Stewart-Peterson Market Commentary

Closing Commentary - November 12, 2018

Top Farmer Closing Commentary 11-12-18

CORN HIGHLIGHTS: Due to the observance of the Veterans holiday, no government reports were released today, which includes export inspections. Corn futures finished with small gains of 3/4 to 1-1/2 cents as Dec clawed higher after trading in negative territory overnight. The Dec close at 3.71-1/2 continues to signal consolidation in a corn market that is going nowhere fast. If you didn't look at the highs and lows, corn futures have traded near 3.70 per bushel in every month since June with the exception of September, when it traded just under this level. Our point is that corn is notorious for building a base when it is searching for a longer term low, and we believe that is the case as the fall harvest winds down. Last week's favorable U.S. stocks figure failed to ignite short covering or aggressive end user buying. The market may still be trying to figure out just what the impact of a significant revision to Chinese production the prior ten years means to the marketplace. The way the market has traded, probably nothing. While this is new news, it doesn't change the idea or perspective that China is not a corn exporter.

SOYBEAN HIGHLIGHTS: Soybean futures edged lower, losing 3-1/4 to 3-1/2 cents on a lack of new positive news and concerns that the dollar continues to show strength. The stock market has taken a significant draw-down as of this writing, and despite this, investors seem to be content to buy the U.S. dollar, anticipating further interest rate hikes. Today's range bound activity was reflective of a lack of new news, as government offices are closed in observance of Veterans Day. Support may have come from heavy rains expected in Argentina the next several days. With expectations that there could be something more definitive on the tariff front by the end of the month, it is possible the bean market is content to consolidate. A cool forecast this week may allow for some harvest, but less than ideal weather conditions over the last month have made for supportive price activity. The question is whether or not this is enough to aid in prices moving higher with an increasing carryout number at now an eye-popping 955 million.

WHEAT HIGHLIGHTS: Wheat futures rocketed higher in Chi, gaining 14-1/2 cents, while KC finished with gains of nearly 6 cents and Mpls nearly 9 cents. Export inspections were not released today due to the government acknowledging Veterans Day. These figures will be released tomorrow. Today was particularly impressive for wheat futures, because the U.S. dollar was also experiencing another up day for the third consecutive session, and prices reached the highest level for the year. Heavy rains in parts of South America, particularly Argentina, may have been somewhat responsible for today's rally. It appears that traders were relatively defensive, and when prices began to move higher, they likely uncovered buy stop orders in what was termed an otherwise uneventful, low-volume day. Nonetheless, where there is smoke, there is likely fire. Concerns of less SRW wheat acres planted due to harvest delays this fall may suggest less acres than originally anticipated.

CATTLE HIGHLIGHTS: Cattle futures closed mixed. Lives were able to find some buyers after last week's sharp break, while weakness in feeders made new lows for the move. The nearby Dec live cattle contract closed 35 cents higher to 114.92, and Feb closed 20 cents higher to 118. Nov feeders were down 62 cents to 148.37, and Jan feeders were down 7 cents to 143.72. Choice beef was down 87 cents on Friday afternoon to 215.20. This is its lowest value since 10/29. Choice beef did bounce 46 cents this morning to 215.66. The next week or so looks very dry for the Plains region, which will aid in weight gain and pressure prices. A strong U.S. dollar and sharply negative move in the stock market today were bearish as well. Much of the buying interest behind today's bounce was due to some short covering out of oversold levels and also spillover support from the higher hog markets. On the Friday's Commitment of Traders report, the CFTC pegged the net speculative long position in live cattle at 63,128 contracts, a reduction from the previous week's net speculative position of 71,297 contracts. Given the seasonal tendency for beef values to drop from here, we would not be surprised to see the sizeable speculative long position begin to exit and push prices lower.

LEAN HOG HIGHLIGHTS: Hog markets made a solid bounce today, with the Dec contract closing 75 cents higher to 56.55, Feb up 2.02 to 61.52 and Apr up 1.62 to 67.32. Carcass cutout values made their lowest close on Friday afternoon since 9/11, down 1.30 to 70.27. Carcass values jumped 2.00 today, though, to 72.27, led by a 9.08 jump in belly values to 123.52. Picnics were also up sharply, 4.08 higher to 55.37. One major source of buying today was news that a major Chinese feed maker has reported that one production unit was contaminated with African swine fever. This means that ASF could have been spreading through feed this whole time and raises further questions about the Chinese government's ability to contain ASF. While the market has been discounting ASF news over the past couple of weeks, instead waiting for reports that China has begun to import pork, news that ASF has penetrated at least part of the feed pipeline creates still more ASF uncertainty. The Dec contract likely did not bounce as much as the deferreds today because it has been supported in the past by its wide discount to the cash market. The deferred contracts were likely oversold, and ASF will be more of an issue for the deferred contracts. The Dec contract was tested and failed to close above its 200-day moving average, while the Feb contract punched back through its 100-day moving average resistance level. Apr hogs tested and failed to close above their 200-day moving average but also broke back above their 100-day moving average resistance level.

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