Stewart-Peterson Market Commentary
Closing Commentary - August 29, 2016
Top Farmer Closing Commentary 8-29-16
CORN HIGHLIGHTS:Corn futures weakened again, finishing with losses of 3-1/2 to 4-1/2 cents as Sept led today's drop, closing at 3.1125, a new contract low close as well as a new contract low established at 3.1075. Dec all scored a new contract low, finishing at 3.20775, down 4-1/4, after posting a contract low of 3.20. Significant losses in the wheat market over the last week as well as continued fund selling have pressured grain prices. Without much positive news, the market is now in a phase where sellers who sold early have not much to lose by adding the short positions. Buyers are backing away from the market. This allows for prices to drift, something we concerned ourselves with, and therefore have stayed on the defensive through hedges, puts and forward sales. We like to believe that corn prices, while they can move lower, will likely stabilize in the near future as more information will be needed in order to continue a bearish tone. The Pro Farmer tour confirmed what most were probably anticipating, and that was a lower yield with their figure at 170.2 bu per acre. If the USDA reduces their figure on next month's report, this could suggest carryout from one month to the next actually declines, and typically this begins to signal a bottom.
SOYBEAN HIGHLIGHTS:Soybean futures traded both sides of steady throughout the session but eventually finished with mostly small losses of 1/2 to 3 cents with the exception of Sept, which closed down 7-1/2 to 9.8325. Nov closed down 3 at 9.6425. Weakness in competing row crops, a firmer dollar in the morning session along with a sharp gain in the dollar last week helped to spur general weakness in beans in recent sessions. Our bias continues to run strong that, not only is the Pro Farmer number probably accurate, but rain in August was likely viewed by the trade as very beneficial to yield potential. The Pro Farmer figure of 49.3 was above the USDA estimate of 48.9 on the August Supply and Demand estimate. As any farmer will attest, trying to guess yield on beans is tricky at best. Therefore, many are probably holding their collective breath, holding that the crop can yield as good as anticipated and, for that matter, as good as it looks. Beans are a highly rated crop, and one of the best in history. With August rains, we think that many plants may live up to their expectation and hold significant pods with large beans. That being said, one never knows. The market appears to be cautiously sliding and not selling off. That is more likely a function of expectation for continued strong world demand. We see no reason to expect Chinese buying to slow, whether beans are 11.00 or 9.00. They will buy regardless based on need and lack projected inventory out of South America. Expectations for the crop remain highly rated and will likely keep prices from much upward ability to rally. Downward technical signals cotn9inue to suggest a potential move down to 8.75 to 9.00 Nov. A better level of support comes into play at 9.43 low of 8/2 and then the 9.36 high from 4/4.
WHEAT HIGHLIGHTS:Chicago wheat futures tumbled today to their lowest prices since August of 2006. Sept futures lost 13 cents to 3.70-1/2, Dec futures lost 10-1/2 cents to 3.97 and Mar futures lost 11 cents to 4.21. Heavy supplies continue to pressure prices, especially with Canadian spring wheat harvest beginning to ramp up and the recent surge of Russian exports. Conditions for next month's winter wheat planting look to be almost ideal, which is also hurting prices. The stronger US dollar is adding to resistance. As bleak as the fundamental picture looks, the price charts look even worse. There doesn't appear to be any source of technical strength at this point. Continuous monthly charts show wheat in a downtrend since Jul of 2012 without any sign of breaking resistance. Friday's CFTC numbers showed commercials reduced their net-long position and noncommercial funds added to their short position. The potential does exist for mass short-covering causing a rally, but such a snap would be extremely difficult to predict. Support, however insignificant, will be at contract lows of 3.69-1/2 and resistance will be at 4.01.
CATTLE HIGHLIGHTS:Live cattle futures finished neutral to negative due to heavy supply this session, with Aug futures up .40 to 110.75, Oct futures down 1.275 to 105.075 and Dec futures down 1.075 to 107.025. Every month but Aug made new contract lows today. Lack of fundamental support is continuing to cause uncertainty in live cattle markets. As of now, Beef cutout values were unsupportive of futures prices moving into the holiday weekend with Choice down .57 to 198.91 and Select down .60 to 192.97. Cattle slaughter was estimated at 37,000 head on Saturday and 112,000 head today. Volatility is possible for the Aug contract moving forward toward expiration on Wednesday, so do not be caught off guard by large swings. On the technical side, oversold conditions suggest the downtrend could be slowing, but that should not happen until there is some change in supply or demand to justify a reversal. New lows put in by deferred contracts are not at all bullish, but prices can only go so low until cattle just become too cheap. Particularly strong technical support was noted today at 105.00 for the Oct contract. Since the Aug contract expires on Wednesday, this support level for the soon-to-be near month contract will be watched closely. Support for the Aug contract tomorrow will be at 110.00 and resistance will fall at 111.50.
LEAN HOG HIGHLIGHTS:Hog futures struggled again today with Oct gaining 5 but deferred months losing 35-62 points. Apr led today's drop. In general, it can be argued the hog market has done a good job of consolidating since 8/12 when most contracts put their low in. Our bias is the market is in a consolidation pattern but not out of the woods yet. Daily slaughters continue to run large, and there are concerns of slaughter capacity. Beef prices are sliding, and Cold Storage reports indicated no shortage of red meat. Poultry increases have also hampered hogs' abilities. A recent jump in the US dollar between the end of last week and early this morning did not help the cause for hogs either. Today's slaughter was estimated at 424,000. Cutout values started the day firmer at 85 cents higher on the A.M. report after losing 14 cents on Friday's values, closing at 76.39.
Market Commentary provided by:
137 South Main Street, West Bend, WI 53095