Stewart-Peterson Market Commentary

Closing Commentary - February 20, 2018

Top Farmer Closing Commentary 2-0-18

CORN HIGHLIGHTS: Corn futures put in a very disappointing second half trade session today, closing negative despite a bullish overnight session and start to the morning. The nearby Mar contract closed 2 cents lower to 3.65-1/2, Jul closed 1-1/4 lower to 3.81-1/2, and Dec closed 1 cent lower to 3.96. Corn prices were able to draw some support this morning with a lack of sufficient rain coverage in Argentina over the weekend. Only 20 to 25% of the country saw light rains during the holiday weekend. In addition, Brazil's second crop corn planting was reported at 26% complete, versus 25% complete for the same week last year. There is already talk that, if planting doesn't speed up soon, we could be looking at significantly less acres for Brazil's Safrinha corn. Export inspections were not exactly bullish with 36.9 million bushels reported shipped versus 49.3 million bushels needed to meet weekly USDA demand expectations. This leaves inspections at 4.5% behind the average pace. While nearby contracts did not show much today as far as technical developments go, the Sep and Dec contracts traded above their 200-day moving averages for the first time since mid August. This is a big deal. The Dec contract 200-day moving average is currently at 3.98, which will serve as some major resistance. There are, no doubt, a lot of producer forward contract orders around 4.00; the 200-day moving average will be resistance, and the 38.2% retracement of the Jul highs to Dec lows lies right around that same area.

SOYBEAN HIGHLIGHTS: Soybean futures closed higher, though not nearly to the degree that most were expecting, based on this morning's trade. The nearby Mar contract closed 5 cents higher to 10.26-1/2, Jul closed 4-3/4 higher to 10.47, and new crop Nov closed 3 cents higher to 10.25. Lack of significant rain in Argentina this weekend gave nearby meal contracts a boost of over 3.00 today. This lent support to soybean contracts, especially old crop months. Export inspections numbers this morning lent strength as well. For the week ending 2/15, 35.3 million bushels were reported shipped, versus 26.2 million bushels needed to meet weekly USDA demand expectations. This leaves inspections still almost 9% behind the 5-year average pace. With developing weather issues in South America, the market has been able to shrug off some short term momentum indicators leaning toward overbought status. Today's close for the Nov contract was the highest since the 7/12/17 close of 10.27.

WHEAT HIGHLIGHTS: Chi wheat futures closed sharply, falling victim to a sharply higher dollar and distant forecasts for the eastern part of the Plains. The nearby Mar Chi contract closed 8-1/2 cents lower to 4.49-1/4, and Jul closed 8-1/4 cents lower to 4.78-1/4. KC contracts closed 5-7 cents lower and Mpls 2-3 cents lower. The 6-10 and 8-14 day forecasts are showing decent chances for rain in the eastern third of HRW areas. This was a selling point for the KC contracts. Chi contracts in particular suffered from poor export data today. 15.5 million bushels were reported shipped for the week ending last Thursday, while 20.6 million bushels were needed to meet demand expectations. Exports are only running about 1/2% behind the average pace. Overall supply and lack of real bullish developments seems to be a limiting factor for Chi contracts. IN addition, Chi contracts have been unable to make any decisive moves toward their 200-day moving average resistance level. They have not traded above that level since mid August, so it would take new developments to break through that ceiling. Prices were slightly overbought coming into today's session, and the Jul contract closing below its 10-day moving average was likely the result of long liquidation.

CATTLE HIGHLIGHTS: Cattle futures closed slightly higher today despite strong cash trade late Friday afternoon and surging beef values. The nearby Feb contract closed 20 cents higher to 130.30, Apr closed 7 cents higher to 127.72, and June closed 15 cents higher to 118.82. After last Friday's market close, reports of cash trade as high as 130 in Kansas should have been a major supportive factor for today's session. However, the lack of reaction to that may suggest that the sharply higher cash trade may have already been priced in. In addition to the strength in the country, beef prices were showing impressive strength today. Friday afternoon, choice cuts closed 2.69 higher to 212.57, and select cuts were 2.31 higher to 207.43. By this morning, choice cuts were up another 3.20 to 215.77, and select cuts were up 3.07 to 210.50. Weather at this point does not appear to be a major factor for the bull camp or bear camp. On the fundamental side, the debate remains the same. Despite outlook for a significant increase in production, demand at this point looks poised to eat it up. Near term technicals may be leaning toward an overbought status. Not only are today's closes outside Bollinger bands, but stochastics are overbought as well. Prices for the nearby Feb and Apr contracts did open up at or near the highs of the day but still managed to close higher. This again could be indicative of overbought prices.

LEAN HOG HIGHLIGHTS: Hog futures put in a triple-digit bounce today, beginning to recover from oversold prices and new lows for the move on Friday. The nearby Apr contract closed 1.05 higher to 69.20, May closed 1.07 higher to 76.00 and Jun closed 1.22 higher to 80.95. The CME lean hog index closed 1.40 lower today to 72.09, leaving the basis much wider than normal. Carcass cutout values were up 1.62 at midsession today to 79.98, providing some quick buying interest. However, the source of today's bounce was technicals. Prices were sharply oversold coming into today's session, especially considering relatively strong pork demand. After stop hunting late last week, many traders were likely satisfied on gains on short positions and covered today.

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