Stewart-Peterson Market Commentary

Closing Commentary - February 23, 2017

Top Farmer Closing Commentary 2-23-17

CORN HIGHLIGHTS:Corn futures reflected a difficult day in the grain markets as contracts posted 5-cent losses. Front month March was down 5-1/2 to 3.655, while May was down 5-3/4 to 3.725. Corn futures were pressured by small portions of bearish news throughout the course of the day. South American weather continues to be favorable, and a new estimate from a Brazilian private analyst put this year's corn crop at 93 mmt, which is up 39% from a year ago. The USDA had its USDA Ag Outlook Forum this morning, and estimated corn planting at 90 million acres for next year. This is down 4 million acres from a year ago and may be slightly lower than expectations but not a surprise. Ethanol statistics were also out this afternoon, which showed total usage favorable compared to USDA estimates by 98 million bushels. Production was softer for the third consecutive week, and stocks continued to rise. This is a disturbing trend that may see the additional usage of grain for ethanol come to a halt as profitability has tightened, and the stockpile of product has grown. Today, March futures closed below the 200-day moving average for the first time since early February. Prices may have additional room to fall with the 50-day moving average at 3.62 the next support.

SOYBEAN HIGHLIGHTS:Soybean futures continued to slide this afternoon, as contracts lost 7 to 11 cents. Front month Mar beans are down 11-1/4 to 10.115. Jul beans are down 11-1/2 to 10.315, and new crop Nov beans were down 9 to 10.045. With today's close, the Mar bean futures pushed through key support levels at the 100 and 200-day moving average for the first time since early Jan. While the overall uptrend since reversing off of August lows is still intact, bean futures are now looking to challenge that trend line as well as the 10.00 psychological barrier in the front month Mar contract. New bearish estimates for this year's Brazilian crop came in at a record 107.8 mmt, or nearly 4 billion bushels of beans. This was at the high end of the most recent estimates but still solidifies reports of the favorable weather for crop production in Brazil. As harvest continues to move along, pressure is mounting in bean prices. The USDA added a negative planting estimate of 88 million acres in today's USDA outlook forum, which would keep carryout estimates extremely large if demand were to taper in the weeks and months ahead. USDA export sales numbers will be released tomorrow, delayed due to the Presidents day holiday. Focus will stay on sales and potential cancellations, as South American bean supplies are coming to the marketplace.

WHEAT HIGHLIGHTS:Despite seeing overall favorable acreage numbers, wheat futures struggled to find traction in an overall negative grains market today, as contracts dropped 2-3 cents. Front month Mar was down 3-1/4 to 4.38, followed by May down 2-1/2 to 4.535. The negative tone in the marketplace and the continued competition from global supplies make it difficult for wheat futures to rally despite today's USDA outlook forum. USDA predicted all wheat plantings to be down 8% in 2017/18 to a record low 46 million acres. This is one of the lower acre totals in a historical sense, but optimism regarding wheat prices will be based more on global weather and production in those key international wheat producing regions. At this stage, things are showing no major signs of production shortfalls, which will make it difficult for prices to rally. Technically, wheat futures are still struggling with the strong reversal seen last week, as prices look to challenge recent support levels. Today, wheat futures held the 20-day moving average for the third consecutive day. A push through that line could have Mar futures looking to challenge the 4.23 area, 15 cents lower.

CATTLE HIGHLIGHTS:Cattle futures closed with moderate strength in disappointing trade. The Apr contract closed 45 cents higher to 116.52, and the Jun contract closed 35 cents higher to 106.77. Beef cutouts had nice closes yesterday, with choice up 2.72 194.53, and select up 1.00 to 190.81. That strength was continued with choice up 1.58 at midday to 196.11 and select up 1.73 to 192.54. The forecasts with blizzards this weekend also was supportive, but much milder weather next weather was limiting. The monthly Cold Storage report was released after the close. Total red meat supplies in freezers were up 2% from last month, but down 9% from last year, and total beef supplies in freezers was down 5% from last month but up 1% from last year. Closes today were not far off the lows and opening prices. The lack of decisive finishes the past few days is not a sign of strength, but at least the weather has been holding tight.

LEAN HOG HIGHLIGHTS:Despite moderate to heavy losses in the hog markets today, the closes could have been much worse considering recent developments in the cash belly sector. The nearby Apr contract closed 1.17 lower to 66.57, May was down 52 to 72.87, and Jun was down 62 to 76.62. Cash belly prices closed 24.54 lower to 153.27, and carcass cutouts closed 4.30 lower to 80.24. The massive losses were more than enough to push hog prices much lower on the open. Belly prices were up almost 17.00 to 170 at midday, stopping much of the bleeding and keeping packer margins from completely imploding. Traders are still nervous about record production and slowing exports, which also pressures prices, but this weekend's blizzard forecasts provided needed support. The Cold Storage report released this afternoon had pork supplies up 11% from last month but down 16% from last year and pork belly stocks down 22% from last month and down 77% from last year. These numbers could provide a bounce tomorrow, which would have some technical base with end-of-week short covering very likely from losses in the nearby Apr contract of 4.67 in three sessions. Prices were also able to stay above the 200-day moving average support levels, which is a good sign, but considering prices have fallen through three different moving averages this week, it is not exactly a reason to be excited.

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