Stewart-Peterson Market Commentary

Closing Commentary - November 20, 2017

Top Farmer Closing Commentary 11-20-17

CORN HIGHLIGHTS: For the second consecutive day, corn futures posted small gains. The Dec contract finished 2 cents higher to 3.45, while Mar was 1-1/2 higher to 3.56-3/4. Trade today was two-sided and choppy, as Dec posted a 3-3/4 cent trading range before finishing 1/4 cent off the intraday high. With the holiday-shortened trading week, news in corn is relatively quiet, as prices look to find direction during the trading day. This year's corn harvest is getting closer to wrapping up with approximately 90% of the harvest complete. Regions in the eastern Corn Belt and in the North are mostly delayed due to a later developing crop or wet weather. The largest bullish factor in the corn market today was confirmation of the overall short position held by managed money. Friday's Commitment of Traders report showed managed money at a record 230,556 contracts. Since that number was compiled on Tuesday, it is estimated that managed money has liquidated approximately 15,000 of those contracts toward the end of the week. This is still an extremely large short position, and if additional short covering can continue, corn prices will be lifted higher. In addition, Friday's push higher was also fueled by rumors that China may have bought US corn. Today's weekly export shipments confirmed the movement of one cargo to China. Today's strength in the corn market did overcome what we classify as a bearish weekly inspections report by the USDA, which put the weekly corn inspections at 24.9 million bushels, below the 34.5 million bushels a year ago and total inspections running at 44% behind previous year's pace.

SOYBEAN HIGHLIGHTS: Soybean futures finished mixed with front month Jan beans losing 1/2 cent to 9.90. Mar was down 1/4 cent to 10.01-1/4. Only 8 long term deferred contracts saw mild gains of 1/4 to 1 cent on bean positions. Soybean futures traded mostly lower today, only to have a late surge of soymeal values help push contracts off of intraday lows. With Jan beans finishing 1/2 cent lower, it was still a strong close with today's intraday low at 9.83, 6-12 cents lower. Soybean harvest is expected to push the last 5% of completion, as producers wrap up this year's harvest. Prices this afternoon may have seen selling pressure as trader continues to focus on South American weather and potential dryness developing in Argentina. Two-week forecasts show improved chances of rain across South American countries, which may have also kept buyers on the sidelines this afternoon. Despite concerns regarding global production and US harvest wrapping up, demand will need to stay strong to be supportive on US beans. Weekly soybean export inspections were at 78.3 million bushels for the week ending 11/16. This was below last year's 98.3 million bushels for the same week. Cumulative inspections are down 13% from a year ago and below USDA projected gains in export sales. Soybean charts failed to put in a higher high compared to Friday's trade, as prices pushed against trend line resistance. Failure to break through this barrier may cause sellers to step back into the marketplace and move prices lower, especially if signs of demand slowing are evident.

WHEAT HIGHLIGHTS: Chi wheat futures finished 4-5 cents lower. Front month Dec wheat was down 5-1/4 to 4.22, and Mar was down 5 to 4.38-1/2. Besides Chi wheat, winter wheat futures lost 5-6 cents, while spring wheat futures were 8-10 cents lower in the front months. Potential talk of dryness concerns in the southwestern Plains may have limited overall downside in winter wheat contracts, but it is still early in the growing season and did not translate into short covering off of Friday's trade. US wheat values likely saw pressure from additional competition globally, as weakness in the Russian ruble and strength in the US dollar helps limit US competitiveness vs global exporters. Russia is making a strong push to be the world's largest wheat exporter, and weakened currency will only help in that regard. In addition, wheat futures saw export inspections this afternoon at 9.5 million bushels for the week of 11/16, which is below the 15.9 million bushels for a year ago. Cumulative shipments are running approximately 7% below last year and below the USDA's projected decline for overall US shipments. This lack of overall favorable demand news, given the competitive global market, will make it difficult for wheat prices to rally in the future.

CATTLE HIGHLIGHTS: Cattle futures finished sharply lower on bearish cattle on feed and commitment of traders numbers. The nearby Dec contract closed 1.75 lower to 116.75, Feb closed 1.65 lower to 123.02 and Apr closed 1.17 lower to 123.70. The placements number on Friday's Cattle on Feed report of 110% vs the average market estimate of 107.5% was the first of the bearish numbers released. Higher than expected placements could result in cattle backing up in the country and greater than necessary beef supply. In addition, as of last Tuesday, traders had only covered about 200 of their existing long positions. This leaves the managed money net long position at 131,830 contracts. This is bearish because it implies that fund long liquidation was not responsible for the recent downtrend and actually leaves them with a sizeable position to liquidate should they decide to exit the market. On Friday afternoon, choice cuts closed 3.00 lower to 207.24, and select cuts closed 2 cents higher to 187.85. This was the lowest choice cutout value since 10/31. By midsession, choice cuts lost another 1.68 to 205.56, and select cuts gained 67 cents to 188.52. Supply issues were another major weight on the market today with traders nervous that cheap feed, solid weather for weight gain and the ample short term supply of market ready cattle will continue to pressure the market.

LEAN HOG HIGHLIGHTS: Hog futures saw triple digit gains today, pulling out oversold levels and challenging nearby points of resistance. The nearby Dec contract closed 1.37 higher to 62.02, Feb closed 1.40 higher to 68.47 and Apr closed 1.22 higher to 72.37. The CME lean hog index was down 55 cents today to 65.42. This moderately tightened the futures discount to cash, but the discount is still too wide for this time of year, which is supporting futures. Carcass cutouts closed 41 cents higher on Friday to 80.96 and were up another 2.08 today to 83.04. Ham prices led the way higher, up 3.02 to 65.81. Picnics were the only primal cut to lose value, down 41 cents to 64.05. The pork strength was likely brought about by the slower than expected slaughter pace from the past few weeks. This can be supportive short term with retail supplies shrinking. However, slower than expected slaughter means that hogs are possibly backing up in the country, adding weight. If slaughter ramps up, the increase in supply will be bearish for futures prices. Most of the early session bounce today was due to short covering brought about by the wider than normal discount of futures to cash. Strong pork prices released mid session provided plenty of buying fuel afterwards. Prices were oversold short term and may be trying to confirm last week's V bottom.

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