Stewart-Peterson Market Commentary

Closing Commentary - December 18, 2018

Top Farmer Closing Commentary 12-18-18

CORN HIGHLIGHTS: Corn prices edged higher today, gaining 1-1/2 to 1-3/4 cents on renewed talk that China could be a buyer of U.S. corn. Futures continue to trade in a very narrow range. Today was no exception with futures trading in a 3-cent range on most futures contracts. Support came from what is termed continued speculative buying and prospects from a technical perspective that, if prices break overhead resistance, a retracement to the 50% level from the summer high to the fall low indicates an upside objective for Mar corn of 3.96. This technical objective would also indicate prices retesting the highs from late July and early August. Our bias is the January Supply and Demand report will indicate another drawdown in yield, as our continued conversations with farmers suggest that most did not live up to last year's crop yield this year. Consequently, we don't see the math working to pull the national average more than two bushels per acre higher.

SOYBEAN HIGHLIGHTS: Soybean futures edged higher, gaining 2-1/2 to 3 cents as Jan led today's gains, closing at 9.07-3/4. The 10-day moving average for the third consecutive session acted as overhead resistance, keeping prices in check. Adverse weather in the southern Hemisphere is beginning to pop up in areas but probably not on a large enough scale to have major impact, at least for now. A more hardline stance (or at least language) from China overnight may have had the market somewhat concerned, but expectations are they will continue to be buyers as they indicated they would, at least for now, to fill government reserves. This is a good long term signal, as it does indicate that demand remains strong and vibrant, and that recent talk about reduced consumption due to African swine fever is likely overblown. Yet, there are a lot of moving parts to the demand for beans, as well as movement, so stay tuned.

WHEAT HIGHLIGHTS: Wheat prices traded range bound today, finishing with losses of 1-1/2 to 2-1/2 cents in Chi, as Mar led today's slide, closing at 5.32-3/4. KC lost 4-5 cents, and Mpls 8 to 8-1/2 cents. Lack of cold, wet weather and a chance for moisture throughout parts of the HRW wheat belt were termed negative for prices today. With a lack of new news, items such as the Australian wheat harvest continuing to push along may be enough to keep prices in a sideways to lower pattern. In addition, without much on the weather front, traders cannot get too excited one way or the other. We continue to believe that export business will pick up in the weeks ahead, and we believe the market thinks so as well, as it has climbed higher over the last couple of weeks.

CATTLE HIGHLIGHTS: Cattle futures made a very nice recovery from yesterday's sell-off. The nearby Dec live cattle contract closed 75 cents higher to 119.77, Feb closed 1.02 higher to 122.57, and Apr closed 75 cents higher to 124.60. Jan feeders were up 82 cents to 146.20, and Mar feeders were up 97 cents to 144.30. Choice beef closed 1.71 higher to 212.67 and was up another 1.06 this morning to 213.73. If choice beef can hold these gains, this would be the highest close in a week. The strength over the past couple of days is adding to optimism that beef prices can hold firm as we head into the Christmas and New Year holidays. Warm and dry forecasts that dominated last week have since added significant amounts of moisture. If the 6-10 and 8-14 day forecasts materialize, weight gain will be difficult, which would be supportive. Early estimates for this week's Cattle on Feed report are as follows: Placements, 92%; marketings, 101%; on feed, 101%. Last week, the USDA moved the Cattle on Feed report from its previously scheduled release date of Friday, Dec 21 to Thursday, Dec 20. Though today's price action did not make bullish key reversals, the strength was impressive nonetheless. Prices traded lower early in the session, testing the 20-day moving average support level and then rebounding back above. Live cattle futures have so far not broken the upward channel support line started on 11/13, so the near term trend may be sideways to higher. Feeder markets jumped back above their 10 and 20-day moving average levels. Live cattle futures were able to close gaps from yesterday's session, while gaps created on feeder charts yesterday still remain open.

LEAN HOG HIGHLIGHTS: Hog futures showed significant weakness for the second session in a row today. The nearby Feb contract closed 1.17 lower to 62.65, Apr closed 1.15 lower to 67.82, and Jun closed 90 cents lower to 81.47. The CME lean hog index was down 4 cents to 55.13. Carcass cutouts were up 16 cents yesterday afternoon to 71.96 and were up 2.35 this morning to 74.31. Picnics and bellies led the way higher today with picnics up 4.50 to 58.80 and bellies up 8.72 to 131.95. Along with corn and soybeans, market rumors were abound today that China would soon begin to make substantial purchases of U.S. pork to alleviate future shortcomings due to African swine fever issues. However, the buying has not yet materialized. Without news of increasing flow of pork to China, the market is currently dealing with a larger than normal premium to cash during a period of increasing pork supply. The USDA moved this week's Hogs and Pigs report from Friday 12/21 to Thursday 12/20, and traders are expecting a 2.7% increase in the U.S. hog herd between 9/1 and 12/1. Feb futures made their lowest close today since 11/14 and fell through their 100 and 200-day moving averages for the first time since 11/14. The Apr contract was able to hold onto its 200-day moving average support. Technical indicators are beginning to read oversold, but if pressure continues, then stagnant longs may exit quickly and open up more downside.

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