Stewart-Peterson Market Commentary
Closing Commentary - March 10, 2014
Stewart-Peterson Closing Commentary 3-10-14
CORN HIGHLIGHTS: Corn futures were on the defensive today losing anywhere from 5-3/4 to 10-3/4, as May and July each finished down with the weakest losses. May closed at 4.78-1/4 while Dec closed down 6-3/4 at 4.78. The March Supply and Demand report was basically a yawner. Carryout dropped from 1.481 mil in Feb to 1.456 mil, or a change of 25 mil bu. The change was in exports which were increased by 25 mil bu. There were no other changes of consequence. Global stocks for corn did inch higher by 1.17 mmt. The USDA left Argentine and Brazilian corn production unchanged. With prices jumping the last two weeks on uncertainty in the Ukraine and expectations for a late start to spring, the market seemed to take a breather today on a lack of new news out of the Ukraine, a neutral USDA report, and what appears to be more spring-like weather occurring.
SOYBEAN HIGHLIGHTS: Soybean futures tumbled with losses of 10-3/4 to 39 cents. May led today's drop closing at 14.18-3/4. After a strong surge and strong finish on Friday, prices corrected after the USDA report was released. Talk early this morning had prices on the defensive that China was canceling a large order of Brazilian beans. The USDA report contained little or no surprises of consequence. Carryout was not estimated at 145 mil bu, 4 mil bu above the pre-report average estimate and below the Feb figure of 150 mil. World projected carryout dropped slightly to 70.64 mmt from the pre-report estimate of 71.52. The Feb figure was 73.01. When viewing the world number, one might view that as friendly, but it's likely that the surge in prices the last two weeks had already factored this in place and, once the report was released, traders were quick to move out of long positions or had stops triggered. The Brazilian bean crop was lowered 1.5 mmt from 90 mil in Feb, and the Argentine crop was left unchanged from Feb at 54 mmt. After posting a very significant and large, bearish key reversal on Feb 28, prices then moved higher last week, negating the reversal. Yet, today's slide lower has prices closing at their lowest level in more than a week. This could suggest that prices are growing tired, and as volatility picks up, that suggests increased uncertainty from both bulls and bears. If behind on sales, get current with recommendations.
WHEAT HIGHLIGHTS: Wheat futures sank to the close, losing anywhere from 1-1/4 on Mar to 13-1/4 on May. All back months lost more than a dime. US carryout was 558 mil bu, 10 mil bu less than the average pre-report estimate and in line with Feb. World projected carryout was virtually unchanged at 183.81 mmt versus last month's 183.73. The rebound on prices as of late doesn't seem to have spurred expectations for either stronger acreage or lower usage. The Ukraine situation continues to provide underlying support, but it looks like this news may be starting to become old. July futures closed back down below a key channel line resistance that was violated on Friday. As we indicated in the corn and bean markets, the key will be follow through selling. It appeared all day long that the wheat market was bending, but it didn't break until the end. The US world crops of consequence, Russia and Ukraine, saw no changes from the previous month's production estimates. There's a lot of speculation that farmers may, in fact, have a challenge in Ukraine in finding credit to apply to 2014 crops. That's all conjecture at this point, and most questions are unanswered. Therefore, the market does build in this uncertainty through higher price and it may already be factored into the current price level.
CATTLE HIGHLIGHTS: Cattle futures finished mixed with Apr losing 10 closing at 143.15 while deferred months gained anywhere from 37 to 52. Strength continues to come from spillover support from a sharply higher hog market and a general push in cutout values. Record-high cutouts continue to provide support for cattle, but expectations that demand could slow due to higher prices is keeping traders in check from buying into cattle at such high levels. Estimated slaughter was a light 105,000 compared to 117,000 today. Choice cuts on this morning's trade were 1.72 higher at 237.74, another new record, and 1.95 higher at 234.82 for select cuts, also another new record. Limited supply continues to be the primary catalyst behind the current uptrend in prices. It's been a difficult weather year for cattle producers. Even though it's been relatively dry this winter, cold temperatures have kept weight gain limited throughout stretches of the winter. As for feeders, we continue to argue that limited supply should supply underlying support. We are having a challenging time bringing ourselves to believe that market can continue to move higher from a practicality standpoint. However, weaker grain prices today helped to provide underlying support and solidify the long term picture that ample inventory of corn and soybeans along with wheat should keep grain prices in check barring any weather adversity.
LEAN HOG HIGHLIGHTS: Hog futures ended sharply again today as the market continues to factor in PED issues. Nearby Apr closed 300 higher as did June. This is the limit. May closed up 2.95 and Aug up 272. Oct continues to be a lagger but did close 227 at 99.87. With such a large discount between Aug, 119.50, and Oct, 99.87, we wouldn't be surprised to see traders focus their attention on Oct. We realize that hog futures are in an extreme trend, and from a historical perspective, experiencing something relatively few commodities have ever experienced, that is a disease that no one seems to be able to analyze how deep the impact may or may not be.
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