Stewart-Peterson Market Commentary

Closing Commentary - February 21, 2018

Top Farmer Closing Commentary 2-21-18

CORN HIGHLIGHTS: Corn futures ended quietly with gains of 1/4 to 1/2 cent as Dec led today's up move, closing at 3.96-1/2. Most contracts traded in a 4-cent range. Strength in soybeans helped provide underlying support, but weakness in wheat and ideas that farmer selling will likely pick up as the winter wears on, not only to reward the recent recovery in price but also because of such a large amount of inventory on hand that producers want to move crop before spring field work. There is probably truth to both, but the reality is that the market is likely not moving because it is awaiting further weather news out of South America. Drier conditions are likely inhibiting production for corn in Argentina, but to what degree remains a question. As for late-planted crop in Brazil, the second crop corn, while behind schedule, is not far enough behind or the season long enough to suggest a significant downturn in production. The market is likely trading as it should at this time of year when carryout is large, which is in a sideways to upper pattern with overhead resistance on new crop at 4.00.

SOYBEAN HIGHLIGHTS: Soybean futures improved with gains of 3-8 cents as futures pushed into new highs for the year in Nov. Mar beans closed up 7-3/4 at 10.34-1/4, while Nov closed up 3 at 10.28 after reaching a high of 10.32-1/2. Today's high exceeds the high that occurred on 7/12/17 at 10.28-3/4. Continued weather concerns in South America, short covering and funds going net long have been primary factors pushing the market in recent weeks and were again today. Heavy rains in parts of Brazil, along with continued mostly dry conditions in Argentina, have helped provide underlying support. Private estimates might be suggesting more beans out of Brazil, and this could cap rally potential. The dollar index was up for the fourth consecutive session, and this may have capped rally potential, as futures slid close to negative territory by mid-session. However, futures did rally late, gaining solid ground. Soymeal finished 1.70 to 3.90 higher with Aug leading today's gains. Soybean oil was supportive across the board as well. In recent weeks, soybean oil has been near contract lows, while soymeal has been shooting higher. Today was encouraging, as oil looked strong in conjunction with firmer soymeal. The market may be seeing across the board buying, unlike in most sessions over the last few weeks where oil has been on the defensive.

WHEAT HIGHLIGHTS: For the third consecutive session, Chi wheat lost ground with today's futures dropping 2 to 3-3/4 cents as Sep led today's drop, closing at 4.91-1/4. Mar closed down 2 at 4.47-1/4, while Jul closed 3-1/2 lower at 4.74-3/4. KC wheat lost 5-6, while Mpls closed mostly unchanged. Improved chances of rainfall in the Midwest is keeping wheat prices on the defensive the last three sessions. News of consequence is lacking as well, and without something favorable, prices are vulnerable to a drop, or at least a drift. We might argue wheat prices are drifting downward, but we also agree new, positive news appears to be lacking. With world inventories considered adequate to more than adequate, sustaining an upward trend in wheat prices may be difficult. Most forecasters, however, are suggesting that rainfall totals in the southern Plains will be on the light side.

CATTLE HIGHLIGHTS: Cattle futures fell sharply lower today after technical selling found stop orders below the market and pushed most futures contracts to triple digit losses. The nearby Feb contract closed 65 cents lower to 129.65, Apr closed 1.50 lower to 126.22, and Jun closed 1.77 lower to 117.05. Today's fed cattle exchange was quiet as usual, with one pen of 91 heifers passed over at 126.25. Beef prices surged for today's session. Yesterday afternoon, choice cuts were 3.35 higher to 215.92, and select cuts were 2.97 higher to 210.40. This was the highest value for choice cuts since 7/10/17. Choice cuts were up another 1.93 this morning to 217.85, and select cuts were up 85 cents to 211.25. Cash trade in the country was quiet today, so it is evident that technical selling was the reason for the lower finishes today. Cattle futures opened moderately lower, but sold off very quickly in the first 15 minutes of the session. Prices broke below major moving average support levels, triggering stops and sending prices even lower. The best traded Apr contract did probe below its 10 and 20-day moving average levels but closed above both, about halfway between the highs and lows for the day. June futures did the same, barely holding onto the 10-day moving average support levels.

LEAN HOG HIGHLIGHTS: Hog futures closed a few ticks higher today, as prices tried to recover from oversold territory. The nearby Apr contract closed 70 cents higher to 69.90, May closed 15 cents higher to 76.15, and Jun closed 35 cents higher to 81.30. The CME lean hog index was down 2.08 today to 71.41, meaning that futures prices are still at a wider than normal discount to cash. Weight data released this morning was not supportive with average weights for Iowa Minnesota hogs for the week ending 2/17 reported at 285.1 lbs, versus 284.9 lbs last week and 281.3 lbs a year ago. Weights are above last year and the 5-year average, a negative force, especially when weights are trending lower at this time of year. Carcass cutouts closed 1.36 higher yesterday afternoon to 79.72 but were down 41 cents by midsession today to 79.31. While today's closes were positive, the price action was very neutral. Closes were essentially steady with the opening prices, meaning that actual trades were choppy for the entire session. The Apr contract did close above its 10-day moving average for the first time since 1/24.

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