Stewart-Peterson Market Commentary

Closing Commentary - January 17, 2018

Top Farmer Closing Commentary 01-17-18

CORN HIGHLIGHTS: Corn futures had an impressive day, finishing with strong gains of 3-1/2 to 4-3/4 cents. Mar led today's rally closing at 3.53, near the day's high of 3.53-1/4. New crop Dec closed at 3.86, up 3-1/2 and at its strongest close since late-December. Perhaps more importantly, Dec, as well as old crop contracts, closed at or above the 50-day moving average, a major resistance point that held prices in check for more than four months. As prices continue to trade in a sideways pattern and base build, a moving average line will flatten, especially if coming from a higher price level. If managers of money who may speculate on the short side of corn, use technical analysis, a crossover of moving averages could be a signal to begin to exit short positions. Coming into today, it is estimated that short managed money has a position total of near 231,000, a very significant and high number, which could be a record. Weakness in the dollar since late-December, as well as the idea that commodities remain cheap as the stock market continues to blow higher, may have been, in part, responsible for today's gains. Today was the single best day for corn since mid-November. While not wanting to read too much into today's trade, it does look impressive, especially on the idea that there wasn't much new news to provide underlying support.

SOYBEAN HIGHLIGHTS: Soybean futures edged higher in a range-bound day, finishing with small gains of 1/2 to 3/4 cent. Mar closed at 9.68-3/4, while new crop Nov finished at 9.88-3/4, down 1/4. Most contracts traded near an 8 cent range, eventually gravitating to the higher side following wheat and corn upward. It appeared traders, earlier in the session, were buying wheat-selling beans, and buying corn-selling beans. It was a positive day in the sense that all three finished in the black, and that the dollar, as of recent, has been weaker. This is spurring ideas of continued strong export activity in beans, but also the potential for pick up in export activity in corn and wheat. Less-than-ideal weather conditions in parts of Brazil, have been viewed as supportive. However, more than likely after the USDA report, prices gravitated higher for two consecutive sessions, and then again today, for a third day on the idea that new negative news is not likely to be had anytime soon. Also, weather in the Southern Hemisphere is just uncertain enough to keep traders, and farmers, from selling aggressively.

WHEAT HIGHLIGHTS: Wheat futures had a good day, finishing with gains of 4 to 5 cents in Chi, 4-1/4 to 5 cents in KC, and Mpls a 1/4 to 3/4 higher. Both KC and Chi are finding support from higher corn prices, a general dry weather forecast with another round of cold temperatures in the extended forecast suggesting potential damage to winter wheat, and what appears to be a lack of selling interest by speculators. With funds aggressively short wheat and corn, we're not surprised to see short covering now that the USDA report is behind the market as of January 12. Bears may be searching for negative news, but could be coming up empty handed, as most negative news is already in the market. Yet, charts haven't made enough of a move to convince anyone of bull or bear since early December, as they remain range-bound.

CATTLE HIGHLIGHTS: Cattle futures were able to find technical support, as well as buying interest, due to demand prospects today on the way to triple-digit gains. The nearby Feb contract closed 2.87 higher to 120.97, Apr closed 2.40 higher to 122.77, and Jun closed 2.10 higher to 114.45. Boxed beef values were a source of pressure for today's session. Choice cuts closed 2.45 lower yesterday afternoon to 205.58, and select cuts closed 2.15 lower to 199.89. Beef prices tried to stabilize by mid-session, with choice cuts down just 7 cents to 205.51, and select cuts down 33 cents to 199.56. Today's Online Fed Cattle Exchange only resulted in the sale of 108 head at a weighted average price of 119.75. This sets cash trade up this week for mostly steady with last week. Demand outlook was once again the savior of cattle markets today. The stock market was sharply higher during today's trade, and though stocks and cattle are not directly correlated, a stronger economy is generally though to increase demand for consumer beef and, in particular, higher quality beef. The Feb contract closed above its 200-day moving average yesterday for the first time since falling below on January 8. This attracted technical buying interest today and pushed Feb futures to close above their 10, 20, and 100-day moving averages for the first time since January 4. Overhead resistance is just over 1.00 higher at the 50-day moving average.

LEAN HOG HIGHLIGHTS: Hog futures took light to moderate losses today, putting in bearish inside sessions. The nearby Feb contract closed 1.17 lower to 72.72, Apr closed 62 cents lower to 75.52, and May closed 45 cents lower to 80.55. Part of the selling pressure today, and possibly moving forward, will be on a seasonal basis. Despite the seasonal trend of hog weights to decline from the last week of January into mid-March, hog futures prices normally decline over the next 2-3 weeks. Following those trends, weekly average weights were reported this morning at 284.8 pounds vs 285.5 pounds last week, but still up from 281.9 pounds last year. Pork values, the main supportive force recently for hog markets, were mixed today. Carcass cutouts closed 38 cents lower yesterday afternoon to 80.71, but rebounded 8 cents by mid-session today to 80.79. Butts were up 3.10 today to 96.64 and ribs were up 3.59 to 135.47, but loins were down 3.07 to 69.18. The negative closes today were not the result of a technical breakdown, but that does not mean technicals look supportive moving forward. The nearby Feb contract did not trade down to its 10-day moving average support level, but prices are still very close to, if not, overbought.

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