Stewart-Peterson Market Commentary

Closing Commentary - July 19, 2018

Top Farmer Closing Commentary 7-19-18

CORN HIGHLIGHTS: Corn futures closed 3-1/2 to 4 cents higher, finishing with gains for the fourth consecutive session but more importantly a decisive close above the 10-day moving average. The 21-day moving average at 3.65 Dec held prices in check, as Dec closed 4 higher at 3.65 after reaching a high of 3.66. Spillover strength in wheat and soybeans helped provide underlying support as did a slightly softer dollar. Varying forecasts are suggesting potentially drier weather for regions of the Midwest that could use moisture. Short covering was noted, in particular after export sales were released, which indicated a solid figure at 55.7 million bushels with 25.2 million for old crop and 30.5 million for new crop. Year to date sales are 2.312 billion, ahead of last year's pace at 2.214 billion. The USDA report this month indicated expectations for 2.4 billion for this marketing year which ends August 31.

SOYBEAN HIGHLIGHTS: Soybean futures finished with gains of 3-1/2 to 4 cents as Sept led today's gains, closing at 8.52. Nov closed up 3-3/4 to 8.61-1/2 and is beginning to show signs of life after posting a reversal and low on 7/16 at 8.26-1/4. Meal closed up 4.00. A reversal in soy oil from the way it traded earlier in the session suggested emphasis may be turning more to the demand market and crush pace. We do not believe farmers have significant inventory of old crop beans on hand, and in parts of the Midwest, we are seeing stronger basis levels develop, which would indicate processors looking for beans. All of it remains on hold with China purchasing US beans, yet the optimistic part of our analysis suggests it is a matter of time before China is back in the US market, as trade negotiations will likely, and eventually, reflect an interest for all parties to come to agreement. Weekly export sales were termed neutral with 9.3 million bushels sold for old crop, and 22.5 million for new crop. Old crop sales YTD are 2.120 billion, compared to last year's pace of 2.218 billion. With a lower expectation for the current marketing year than last, we continue to argue that recent sales are supportive for beans.

WHEAT HIGHLIGHTS: Wheat futures continued their sporadic movement with a strong showing today, as Sep Chi posted a reversal after yesterday's down day, closing 9-3/4 higher, in line with most futures contracts in Chi. KC closed 8-1/4 to 8-3/4 higher, and Mpls very similar to KC. Good strength and expectations for stronger exports and a weaker dollar all helped provide underlying support. Today's export sales at 11 million bushels were termed neutral. On one hand, we believe the wheat market is poised to continue to trade somewhat sporadically, as big world inventories, albeit down from a year ago, continue to weigh on rallies. At the same time, we expect farmer selling on dips to be light, and we have seen more speculative buying interest this past year looking to buy dips rather than sell into weakness.

CATTLE HIGHLIGHTS: Live cattle futures put in mixed sessions, struggling to break through overhead support without overly bullish fundamentals. The nearby Aug live cattle contract lost 5 cents to 108.90. Oct closed steady at 110.65. Dec closed 22 cents higher to 114.42. Choice beef prices were a stabilizing factor, closing 41 cents higher yesterday afternoon to 204.80 and up another 21 cents this morning to 205.01. Cash trade yesterday afternoon in Kansas reached as high as 122, steady with last week. However, published bids today are only seen as high as 108. Movement in the country is expected to be slow until after cattle on feed numbers are released tomorrow after the close. Estimates for a heavy cattle on feed report were a weight on prices today. Placements are expected to come in at 100.6%, marketings at 101.1% and on feed at 104%. Technical signals provided additional resistance today with the Aug and Oct contracts unable to push through their 200-day moving average resistance levels with any determination. The Aug contract has not made a close above that level since mid-March, and Oct has never done so. In addition, the strength over the past week has some indicators reading close to overbought, and longs profit taking was also likely ahead of tomorrow's Cattle on Feed report.

LEAN HOG HIGHLIGHTS: Hog futures ended the day with mixed results, giving up early session gains to finish with disappointing closes. The nearby Aug contract closed 5 cents higher to 67.25, Oct closed 30 cents higher to 52.22, and Dec closed 15 cents lower to 46.87. Carcass cutouts were down heavy yesterday afternoon, closing 1.85 lower to 82.35. This is the lowest carcass cutout value since 6/14. This morning, carcass values were up 25 cents to 82.60. Export sales data released this morning was friendly with 19,700 tons of pork reported sold for the week ending 7/12. This is higher than the previous 4-week average of 14,875 tons, leaving cumulative 2018 pork sales up 2.1% from last year's pace. Hog markets are still deeply oversold as of today's close, and the higher trade earlier in the session was likely short positions covering and taking profits. Without positive trade news at this point, these markets look extremely bearish, and further short covering seems to be about the only fuel at this point for green finishes.

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