Stewart-Peterson Market Commentary

Closing Commentary - July 17, 2018

Top Farmer Closing Commentary 7-17-18

CORN HIGHLIGHTS: Corn futures finished with gains of 3-3/4 to 4-1/2 cents, as front months lead today's gains. Dec closed at 3.59-3/4, gaining 4-1/2 on a decline in weekly crop ratings as well as a lack of strong farmer selling. A rebound in the dollar late in the session may have capped upside potential after prices traded 6 higher close to the noon hour. Ratings indicated the crop dropped from 75% good to excellent last week to 72% this week. At the same time, the poor to very poor category increased from 7% to 9%. 25% of Missouri's crop is rated as poor or very poor and another 42% as fair. Dry weather in the southwestern regions of the Midwest has definitely taken its toll. Kansas corn is also at 20% poor to very poor and 32% fair. The "I" states, however, remain in great states, as Illinois enjoys 80% of its crop rated good to excellent. Indiana is 72% and Iowa 78% good to excellent. A near term weather forecast that looks benign with generally cooler temperatures and average rainfall totals suggests the next couple of weeks should allow pollination to occur without much issue.

SOYBEAN HIGHLIGHTS: Soybean futures gained 8-3/4 to 10 cents on a small decline in crop ratings, along with short covering after prices posted a bullish key reversal yesterday. Beans have become a strong value to end users. We also believe farmers are holding very little old crop, and this is evident through increasing basis. By day's end, Aug beans closed 10 higher at 8.39-1/2 and Nov 9-1/2 higher at 8.55-1/4 with a range today of 8.46 to 8.59-3/4. The crop is ahead of schedule, which shows 65% of the US through Sunday is in the blooming stage, versus a 5-year average of 45%. Setting pods is at 26% versus a 5-year average of 11%. Crop ratings indicated the good to excellent category at 69%, versus 71% last week and the poor to very poor category at 8% versus 7% last week.

WHEAT HIGHLIGHTS: Wheat futures firmed throughout the session on a weaker dollar. However, when the dollar rebounded later in the session, wheat prices lost some steam. By day's end, Chi Sep wheat closed up 9-1/4 at 4.97-3/4 after reaching a high of 5.04-1/4. KC closed 5-6 higher, and Mpls 3-1/2 to 5 higher. Continued concerns in eastern Europe and the Black Sea region over crop size is providing support. As indicated on previous reports, the world has ample inventory. With crop condition concerns in the US and abroad, the market has taken notice, and wheat prices have performed moderately well for the year, holding small gains from where futures started in January. Harvest pressure has exerted itself lately, and we expect to hear good yield results in the SRW wheat belt where recent rains should help to provide higher yielding potential. Our bias is that wheat prices have a limited upside, will be choppy, and rallies should be viewed as opportunities to sell. At the same time, we have been encouraged in 2018 that prices are holding together. With world supplies expected to decline for the first time in six years, the market may have seen its low in January.

CATTLE HIGHLIGHTS: Live cattle futures closed slightly lower today after failing to find new buying interest on yesterday's closes above resistance levels. The nearby Aug contract closed 50 cents lower to 106.42. Oct closed 15 cents lower to 108.50, and Dec closed 7 cents lower to 112.62. Prices yesterday rallied on last week's cash trade from 110 to 111, but expectations are lower for this week. Yesterday afternoon, choice cuts closed at their lowest value since 12/29, down 38 cents to 203.76. Choice beef was up 1.24 today to 205, but the choice/select spread continues to narrow, currently at 7.73. Market guesses for Friday's Cattle on Feed report are very sporadic, but average estimates appear heavy. The average guess for marketings is at 100.8%. The average placements guess is 101.3%. The average guess for on feed supply is at 104.1%. If these average guesses are right, futures prices will almost certainly move lower, but trade guess ranges are so wide that almost anything is possible. Technically, today's lack of follow through buying after moving through yesterday's highs was somewhat disappointing. Nearby support levels did hold, particularly at the 100-day moving average levels. However, without some bullish fundamental news, prices are likely to remain range-bound to lower.

LEAN HOG HIGHLIGHTS: Hog futures closed sharply lower, with the nearby Aug contract making another new low. Aug hogs closed 1.30 lower to 67.90. October closed 1.80 lower to 52.20, and Dec closed 1.70 lower to 47.47. The CME lean hog index closed 57 cents lower today to 80.34 and may be beginning to accelerate lower. Carcass cutouts were down 45 cents yesterday afternoon to 84.37 but recovered today, up 1.15 to 84.52. The bounce in cutout values was led by hams, up 2.52 to 57.95 and loins up 1.73 to 80.17. Technically, today's price action was very negative. Prices barely traded above the opening trade for the day and surged lower early. The Aug futures contract made a new low for the third time in the past seven sessions. The Oct and Dec contracts did not make new lows but are within striking distance.

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