Stewart-Peterson Market CommentaryClosing Commentary - October 30, 2014
Stewart-Peterson Closing Commentary 10-30-14
SOYBEAN HIGHLIGHTS: Bean futures went on the defensive today losing anywhere from 8-1/2 to 20 cents. Prices pushed higher on the overnight with Nov reaching a high of 10.53-3/4, pushing through the 100-day moving average. Prices failed to sustain this rally and reversed downward posting a hook reversal which could be suggesting a near-term top is in place. Soybean meal has continued to lead the surge higher as prices have made a magnificent run, but meal, too, reversed downward today after pushing into new highs. Dec hit a high of 408-1/2 before eventually closing at 380. The contract high was in May at 411.40. From a long-term perspective, the meal market has made a magnificent rally in a short window of time, and we believe this has been due mainly to logistical issues and overestimating of carryout from the USDA. Therefore, if carryout was in fact overestimated, that would imply that carryout is lower. This could ultimately lead to reduction in projected carryout in beans. For now though, it looks like the rail systems are picking up significantly and the movement of grain products.
CATTLE HIGHLIGHTS: Live cattle futures turned positive today, gaining 10 to 150 points as Oct led today's rally. In the electronic after trade session, Oct traded as high as 171.35,up 235 points. Tomorrow is the last trading day. Dec will take over and may be viewed as likely undervalued. Yet, keep in mind, by Dec, not only will hog production continually increase but also poultry. In fact, we believe the Dec contract as well Feb have exhibited a number of potential topping signals. While prices are holding together well based on support from excellent demand, it could be a matter of time before prices come under pressure. Cutout values have firmed this week. Today's morning cuts, however, were basically unchanged. Choice cuts are trading at 253.61 and select at 239.74. We believe these values will support current futures prices. It's the next two to four weeks that could be troublesome. This is especially so if the trade begins to see liquidation of long cattle. This could very well occur toward the fourth quarter as funds that have been long most of the year move out of the market, looking to show profits. From a long-term perspective, the market is in the throes of excellent longer-term support based on tight inventories. Yet, all bull markets eventually end.
LEAN HOG HIGHLIGHTS: Hog futures were under pressure again with front month Dec breaking support, dropping 140 points closing at 87.20. Feb lost 1.10 closing at 86.95. After showing life on Tuesday and pushing to the highest level in nearly two weeks, hog futures have since backed up and now look challenged to recover. This is especially true in the Dec contract. Daily slaughters have continued to creep higher, and we feel that's the big key that PED has had little impact on hogs other than summer months. Today's slaughter was 432,000 which was the same as a year ago as well as yesterday. Carcass cutouts were down 1.45 at 97.90.
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