Stewart-Peterson Market Commentary

Closing Commentary - October 24, 2014

Stewart-Peterson Closing Commentary 10-24-14

CORN HIGHLIGHTS: After pushing to its highest price point since the end of August, corn futures reversed on the afternoon and finished 5 to 6 cents lower. Front month Dec was down 6-3/4 to 3.53, followed by Mar down 6-3/4 to 3.66-3/4. For the week, the Dec corn contract posted a 5 cent gain, while Mar was 5-1/2 cents higher. Corn futures fell as profit taking kicking after posting its highest close in nearly seven weeks yesterday afternoon. Since the October 1 low, corn futures have gained 34 cents in the Dec contract. This move has come in the face of mostly bearish fundamentals in the corn market. This past week, harvest should have progressed steadily as weather has been excellent and is forecasted to maintain itself through this weekend. The market is expecting harvest to be 43% to 47% complete on Monday's USDA crop progress numbers. Historically, as we move from the month of October into November and December, corn futures usually see a downtrend. The prospects are there for this year as well given the fundamental picture, as well as the strength we've seen in prices as of late.

SOYBEAN HIGHLIGHTS: Soybean futures fell under their profit taking window this afternoon, as well as contracts posting 12 to 16 cent losses. Front month Nov was down 15-3/4 cents to 9.77-1/2, followed by Jan down 16-3/4 to 9.83-1/4. Despite today's pullback, the Nov contract posted a 25-3/4 cent gain for the week. On overnight trade, the Nov bean futures did push and touch the 10.00 mark with a high today at 10.02. Today's trade had a lot of volatility as we hit options expiration for those Nov bean options. Recent positive news on the demand front, as well as strength in soybean meal, has provided strength for this market as we've rallied 90 cents off of the October 1 low. Given continued overall bearish fundamentals regarding the size of this year's bean crop, this move has a lot of traders and analysts scratching their heads of where the strength is coming from. However, as harvest progress has been slow, strong demand for US beans is providing a bit of a bidding opportunity. The focus will now be looking down the road if that pipeline does fill and we have ample beans on hand. Today's reversal of highs and testing the 50-day moving average could pose some caution as we move forward.

WHEAT HIGHLIGHTS: Being strengthened by global production concerns, wheat futures reversed off of early morning highs to finish 8 to 9 cents lower this afternoon. Dec wheat futures were down 9 to 5.17-3/4, followed by Mar down 9-1/4 to 5.31. For the week, the Dec wheat futures still posted a 1-3/4 cent gain. Despite a lackluster performance, the Dec contract did finish with its fourth consecutive weekly gain. This market has been supported by concerns of dry conditions in southeastern Australia, as well as poor crop conditions with the Russian wheat crop. Concerns over Russian wheat prospects were warned by the Sov Econ stating that Russia's 2015 wheat crop may fall more than 15% to 20% and gave the market some strong overnight support. Today's reversal in wheat futures comes at a time where we normally see historical pullback in wheat prices as we move from October into November. With a rally that has come nicely off of Sept lows, and given the overall supply situation globally, wheat futures may be poised for a bit of a step back, especially if other grains soften as well.

CATTLE HIGHLIGHTS: Live cattle futures finished strongly lower this afternoon with most contracts ranging in triple digit losses. Front month Oct was down 80 cents to 168.25, followed by Dec down 2.20 to 166.90. For the week, the Oct contract posted a 3.20 gain. Supported early by cash trade for live cattle at 1.70, prices tested new highs. After an overall strong week, profit taking stepped in before this afternoon's cattle on feed numbers were reported. This afternoon, the USDA reported neutral to slightly bearish cattle on feed numbers. Total cattle on feed on October 1 is at 99% of last year, placements at 101% of last year, and marketings at 99% of last year. These three numbers were all just a shade under trade estimates. With placement numbers 1% above 2013, it gives this market a slightly unfavorable response going into Monday. Overall, this confirms the tightness of supply in our cattle crop, as with the total on feed at 99% of last year, this is the 26th straight months we've seen a decline in cattle numbers.

LEAN HOG HIGHLIGHTS: Lean hog futures saw an active trading range this afternoon as contracts finished mostly higher. Front month Dec was up 1.52 to 90.25, followed by Feb up 1.42-1/2 to 88.87-1/2. Early morning weakness spurred by a continuous pullback in retail prices, as well as lower trending cash prices, gave way this afternoon to profit taking. For the week, the Dec hog futures contract posted a 32-1/2 cent loss. Today's move did help significantly as we are nearly 2.00 higher than the low of the week. Front month Dec continues to see support as it is trading nearly 12.00 under the CME hog index. Any gains could be limited given the supply picture as slaughter numbers have been outpacing last year's totals, and carcass weights have continued to stay strong. Going forward, retail prices will continue to be key to meet the bulging supply of pork in the cooler. Retail prices today closed 2.29 lower, which could put pressure on Monday's trade. 

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