Stewart-Peterson Market Commentary

Closing Commentary - August 20, 2019

Top Farmer Closing Commentary 8-21-19

CORN HIGHLIGHTS: After trading 4 to 5 cents higher in the overnight trade, corn futures reversed direction by mid-morning, closing with losses of 1-1/4 to 5-3/4, as Dec led today's drop, closing at 3.68-3/4. Bear spreading between old and new crop was again noted today, as Dec futures made a new low close for the contract. The contract low, at 3.63-3/4, established on 5/13 still holds with today's low in Dec at 3.68-1/4. Back in May when the market bottomed, it also reversed in that session and finished at 3.76-1/2, posting a bullish key reversal. Despite what appears to be lower yield estimates from Ohio and South Dakota, compared to the USDA, and continuation of private sources indicating yields probably 155 to 163 on a national basis, corn futures continue to slide. The wet rag over the market is growing concern that demand is diminishing rapidly over the last several months, as exports remain slow and ethanol usage questionable. The basic complaint from farmers is that the oil industry, in essence, is manipulating the EPA to small refinery exemptions from purchasing and blending ethanol. This is viewed as an artificial cap on domestic demand for ethanol. That, along with rain on the radar and a lack of new positive news, allowed prices to finish weaker.

SOYBEAN HIGHLIGHTS: Beneficial rains are likely responsible for capping soybean prices today, which finished 1 to 1-3/4 cents higher as Nov led today's gains, closing at 8.68-1/4. The near-term downtrend remains intact, and it looked as though prices may have strength today, but by day's end barely finished to the positive side. Weakness in wheat and corn, along with a lack of new positive news, has pressured prices. As we look to the Pro Farmer crop tour, lower bean counts in Ohio and South Dakota were noted, with more information regarding Indiana and Nebraska due soon. A good bottom line, however, is variability to the crop. Recent rains are viewed as beneficial, and with rain on the radar today, prices have had a difficult time moving higher. Crop ratings continue to suggest a somewhat sub-par crop.

WHEAT HIGHLIGHTS: Wheat futures continued their slide with another round of losses today. A firming U.S. dollar, as well as lack of positive news, are the likely reasons for traders to continue to be on the defensive. By day's end, Dec Chi was 6 lower, closing at 4.66-1/2, its lowest close since early May. KC Sep closed 4-1/2 lower at 3.86-3/4 near last week's low. Sep Mpls closed 1-1/2 lower at 5.04. Continued wet conditions are hampering harvest pressure. As news in general is lacking to provide support, prices find it easy to slide. In particular, the wheat market has struggled when the U.S. dollar rallies. Expectations that world inventories will continue to be ample and likely confirmed on the September Supply and Demand report will also act as overhead cap.

CATTLE HIGHLIGHTS: Cattle markets posted solid gains with Aug lives up 1.60 to 101.80. Oct lives were up 1.77 to 100.00, and Dec lives were up 1.10 to 104.82. Aug feeders were up 62 cents to 136.30, and Sep feeders were up 90 cents to 133.72. Choice beef values closed 44 cents higher yesterday afternoon to 239.13, the highest choice value 6/23/17. Choice beef was up another 3.50 to 242.63 at midday. Traders were comforted by the high slaughter number last week, as it proves that cash demand can stay steady despite the Tyson plant in Kansas being knocked offline. Packers are making huge profits and should keep killing cattle at a good clip, especially when beef values are at their highest levels in over two years. Cash trade has been relatively quiet so far this week, but a handful of cattle did trade in Nebraska yesterday at 109. On Friday's Cattle on Feed report, placements are expected at 100.1%, marketings at 106.4% and on feed at 100.8%. The Oct live cattle contract nearly matched the highs from 8/14 today and closed within 60 cents of the day's highs. The next target higher is the 10-day moving average at 1101.62. Deferred feeder contracts had a disappointing session today with the Sep and Oct contracts pushing through their 10-day moving average resistance level but ultimately closing just off the close of the day and below their 10-day resistance.

LEAN HOG HIGHLIGHTS: Hog markets had a moderately positive session, with deferred contracts breaking through resistance that the nearby Oct was unable to breach. Oct hogs closed 95 cents higher to 64.97, Dec closed 1.32 higher to 64.17, and Feb hogs were up 1.07 to 70.80. The CME lean hog index was down 47 cents to 78.55. Carcass cutout values closed 1.28 lower yesterday afternoon to 84.98 and were down another 87 cents this morning to 84.11. Hams have fallen nearly 13.00, or 17% in just a week. China's spot pig prices continue to rally and were up 1.14% overnight, up 27.5% for the month of August so far, and are up 82.8% year to date. This should indicate massive pork imports at some point, but there has not been much evidence of that at this time. Oct hogs tested and failed to close above their 10-day moving average resistance level today. Dec and Feb hogs were able to push above the 10-day moving average levels and close above them. Feb and Dec have had better luck moving through that level but have not been able to sustain that for very long. Consecutive closes above that level should be enough to attract some buyers.

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