short term technical weakness points to further downside as prices may test the lower end of the trading range at 9.90 Jan. On the product market, soybean oil has been a shining star as prices have rallied nearly 3.50 in two weeks. Finishing 81 cents higher this week, bean oil futures posted new monthly highs and have good potential upside based on the demand for bean oil for fuel or edible oil replacement for palm oil.

WHEAT HIGHLIGHTS:Wheat futures saw a strong short covering rally, as Mar gained 8-3/4 cents to 4.0425. This was followed by May gaining 8-1/4 cents to 4.17. Front month Dec contract is thinly traded after first notice day this week rallied 16 cents on light volume. For the week, Mar wheat futures posted losses of 15-1/4 cents. The sole bright spot of the wheat market has been the Mpls spring wheat market, which has continued to surge as the front month Mar contract posted 9-3/4 cent gain as quality concerns across the varieties of wheat have brought some premium in the Mpls wheat contract. Overall, fundamentals continue to be bearish, as well as the technical picture established this week with the aggressive sell-off as the Mar contract pushed to new lows. Adding more fuel to the bearish fire, the National Australian Bank expects this year's wheat harvest to increase 22% from a year ago, and the second biggest crop ever. In a global marketplace that is very flush with wheat, the extra bushels are not necessary.

CATTLE HIGHLIGHTS:Live cattle futures confirmed yesterday's bearish price action, taking heavy losses and falling below support levels to set up a probable correction. The nearby Dec contract closed 2.35 lower to 108.22, and the Feb contract closed 2.50 lower to 108.87. Long position liquidation on the extended rally since mid October was present, as the market began to look toppy and oversold. Demand concerns persist, especially with historically high slaughter levels and beef production at its highest level since June 2011. With such heavy losses today and yesterday, cash trade next week will likely not take place until Thursday or Friday, and all signs point to it being significantly lower. With nearby Dec futures more than 8.00 lower than cash trade this week, the very strong basis next week will make it difficult for feedlot managers to resist low bids. Today's price action created an outside period on the weekly charts and a bearish key reversal. Both the Dec and Feb futures contracts opened just off the highs of the day and swiftly feel below the 10-day moving average support levels and closed near the lows.

LEAN HOG HIGHLIGHTS:Lean hog futures finished mixed on lethargic trade activity and diverted attention to cattle markets. The near month Dec contract closed 52 cents higher to 50.75, and the Feb contract closed a nickel lower to 54.02. Lighter slaughter was welcomed today with just 431,000 versus 436,000 a week ago and 433,000 a year ago. Carcass cutouts were down 29 cents to 74.02 and the strength in cutouts over the week was responsible for some bull spreading today. Export sales reports yesterday had traders split today. The bulls were trading on the fact that pork exports were up 1% from a week ago and 2% above the previous 4-week average. The bears were focusing on the fact that export sales were 60% lower from last week and 55% lower than the previous 4-week average. All of these conflicting factors, along with heavy losses in cattle, created a slow and uneventful day in hog markets. The near month Dec contract was able to hold the 100-day moving average as support, again boosted by recent cash strength. The Feb contract was not able to break the 20-dya moving average resistance level, but it did hold support at 53.50.

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