Stewart-Peterson Market Commentary

Closing Commentary - December 18, 2017

Top Farmer Closing Commentary 12-18-17

CORN HIGHLIGHTS: Corn futures ended quietly after another range bound session with futures finishing steady to 1-1/2 lower with Mar closing at 3.47. Prices traded both sides of steady with a range of 2 to 2-1/2 cents per futures contract. There was not much volatility. It has been quite some time since we have seen extended slow volatility as the last four months in the corn market. It is reminding us of the late 90s and early 2000s when prices were range bound. At that time there was a safety net, and there wasn't much of a reason for prices to move as ample inventories and a price flooring mechanism kept prices within a range. This past year is much different, however. The market is a long way from any type of safety net, and the prospects of record world demand should help keep prices supported and volatility alive, as will the need for big crops on a continuous basis. The market has found itself in a spot where it needs to buy time and use inventory. We call this base building. Export inspections were termed neutral to negative at 23.4 million.

SOYBEAN HIGHLIGHTS: Soybean futures were under pressure again despite ideas that rains over the weekend were less than anticipated in regions of Brazil and Argentina and despite a very solid export inspections figure today at 65 million bushels, which was higher than most were looking for. By day's end, beans finished down 5-1/4 to 5-3/4 with January leading today's drop as prices closed at their lowest level since early September. This marks the ninth straight consecutive day of losses for the bean complex, as traders appear to be exiting long positions. Prices did trade on both sides of steady, just as they have in most of the recent nine sessions but eventually finished toward the low end of the day. Meal lost $1 to $2, and soyoil was down 14 to 16 points. We are a bit surprised the markets seems to have run out of gas with all of the critical weather for South America's growing crop yet ahead. With general weakness in row crops and traders likely moving out of long beans/short wheat spreads, bean prices remained under pressure.

WHEAT HIGHLIGHTS: Wheat futures edged higher as traders appeared to be buying wheat and selling beans, as this spread continues to unwind from early October when traders were buying beans and selling wheat. Chi wheat finished up 2-1/4 to 2-3/4 cents, while KC finished 1 to 2-1/4 higher and Mpls steady to weaker. Our bias is that the wheat market does not have much friendly news to go on, yet traders who have been selling wheat for the last 60 days or so probably recognize that there is limited downside and are beginning to take their money out of the market. Today's close above the 10-day moving average was the first time this has occurred since 12/4. Supporting prices was a good export inspection figure at 21.5 million bushels, more than most were looking for. There is a general concern that significant cold and freezing weather could push down into the Plains states next week, and this may have some traders either exiting shorts or starting to buy long.

CATTLE HIGHLIGHTS: Cattle futures started the week mixed with mostly negative closes. Nearby Dec live cattle contract closed 1.07 higher to 119.97. Feb closed 42 cents lower to 120.60, and Apr closed 12 cents lower to 122.02. Feeder cattle futures had negative closes as well, with all contracts out to Sept 2018 losing 10 to 85 cents. Cash trade late Friday as high as 120 gave cattle markets a boost to start the session. Last week, cash trade was expected to hover around the 117 levels, so the 120 trade was a big surprise. In addition, beef prices closed higher on Friday for the first time in a week. Choice cuts closed 83 cents higher to 201.87, and select cuts closed 44 cents lower to 183.25. By mid-session, choice cuts were 1.36 higher to 203.23, and select cuts were 1.31 higher to 184.56. Other traders were bullish today after forecasts for slightly colder and wetter weather in the Plains. Selling action quickly emerged at some key resistance levels. Live cattle futures were unable to break above their 21-day moving average resistance level, and feeder cattle futures were unable to break through the neckline on their head-and-shoulders reversal pattern. Trade the rest of the week will likely stay light, as Friday's session is set to be an unusual one. With livestock markets closing at 12:15, Friday's Cattle on Feed and Cold Storage reports will be released at 11:00 instead of after the session is closed, as usual. This means the market will be able to trade report results on the day of instead of waiting until the following Monday. Because of this, trade this week will be focused on position taking before Friday.

LEAN HOG HIGHLIGHTS: Hog futures finished lower, unable to hold onto early session strength. The nearby Feb contract closed 1.12 lower to 67.40, Apr closed 55 cents lower to 72.25, and May futures closed 40 cents lower to 77.45. Stabilizing ham and belly values late last week also provided some buying interest this morning and short covering on the recent losses. However, carcass cutout values were ultimately a negative fundamental for today's session. Carcass cutouts were 26 cents higher Friday afternoon to 77.57 but were down 1.90 by midsession today to 75.67. Picnics were down 3.60 today, and loins were down 3.51. Ribs, hams and bellies were all lower as well. In addition to soft pork values, the market is expecting cash trade to be steady to lower compared to last week. There will also be some position taking this week, as Friday's shortened session brings Hogs and Pigs and Cold Storage reports during trading hours. Estimates for these reports will be outlined later this week.

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