Stewart-Peterson Market Commentary

Closing Commentary - October 22, 2019

Top Farmer Closing Commentary 10-22-19

CORN HIGHLIGHTS: It was a quiet day in corn futures as closing prices were unchanged to 3/4 of a cent higher as Dec led today’s gains. Prices bounced late in the session respecting the 21-day moving average after trading as low as 3.85 in Dec. Dec 2020 closed up 1/2 at 4.09-1/2. Harvest pressure and a lack of new news, along with a forecast that looks mostly conducive to harvest in the next week kept prices in under pressure, but a lack of strong farmer selling is helping to provide support, as is general lateness to the crop in which this year’s pipeline is not as full for the third week of October as in past years. Yesterday’s 6-10 day forecast does indicate precipitation likely to move back into the Midwest and temperatures cooler than normal. An above-normal precipitation map along with a below-normal temperature map could suggest slow dry down for wet fields. That being said, harvest will likely pick up steam into the weekend. As of last Sunday, harvest was 30% complete vs a 5-year average of 47%.

SOYBEAN HIGHLIGHTS: Soybean futures ended quietly with Nov 2020 finishing unchanged at 9.73-1/4 and Jan closing up 1-1/2 cents at 9.48-1/4. Bullish traders will argue the market finished firmer, while bearish traders will say the market finished well off its highs by near 10 cents on most contracts. Talk this morning that China could be a buyer of 10 million metric tonnes had buyers on the offensive, but as lack of detail followed prices seemed to mitigate the positive action and slide throughout the session. Funds remain on the long side of the market and are estimated to be long near 53,000 contracts of soybeans coming into today. The fundamental picture looks supportive for beans as expectations for yield are edging downward due to continuous wet weather, snow, and high wind. 46% of the crop was harvested, 20% stronger than a week ago but still well behind the 64% on the 5-year average. Rainy weather has been a continuous problem trying to harvest but there may be a window between now and the next five or six days where harvest could move significantly forward. Lack of positive news is beginning to concern us. Prices are consolidating in a nice pattern and the top end of an 80 cent rally. Yet, the market can’t seem to find reason to push higher. If behind on sales make sure and get current with recommendations.

WHEAT HIGHLIGHTS: Wheat futures finished mixed with Mpls wheat gaining 1 to 1-3/4, while KC lost 3 to 4-1/4, and Chi led today’s losses closing 4-1/4 to 5-1/2 lower with Dec closing at 5.18. Today’s technical trade was not impressive as futures in Chi finished at the low end of its trading range for the second consecutive session after strong daily gains from earlier in the session. Weak finishes are suggesting that traders are using rallies the last two days as opportunities to sell or exit out of long positions. A lack of new positive news, a rebound in the dollar, and now technical weakness are suggesting prices are looking tired and may have room to correct lower. We believe a lack of positive news is probably the biggest factor that wheat prices face as the news this month was primarily negative on the heels of bigger world and U.S. inventories according to the October Supply and Demand report. Spring wheat harvest is now only 4% unharvested for the year, a surprising pickup from last week. Yet, quality is an issue and there will be a resurvey of numbers for spring wheat that will be released on the November Supply and Demand report. U.S. export pace continues to run ahead of year ago levels and that is viewed as supportive, as is dry weather in Australia. Beyond that, new positive news is lacking and this leaves the market vulnerable to a drop.

CATTLE HIGHLIGHTS: Cattle markets had mixed to mostly lower closes today, with Oct lives down 1.07 to 109.87, Dec lives were down 17 cents to 113.70, and Feb lives were down 12 cents to 119.10. Oct feeders were up 27 cents to 143.70 and Nov feeders were up 65 cents to 143.50. Choice beef values closed 2.09 higher yesterday afternoon at 220.13, the highest value since September 16. Choice beef was up another 75 cents this morning to 220.88. The strong U.S. economy along with expectations for falling beef production in Q4 is helping to keep retail values supportive. The supporting exports and cash activity have kept price action choppy. Maybe the main pressure point lately in the cattle markets has been the sharply overbought technicals. According to Stochastics, Dec live cattle have been overbought since September 18 but have still continued their rally into a consolidation range. The rally since September has come essentially without a correction, so one could be nearing if fundamentals soften up.

LEAN HOG HIGHLIGHTS: Hog markets closed sharply lower today, falling through nearby support on extremely heavy pork production. Dec hogs were down 2.32 to 65.50, Feb hogs were down 1.90 to 76.27, and Apr hogs were down 1.27 to 83.12. The CME Lean Hog Index was down 11 cents to 65.53. China’s Spot Pig Index was up 3.4% overnight, leaving it up 11.8% for the week, up 41.8% for the month, and up 199.9% year to date. Carcass cutout values closed 1.50 higher yesterday afternoon to 78.53, their highest value since August 23. Carcass values were off 1.80 this morning to 76.73, likely due to oversupply from extremely heavy slaughter. Slaughter so far this week is running 13,000 head ahead of the same week last year. The best traded Dec hog contract made its first close today below its 50-day moving average level since October 7 and just its second since September 20. Momentum indicators are pointing lower and we may see further correction from the bearish outside day today.

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