Stewart-Peterson Market Commentary

Closing Commentary - April 29, 2016

Top Farmer Closing Commentary 4-29-16

CORN HIGHLIGHTS:Bull spreading was noted again with nearby May leading today's rally, gaining 3-1/4 cents at 3.90-1/4. July closed 1/2 higher and new crop Dec 3/4 higher at 3.9525, its highest close since 4/19. This week's high was 3.9775 on Dec futures, well below the high from last week at 4.09. Nonetheless, prices started the week with a low at 3.7775 established on Monday, so a pickup near 18 cents off the low for the week should be viewed as a victory for the corn market. A weaker US dollar, which lost 66 points as of this writing today, pushed to its lowest level since 8/24/15. Dry weather in Brazil, stronger soybean prices and some planting delays this week and expectations for more into early next week helped provide underlying support as well.

SOYBEAN HIGHLIGHTS:Soybean futures, like corn, experienced bear spreading today as May beans closed 3 higher at 10.21, while new crop Nov lost 3/4, closing at 10.0775. For the week, May beans gained 34 cents, or 3.44% for the week. New crop Nov closed last week at 9.83, compared to this week's close at 10.0775. The ability to close above 10.00 each day this week suggests the market is comfortable holding at this area and could make another leg higher. The question is, to where? Overhead resistance likely comes into play first near 10.25, and then 10.355 Nov, which was the high from 11/13/14. Continued concern with supplies in the southern Hemisphere provided underlying support this week. Most estimates are suggesting near a 5 mmt loss out of Argentina, or approximately 200 mil bu. Forecasts continue to suggest additional rain as well. A weaker US dollar was noted as providing support, which when combined with the southern Hemisphere issues all suggest the US could capture more export activity, especially in the near term.

WHEAT HIGHLIGHTS:Wheat futures climbed higher into the close, finishing with gains of 2-1/2 to 3-3/4 cents as Dec wheat led today's rally. Jul closed at 4.885, up 14-1/2 cents from yesterday. Wheat was more of a follower this week as corn and bean prices led the charge higher. Strong export sales for corn and supportive beans helped provide underlying support for the entire grain complex. Wheat numbers were supportive but not outstanding. Another downturn in the US dollar, which is now trading at its lowest level since August of last year, helped provide underlying support as well and builds a bullish argument that the US could find itself in a more desirable position for exports. New crop export sales were supportive, and if that trend continues, wheat prices may see little harvest pressure. Worldwide, we see some concerns for weather but mostly in small regions without any major trend of concern.

CATTLE HIGHLIGHTS:Cattle futures finished with gains of 12 to 75 points as Oct led today's rally, closing at 112.32. Weak cutout values plagued the market all week, but today's turnaround may signal that the market is running out of downward selling pressure. Estimated slaughter was 112,000 vs the same figure a week ago and 107,000 a year ago. After plunging over 2.00 yesterday, cutout values were mixed on the open with choice down 45 at 212.05 and select up 8 at 203.17. At those values, we believe the June contract, which will now be the lead month with today the last trading day for April futures, is probably undervalued at 114.92. Yet, we did not see traders rolling out of April into June today, which would suggest the market is tentative at best. After a 14.00 drop from highs in mid March, we believe demand will begin to improve. The dollar reached its lowest level today since August. Therefore, while we will maintain our defensive posture into early next week, we are not necessarily married to short positions, and there is a high likelihood we will pull hedges off of June. Feeder cattle consolidated today but finished mixed with May down 15 and Aug up 57, closing at 140.37. Feeders, like the live market, have a weak undertone and posted new contract lows today before posting gains, and the August through Nov contracts posting hook reversals.

LEAN HOG HIGHLIGHTS:Bull spreading was a noted feature in hogs again today with front months leading today's charge higher with June closing firmer for the third consecutive session near the high of the day. Nearby May finished 57 higher at 77.90, still well above the cash index of 69.81. With that type of premium, we will look to hedge May hogs on Monday. We do not know if the cash market will gather enough strength to rally 8.00 in the next couple of weeks, especially with weak beef prices. June closed at 81.70, its highest price in over a month. Short covering after prices pushed through the 40 and 50-day moving averages may have been a catalyst in today's trade. Slaughter numbers are expected to slide into the summer months, but we have not seen much evidence of that yet. Today's figure was a light 387,000, which was viewed as supportive. Last week saw 421,000, and a year ago 413,000. Rallies need to be viewed as opportunities to shift risk as there is some concern of packer capacity by mid to late summer.




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