Stewart-Peterson Market Commentary

Closing Commentary - October 21, 2014

Stewart-Peterson Closing Commentary 10-21-14

CORN HIGHLIGHTS: Corn futures saw some buying strength this afternoon as contracts posted a 6 to 8 cent gain. Nearby Dec was up 7-3/4 to 3.56, followed by Mar up 7-3/4 to 3.69-1/2. Grain futures are supported by slow harvest progress as parts of the Midwest, as well as producers being reluctant to sell grains at these levels. The USDA crop progress numbers showed harvest at 31% complete Monday afternoon, this is well behind the 5-year pace of 53%, and with last week's wet weather, it only moved 7% over the previous weeks total. Wet conditions in the eastern half of the Corn Belt have helped prevent farmers from moving forward with harvest in those regions. Harvest pressure should continue to be more aggressive this week as producers are wrapping up soybean harvest and dryer weather is allowed the switch to aggressively pick up progress with corn. News is currently lacking to give us direction one way or another, but with harvest, we believe the path of least resistance is still likely lower. We'll stay with a defensive bias, but cautiously watching as corn prices have been getting some buying support off of softness.

SOYBEAN HIGHLIGHTS: Soybean futures saw the most buying strength this afternoon in the grain complex as contracts posted a 15 to 20 cent gain. Nearby Nov beans were up 20 cents to 9.64-1/4, followed by Jan up 19-1/2 cents to 9.71-3/4. Soybeans saw buyers step forward as two factors help provide support underneath this market. The first being harvest delays as the USDA pegged soybean harvest pace at 53% complete, which is down from the 5-year average of 66%. The majority of that progress was in the northern states and delays were still seen from MO and IA to IN. Wetness the past couple of weeks have kept producers sitting idle and processers looking for beans in those regions. Bringing us to our second factor is the strength in soy meal market. As beans have been slow to get into the pipeline in certain areas, soybean meal values have continued to climb. Today, Dec meal was up 13.50 to 342.90 on the futures prices. As harvest has been delayed, processers are looking to bid up to get those beans out of bins and fields and into their plants to meet feed demand. On the bearish front, weather forecasts look favorable this week as producers can get some of this crop in. In addition, the bears expectations for a 3.9 bil bu crop should keep prices somewhat limited in the near term as we work through this large supply of beans.

WHEAT HIGHLIGHTS: Wheat futures posted a gain of 5 to 8 cents this afternoon as Dec was up 5-3/4 to 5.19-1/4, followed by Mar up 6-3/4 to 5.33. Wheat futures continue their nice correction off of last month's lows with the Dec contract up over 50 cents. Today's close also had the wheat futures settle above the 50-day moving average for the first time since late August. The overall strength in grains, as well as closing above this technical resistance, could give wheat futures a bit of a boost as we move forward. Recent gains seen in wheat have come from the prospects of exports improving in the general overall bullish movement in other grains. Fundamentally, the large surplus of wheat on the global scale, as well as the US, should continue to keep rallies limited. The key going forward will the demand for US wheat bushels.

CATTLE HIGHLIGHTS: After front months tested contract highs this afternoon, cattle futures pulled back to finish the day modestly lower. Oct cattle were down 1.35 to 166.55, followed by Dec down 97-1/2 to 167.05. The Oct contract pushed to a new high this afternoon at 168.80 before some profit taking kicked in. Today's move higher took out last week's bearish key reversal that was looming at the top of this market, and the break to new highs could bring some additional technical buying for tomorrow's session that could have a rally that could push us closer to a 172.00 target. Limited supplies continue to be noted on daily slaughter numbers as we see that there are not many cattle out there. Today's slaughter number was estimated at 115,000 head, nearly 9,000 less than a year ago. Cutout value was slightly firmer as choice carcasses gained 20 cents, followed by a 39 cent gain in select. One of the biggest factors that may have caused the turn in those cattle prices was the strength seen in the grain complex this afternoon. With that overall strength in grains, as well as the pullback in fat cattle prices, feeders posted significant losses. Most contracts touched limit lower, but the nearby Oct finished down 1.80 to 238.95, and Nov was down 2.90 to 233.92-1/2.

LEAN HOG HIGHLIGHTS: Hog futures ended the day mixed to lower as Dec posted a 70 cent loss at 88.45, followed by Feb down 32-1/2 to 86.07-1/2. Hog futures continue to see pressure as the prospects of numbers will continue to increase in terms of slaughter for the months ahead, as well as weakness seen in retail demand. Slaughter is expected to be at 429,000 head today, this is just less than 2000 hogs compared to a year ago. With the slaughter numbers pulling into last year's ranges and weights continuing to stay high, there is a surplus of product available on the retail level. It seems as though the slaughter numbers have worked through this winter's PED issue, at least here in the short term. In addition, carcass cutout values dropped another 3.27 this afternoon after posting a 4.55 drop yesterday in the pm trade. Some of the factors in those retail prices could be retailers looking towards the Thanksgiving day holiday and switching their coolers over to turkey products and whole birds, as compared to storing excess hams. With the continued prospects of an increasing supply, we should be able to keep rally potential in check for the near term. Dec hog futures are showing a large discount to the CME index of nearly 14.00. This could keep other severe losses limited in that Dec contract. This may be more of a case as cash prices continue to slide on the countryside and the index will come to meet the futures, as compared to the futures rising to meet the index. 

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