Stewart-Peterson Market Commentary

Closing Commentary - June 24, 2016

Top Farmer Closing Commentary 6-24-16

CORN HIGHLIGHTS:Corn futures had a sharp downturn overnight; prices traded 12-14 cents lower with Dec reaching a low of 3.825 before closing the day at 3.9425, down 3-1/2. Citizens of Britain voted to leave the European Union and consequently, that had a major ripple effect across the world. The US dollar spiked higher, gaining over 2 full points, and commodities hit the skids. The vote was a surprise (to a degree) considering late in the day yesterday, most talking heads and the stock market seemed to indicate that Britain would stay in the European Union. What it means moving forward is unclear, but it may mean a little or a lot. Be prepared for volatility. Our bias is the biggest concern is it could be a tipping point for additional countries to leave the European Union and consequently the confusion as well as the disintegration of compacts and resulting trade issues. From the weather front, those who received rain this week saw crop improvement. Those who didn't continue to struggle, and we feel that could become front and center next week if rain is not received soon. Most long range forecasts continue to call for above normal temperatures.

SOYBEAN HIGHLIGHTS:Soybean futures had a rough landing today, losing 21-1/2 to 23 cents as commodities were generally on the defensive after Britain voted to leave the European Union. The vote was somewhat surprising as it appeared that citizens were headed toward voting for staying in the Union late yesterday, but overnight results were released and indicated they did vote to leave. This left in the world in a somewhat precarious position, and big changes occurred in a short time with the US dollar jumping 2 full points and commodities going on the defensive. Better weather this week for bean production also weighed on futures with Nov closing down 23 at 10.785. This is down from last Friday's close of 11.4825. Technicals were also challenged this week as prices pushed through the 21-day moving average but did manage to hold the 40-day moving average as well as the consolidation support level near 10.75. Weather will be the dominant factor from this point onward. While the vote in Europe was important, it is now behind the market. The biggest concern is that it could be a tipping point for other countries to leave the European Union and create an environment of more political uncertainty.

WHEAT HIGHLIGHTS:Wheat futures were struggling all session but managed to crawl back late, finishing mixed with Jul Chi gaining 1/2 cent at 4.5475, while Sept lost 3/4 cent, closing at 4.65. The close in Jul was impressive, gaining more than 12 cents off its low after a harsh sell-off early in the session when prices reacted to the news that Britain had voted to leave the European Union. The dollar shot up 2 full points, and wheat was battered hard as it broke into new contract lows. For the week, Jul wheat lost 26-1/2 cents in another week of down prices. The first week of June saw Chi wheat topping at 5.24. Like most other commodities, once the dollar raced higher, they went on the defensive. It appeared cooler heads may have prevailed late in the session. Traders may have also been interested in securing profits for the week.

CATTLE HIGHLIGHTS:After strong gains yesterday, cattle prices flipped the opposite, finishing with sharp losses of 205-297 points, closing at 110.87. Today's disappointing trade activity was most likely due to a sharp rise in the US dollar after the marketplace learned that Britain voted to leave the European Union. This shockwave was felt throughout the world and more so in commodities, which took a strong hit. Cattle likely ran sell stops, which helped accelerate today's down move. Feeders lost 235 to 292 points. We are concerned after yesterday's solid gains that the ability for prices to move quickly to the downside may yet be a telling sign that futures have a weak undertone. A bearish mindset in front of this afternoon's Cattle on Feed report was likely a secondary factor in today's trade activity. Today's figures are as follows: On feed, 102%; marketing, 105%; placements, 110%. We do not see much friendliness there, other than, perhaps, the marketing number, which suggests feedlots may be more current than first thought.

LEAN HOG HIGHLIGHTS:Hog futures slid, losing 22-47 points on front month Jul and Aug. Back months lost 25-75, with Dec leading today's drop, closing at 64.15. The precipitous drop in hog futures seemed slow today, as prices begin to migrate into a consolidation pattern after losing 5.00 to 6.00 in recent sessions. We felt the market got ahead of itself and was priced too high. Today's Cold Storage report may have a slightly friendly bias. This was released after the markets were closed with pork supplies at 612.7 mil lbs, vs last year's 655.3, or a drop of over 6% from a year ago. Bellies had higher numbers at 77.8 mil lbs, vs 64.8 a year ago. All hogs were at 102%, compared to the average estimate of 100.6%. Kept for breeding was 101%, vs the average estimate of 100.4% and kept for marketing at 102%, vs an average estimate of 100.6%.

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