Stewart-Peterson Market Commentary

Closing Commentary - February 03, 2016

Top Farmer Closing Commentary 2-3-16

CORN HIGHLIGHTS: Corn futures again had a very small trading range and edged lower by the close, losing 1-1/4 to 1-1/2 cents as March led today's drop, closing at 3.71. March had a trading range of 3 cents, while new crop Dec had a trading range of 2-1/2 cents, finishing at 3.93. A very sharp break in the US dollar may have provided some support, but it didn't seem very evident today. Weakness in soybeans may have pressured corn, yet wheat prices ended 3-5 cents higher. By day's end it looked like the corn market was somewhat lifeless, searching for some type of news to provide direction, and it found little. Farmers are holding significant old crop inventory; that is nothing new, but as the winter wears on, the concern is the amount of inventory that eventually has to make its way to the marketplace. The good news is that it is only early Feb, and that plenty can occur between now and spring to provide underlying support. Namely, we believe Dec corn needs to move more toward 4.00 or higher in order to secure the same amount of acres as next year. One might remember about 2 mil acres were abandoned due to wet conditions last year. Therefore, acreage could be up some, but unless corn prices rally, we would expect that increase in acres to be less than 1 million.

SOYBEAN HIGHLIGHTS: Despite a weaker dollar, soybeans were under pressure, finishing with losses of 7-1/2 to 9-1/2 as nearby March led today's drop. After a very encouraging session and strong finish yesterday, one would hope that prices might try and make a break to the topside. Instead, they closed back under the 100-day moving average. The 50-day moving average did act as support. As indicated in previous reports, we do not feel there is a strong enough trend of weather adversity in South America to have much influence at this time. Therefore, when prices do not follow through to the topside, traders are quick to go short. We have seen this a number of times in recent weeks. We feel the market is well supported with good demand, and until the entire Southern Hemisphere crop appears that it is going to mature without much of a problem, we believe there is limited downside. Ultimately, we do have to respect the idea that, if yields run close to anticipated in the Southern Hemisphere, beans could push back down toward 8.50 or lower.

WHEAT HIGHLIGHTS: A sharp break in the dollar seemed to be enough to provide underlying support for wheat as it edged higher late in the session, closing 2-3/4 to 4-3/4 higher, with March leading today's rally, at 4.80. One of the issues with the wheat market lately is less than expected demand. That has kept rally potential in check. A big break in the US dollar today might be just the catalyst for the wheat market to move higher. Expectations that the federal reserve will not be raising interest rates anytime soon could pressure the dollar further and, consequently, make US wheat more competitive. Yet, this week's winter storm system could be just what the doctor ordered to provide needed moisture and snow cover for large portions of the winter wheat belt.

CATTLE HIGHLIGHTS: The entire meat complex pushed into positive territory with cattle leading the way. After some sluggish near term activity, it appeared prices took into account yesterday's firming values and moved higher with Feb cattle trading at their highest level since early Jan. As of this writing, Feb was trading 137 points higher at 137.10. Deferred months were up 40 to 120 points. Feeder cattle were 65 to 90 points higher. Hogs were higher as well. Estimated slaughter was 98,000, which compares to 109,000 yesterday, another day of lighter numbers due to winter storms. Cutout values were mixed with choice down 35 at 222.12 and select up 42 at 218.05. We would like to think that, in order for Feb to push much above the 137 mark, it is going to take additional increases in cutout values. We are not sure they are high enough to support new upward pressure for prices in the live cattle contracts.

LEAN HOG HIGHLIGHTS: Lean hog futures gained back some of yesterday's losses with nearby Feb last trading 55 higher at 64.75, while Apr gained 65, last trading at 69.75. Today's cutout value lost 1.14, which would suggest yesterday's drop-off in futures was warranted. We believe that the market is beginning to run out of gas to the topside. The exception, of course, would be if cattle can continue to move higher, traders may try and push hogs toward their fall highs. Estimated slaughter today was a light 395,000. We are not surprised at this figure, given the winter storm system had lingering effects throughout much of the Midwest today. Look for bigger slaughter numbers on Thursday and Friday. 

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