Stewart-Peterson Market Commentary

Closing Commentary - February 22, 2017

Top Farmer Closing Commentary 2-22-17

CORN HIGHLIGHTS:Corn futures finished with slight gains. Front month Mar was up 1-3/4 to 3.71, and May corn was up 1-3/4 to 3.7825. Corn futures saw some follow through after reversing into positive territory yesterday afternoon, as the overall news front remains relatively quiet. The market continues to digest large supply and the prospects of a strong South American crop keeping rallies in check in the short term. Last week's reversal off the most recent highs still weighs heavily on traders' minds in the corn market. Traders in the corn market are still focused on South American weather and the pace of bean harvest, as second crop Brazil corn, which makes up 2/3 of their total production, is slightly behind planting schedule due to delayed bean harvest in those key areas. The demand side of the market stays strong with the second day of reported sales. The USDA announced a 5.4 million bushel sale to South Korea this morning. Weekly export sales numbers are delayed until Friday, given the Presidents Day holiday on Monday, but should continue to build supportive base underneath this marketplace.

SOYBEAN HIGHLIGHTS:Soybean futures continue to grind lower as the front month March contract was 3-1/2 cents lower to 10.2275, followed by May down 3-3/4 to 10.335. For the second consecutive trading day, overnight strength seen in the bean market gives way to selling pressure, as prices continue to challenge downside support. With today's lower close, the front month March contract looks to challenge the 100 and 200-day moving average, which has been supportive on this long term uptrend. As South American crop prospects continue to stay strong overall, it would be difficult for bean futures to gain much traction in the face of continued growing global supplies. Recent forecasts in the southern Hemisphere have brought rainfall into key areas of Argentina again, but this time frame seemed to be minimal in terms of overall impact. Like last year, heavy rain in those key production areas will be closely watched to see if any further damage can be limiting overall Argentina production. Regardless, growing conditions remain strong overall, and any losses seen from early season heavy wetness will be easily absorbed by other regions' strong production.

WHEAT HIGHLIGHTS:Wheat futures saw a round of short covering this afternoon, as prices finished 4-6 cents higher. Front month Mar wheat was 5-1/4 higher to 4.4125, followed by May up 6-1/4 to 4.56. The market continues to display volatility, as this spring's unusual weather has traders closely watching crop conditions. With temperatures pushing to record highs this past week, wheat moving out of dormancy may become susceptible to cold shock, given any strong, late winter storms. In addition, regions of the southern Plains are still experiencing dryness as noticed on the most recent drought monitor maps. With wheat acreage numbers already at historical lows, any additional losses may continue to be supported within the market. Demand has been improving, as we have seen the latest USDA numbers moving demand factors higher with the USDA reporting a sale yesterday. Last week's bearish reversals on the charts still weigh heavy on traders' minds, as the short term technical picture looks negative. Today's rally in wheat futures was held in check by the 10-day moving average over top of the Mar and May contracts. If prices can push through that rung of the ladder, some additional short covering could take place.

CATTLE HIGHLIGHTS:Cattle futures finished with nice gains but somewhat indecisive closes. The nearby Feb contract closed 2.20 higher to 121.30, the Apr contract closed 77 cents higher to 116.07, and the June contract closed 47 cents higher to 106.42. Today's fed cattle exchange provided a good start to the day with prices ranging from 120 to 124.50, giving the weighted average price of 122.10, compared to last week at 119.04. We even saw cash trade in the countryside as high as 125 today. Beef cutout values were also strong with choice up 2.37 to 194.18, and select up 60 cents to 190.41. Much of the strength in beef values and strong cash trade is likely due to the snow storms coming this weekend. Not only will transportation become difficult with all the snow, cattle will not respond well to 70+ degree temperatures switching quickly back to freezing temperatures and deep snow. Friday brings the Cattle on Feed report. Traders estimate placements at 111%, marketings at 109.8% and on feed at 100.7%. Despite all the bullish news today, prices were only able to close near the mid points of the trading ranges. This suggests that, while things look bullish for the next week or so, there is still lots of uncertainty in the big picture.

LEAN HOG HIGHLIGHTS:The recent cash pork belly rally took a serious hit, and with it, the lean hog futures markets. Apr hogs closed 2.60 lower to 67.75, May closed 2.05 lower to 73.40, and Jun was down 1.80 to 77.25. Cash bellies closed 6.12 lower to 176.74 yesterday afternoon, providing the initial selling pressure this morning. At midday, they were down another 10.19 to 167.62. This pushed pork cutout values down 1.48 to 83.06. The recent spring-like weather was also a bearish pressure force for hogs. Average weights for the week ending 2/18 were up to 281.3 lbs from 280.6 lbs the previous week. However, this weekend's expected blizzards provided some support as they will likely cause transportation issues and hog stress. Today's close below the 50-day moving average was the first since November and the farthest below the moving average since late June. If cash belly prices cannot take back some of the losses shown at midday, then more pressure tomorrow will likely follow with strong resistance overhead at the 50-day moving average.

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