Stewart-Peterson Market Commentary

Closing Commentary - May 25, 2018

Top Farmer Closing Commentary 5-25-18

CORN HIGHLIGHTS: Corn futures showed strength throughout the day as contracts finished from 1 to 3 cents higher. Front month Jul was up a 1-3/4 cents to 4.06, while new crop Dec finished 2-1/2 cents higher to 4.25. This ended a strong week for corn futures as prices finished 4-3/4 cents higher on the Dec contract, and 3-1/2 cents higher on Jul. In today's close, Dec posted its highest weekly close for the contract life. Despite seeing potential selling pressure from a strongly weaker crude oil market, and a firmer U.S. dollar, overall strength in the grain market provided some carryover support in the corn futures today. News was relatively quiet, as prices were in consolidation mode in today's trade. Weather will stay clearly in focus, as the U.S. is forecasted for warm weather to dominate next week, so the key will be rainfall coverage throughout that region. Second crop Brazil corn is trending back drier in the short-term, which could continue to put pressure on this year's second crop corn. Earlier this week, analysts evaluating that Brazilian corn crop lowered estimates reflecting potential impact from dry conditions. Today, corn prices may be looking for some direction, but with holiday trade, failed to develop much of an overall pattern. Prices are still finishing 5 cents off of yesterday's challenge of the Dec contract highs, which could have prices poised for a bit of a pause. Going forward, it will be about weather and development of this year's crop.

SOYBEAN HIGHLIGHTS: Soybean futures finished 4 to 6 cents higher in today's trade, with the Jul contract up 5-3/4 to 10.41-1/2 and Nov up 6 to 10.53-1/4. Today finished an impressive week for bean markets as the Jul contract finished 43 cents higher and Nov gained 45 cents in weekly trade. In a relatively quiet session, bean futures held moderate gains throughout the entire trading session, being supported by China stepping into the export market, locking in some new crop bean sales. In addition, an ongoing trucker strike in Brazil is likely starting to disrupt the movement of soybeans from fields to ports, as well as supplies back and forth throughout the countryside. Though having a minimal impact at this time on Brazilian exports could develop into a potential problem if the strike maintains a longer term play. Soybean futures found buying support on the Nov contract on the 10.50 level, as prices held support above this key psychological level. Jul futures tested support levels at the 20 and 40-day moving averages, holding this level by the end of today's trade. Going forward, weather will clearly be in focus to determine the start of this year's U.S. bean crop, which has planting pace in line with expectations, but hot forecasts may bring some early weather premium if rain doesn't materialize as forecasted.

WHEAT HIGHLIGHTS: Wheat futures were the strength of the grain market today, as Chi contracts finished with double-digit gains of 10 to 12 cents. Front month Jul finished 12-3/4 cents higher to 5.43, while Sep was up 12-3/4 to 5.59-3/4. Strength was in other wheat markets as Jul KC hard red winter wheat finished 15 cents higher to 5.64, and Mpls spring wheat Jul was up 9-1/2 to 6.44-1/4. Like soybeans, today ended a strong week in the wheat market with Chi Jul up 4-3/4 cents. Wheat futures rallied off of yesterday's late afternoon profit-taking as weather dictated the movement in the market. Forecasts across the southwestern Plains are for extremely warm temperatures which should help boost maturity, adding heat stress to a crop looking to finish out. Rain forecasts are scheduled for the Kansas area, but may be too late to matter as these warm temperatures are forecasted to run into next week. In addition, internationally, weather concerns in the Black Sea Region and Australia may have also helped provide some spillover buying support. The export front will continue to be difficult for wheat futures at these elevated prices, as the Black Sea Region will continue to dominate export trade, versus the more expensive U.S. wheat counterpart.

CATTLE HIGHLIGHTS: Cattle futures put in positive closes today, though just moderately so. Jun live cattle futures closed 25 cents higher to 104.65, Aug closed 52 cents higher to 102.30, and Oct closed 57 cents higher to 105.82. Feeder cattle futures put in closes over 1.00 higher out to Apr next year. Today's Cattle on Feed report came in directly in line with expectations. Placements were pegged at 91%, marketings at 106%, and on feed at 105%. These results were relatively neutral for the market. Beef values were a source of pressure today, with choice cuts closing 1.08 lower yesterday afternoon to 229.00, and down another 1.59 this morning to 227.41. Just a few head were sold in Kansas late yesterday afternoon at $109 to $110, down $1 to $2 from last week. Country activity today has been very quiet with bids seen in the $108 to $110 area. Today's technical price action was not very exciting, though the positive finishes on the week were solid. Jun futures picked up 2.25 this week, Aug gained 4.07 and Oct gained 4.12. Jun futures remain below major moving average resistance at the 20 and 50-day, and Aug below its 20-day moving average.

LEAN HOG HIGHLIGHTS: Hog futures put in mixed closes today, with the Jun futures unable to gain any steam higher, while Jul and Aug broke out of their trading range. Jun futures closed 62 cents lower to 74.20, Jul closed 77 cents higher to 77.55, and Aug closed 72 cents higher to 76.07. The CME Lean Hog Index was up 26 cents to 69.29, and carcass cutout values were essentially steady, keeping the pressure on packer margins. Ribs were up 8.74 today to 135.20. This was supportive, but after a drop yesterday of over 23.00, an 8.00 jump does not seem quite so bullish. Buyers, this week, were active on forecasts for hot temperatures over the 3-day weekend, which could further lower average carcass weights. Jun futures lost 50 cents this week, but were able to limit the losses with Wednesday's and Thursday's gains. Jul closed 30 cents higher on the week, and Aug closed 55 cents lower on the week. This is indicative of a market that is trapped between a more supportive short-term outlook, but a hefty long-term supply outlook.

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