Stewart-Peterson Market Commentary

Closing Commentary - July 27, 2017

Top Farmer Closing Commentary 7-27-17

CORN HIGHLIGHTS:Corn futures edged higher, finishing with small gains of 1-1/2 to 1-3/4 as Dec led today's gains, closing at 3.87-3/4. Dec reached a high of 3.90-1/2. As rain pushed through the Midwest over the last 48 hours, it absolutely helped many producers, yet at the same time rainfall totals in other areas were light, which is suggesting more moisture will be needed soon. The northern U.S. Plains states are expected to see below average precipitation with temperatures generally above normal. Most of the Midwest will see normal temperatures in both the 6-10 day, as well as extended outlook. Therefore, without a stretch of well-above normal temperatures, as those experienced last week, corn prices may likely consolidate and await further news to find direction. Crop ratings next Monday will again provide some direction, but the market will still move on future forecasts. Any change from the current forecast could send prices a dime higher or lower in a hurry. Overhead resistance on Dec corn is first at 3.89-1/2, the 100-day moving average, and then 3.92, the 50-day moving average. With much of the crop late, weather will be critical through at least the third week of August. However, moving into the last part of July, one would have to argue that the weather, as a whole has improved from mid-July.

SOYBEAN HIGHLIGHTS:Nov soybean futures finished with gains of 6 to 7-1/4 cents, as Nov led today's higher closing at 10.07-1/2. Nov reached a high of 10.12-1/2, its highest level since Monday when prices exploded on the overnight trade with sharp gains, but gave these back by day's end. Today was the strongest close in Nov beans since July 24. The charts may indicate consolidation, but the key here is that prices held just under the 9.85 mark for the third time since early July. This tells us there's buying interest with expectations for strong demand and continued concern that weather over the last 30 days has taken its toll on parts of the bean crop (either too dry or too wet). Crop ratings indicate 14% of the crop poor to very poor. Strength in soymeal has been noted the last two sessions as well, with futures gaining close to 7.00 off their recent low. Export sales were viewed as supportive with 11.8 million bushels sold for old crop and 19.5 million for new crop, for a combined total of just under 30 million bushels. This puts old crop sales at 2.229 billion, which compares to the USDA estimate for the year of 2.150 billion. Therefore, it looks likely to us the export figure will need to be raised and likely carryout number lowered.

WHEAT HIGHLIGHTS:Wheat futures finished with small gains of 1 to 2 cents in Chi, 5 to 5-1/2 in KC, and 4-1/2 to 6-1/2 in Mpls. The spring wheat tour continues along in day three. Yesterday's figures, through the end of day two, indicated average yield at 35.8 bushels versus day two last year at 46.9 and the 5-year average at 46.6. Harvest is winding down for both hard red and soft red wheat, so harvest pressure is not likely a factor any longer. What will be a factor is the August 10 USDA Supply and Demand report, which will attempt to estimate yield, as well as world supplies. Drier conditions, particularly in Europe, may curb world production of wheat. The International Grain Council figure this morning also lowered world wheat production slightly.

CATTLE HIGHLIGHTS:Cattle futures closed steady to higher, still taking advantage of wide basis levels and steady exports. The nearby Aug contract closed steady at 114.30, Oct closed 20 cents higher to 113.57, and Dec closed 42 cents higher to 114.40. Feeders had a comparatively stronger day, with Aug up 1.35 to 147.82, Sep up 1.87 to 148.95, and Oct up 1.72 to 148.25. Cash bids were steady with yesterday's FCE trade, between 1.17 and 1.18. Boxed beef values had limited gains today. Choice cuts closed 55 cents lower to 207.07 and select closed 1.06 lower to 197.87 yesterday afternoon. By midday today, choice cuts were down another 26 cents to 206.81 and select cuts were down 64 cents to 197.23. U.S. beef export sales for the week ending July 20, came in at 13,900 metric tons versus the previous 4-week average of 13,275 metric tons. Cumulative sales for 2017 are running 7.8% ahead of last year's pace, currently sitting at 505,600 metric tons. The Oct and Dec contracts found support today at the 100-day moving average and closed between that supportive level and the 20-day moving average resistance level. The Aug contract opened at its 100-day moving average level, but was unable to close above it.

LEAN HOG HIGHLIGHTS:An extremely steep basis and large downward swing in pork values led hog futures to mixed finishes today. The nearby Aug contract closed 25 cents higher to 82.25, Oct closed 2 cents higher to 67.67, and Dec closed 12 cents lower to 61.80. The Aug futures are currently at a discount to cash of over 7.00, and Oct is at a 22.00 discount to cash, both of which are very wide for this time of year. However, sharply lower pork values extinguished much of the buying interest that normally comes with large discounts to cash. Yesterday afternoon, carcass cutouts closed 1.82 lower to 100.58, and were down another 1.19 to 99.39 by midday today. This drop was led by butts, ribs, hams, and bellies, all losing 2.00 to 6.00 on the day. If this trend continues, falling pork values, and consequently falling cash values, may be the easiest route for the basis to tighten back up. U.S. pork exports sales for the week ending July 20 were reported this morning at 19,100 metric tons versus the previous 4-week average of 15,200 metric tons. Cumulative sales for 2017 are 8.3% ahead of last year's pace, currently pegged at 755,700 metric tons. Technical action was impressive today for the contracts that closed positive, particularly the Oct contract. Oct futures traded sharply lower early in the session, but rallied back above its 100 and 10-day moving averages to close above both. This is the first close for the Oct contract above its 10-day moving average since July 10.




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