Stewart-Peterson Market Commentary

Closing Commentary - March 23, 2018

Top Farmer Closing Commentary 3-23-18

CORN HIGHLIGHTS: Corn futures were volatile, finishing 1-2 cents higher, well off of early session lows. Front month May was up 1-1/4 to 3.77-1/4, while Jul corn gained 1-1/2 to 3.85-3/4. New crop Dec corn finished 1-1/4 higher to 3.99-1/4. For the week, corn futures saw pressure as the May contract lost 5-1/2 cents, and Dec was down 4-1/2 cents. Today's trade was all about reaction to potential trade wars with China, as the Minister of Commerce issued a list of 128 US products with proposed tariffs of at least 15% to counterbalance the US's most recent tariff package. Soybeans were not on the list, but potential concerns did send shockwaves through corn futures in early trade. After trading to an intraday low of 3.69-1/4, May futures rallied off those lows to a positive finish. The corn market saw support from continued concerns regarding the size of this year's Argentine corn crop, as the Buenos Aires Grain Exchange lowered its crop estimates to 32 million metric tons, down 2 million metric tons from previous projections. This is a reflection of continued poor conditions for the Argentine corn crop. The USDA announced export sales today with last week's sales at shipments at 57.9 million bushels and 54.1 million bushels respectively. This is slightly bearish overall, but the sales pace is continuing to move aggressively.

SOYBEAN HIGHLIGHTS: Soybean futures were highly volatile with prices finishing mixed, pulling well off of early session lows. Front month May was down 1-1/2 to 10.28-1/4, while Jul beans lost 1-1/2 to 10.39-1/4. New crop Nov beans finished with a 1/4 cent loss to 10.26-1/2. Today's close brought the end of a difficult week for beans, as the May contract dropped 21-1/4 cents, while new crop Nov beans lost 14-1/4 cents after Monday's strong sell-off. In intraday trade, affected by the potential tariffs imposed by China against the US in retaliation to yesterday's US tariff package, soybean futures saw aggressive selling on the overnight session. With the market holding a large amount of speculative long positions, a risk-off mentality was seen early in today's trading session despite the fact that soybeans were not initially tabbed on China's retaliation list. As the market reacted to morning news, focus in afternoon trade turned it back toward South American dryness and deteriorating crop expected in Argentina. The Buenos Aires Grain Exchange lowered its soybean crop estimates from 42 million metric tons to 39.5 million metric tons. This helped promote a strong rally in soymeal prices, which posted strong reversals with the front month May contract rising off of lows and finishing 9.90 per ton higher.

WHEAT HIGHLIGHTS: Despite early morning weakness, wheat futures finished with modest gains in today's trade. Front month Chi May wheat gained 4-1/2 cents to 4.61-1/4, followed by Jul up 4-1/2 to 4.76-1/2. KC HRW wheat pushed 8 cents higher with May up 8-1/4 to 4.79. Spring wheat contracts finished with gains of 4-9 cents with front month May up 9-3/4 to 6.02-3/4. The main bullish factor in the wheat market continues with the drought in southwestern US. With long range forecasts predicting only light rains over the next 7 days, wheat futures picked up slightly off of early morning weakness. Yesterday's weekly drought monitor maps showed persistent drought conditions across the southwestern Plains, and overall crop ratings for this year's HRW wheat crop are extremely poor. This has kept support underneath the market after the most recent correction. Today's trade also saw some profit taking as short covering was noted in the KC and Chi contracts with May KC wheat down 20-1/4 for the week, and Chi wheat down 7-1/2 cents. Weekly export sales and shipments totaled 9.7 million bushels and 17.4 million bushels respectively. The current shipment pace is down 8% in 2017/18 from last year's slow pace.

CATTLE HIGHLIGHTS: Cattle futures finished the week with triple digit losses, extending weekly losses to the worst this calendar year. Apr futures closed 2.10 lower and 5.20 lower on the week to 116.05. Jun closed 2.20 lower and 5.55 lower on the week to 106.20. Aug closed 1.42 lower today and 4.17 lower on the week to 104.95. Cattle futures saw significant pressure on news that China would be putting a 25% tariff on pork products coming from the US. Weekly US beef export sales for the week ending 3/15 were reported this morning at 6,000 metric tons, vs the previous 4-week average of 17,775 metric tons. This is the lowest weekly total so far this year. Cumulative sales for this year are now at 297,900 metric tons, 15.1% ahead of last year's pace. Boxed beef values closed 83 cents higher yesterday afternoon to 225.21 but were down 1.09 this morning to 224.12. Even though China did not announce tariffs on US beef products, the fear of trade wars was noted across all markets today. Technical selling was evident today as well, with the Apr contract putting in a bearish outside session and its lowest close since 9/6. Today's Cattle on Feed report released after the close was another bearish factor, which will be traded on Monday. Marketings came in at 102%, vs market expectations of 101%. Placements came in at 107%, vs the market estimate of 104%. On feed came in at 109%, vs the market's estimate of 108%.

LEAN HOG HIGHLIGHTS: Hog futures markets took very heavy losses today after China levied a 25% import tariff on American pork products yesterday afternoon. Apr futures closed 2.90 lower today and 7.02 lower on the week to 58.42; May closed 2.92 lower today and 7.52 lower on the week to 65.22. Jun closed 1.32 lower today and 4.97 lower on the week to 74.15. Because pork products were the only major agricultural commodity targeted by Chinese tariffs, hog markets felt the brunt of the selling pressure. Pork export demand has been shaky lately, and this Chinese tariff will not help that. Weekly US pork export sales for the week ending 3/15 were reported this morning at 19,500 metric tons vs the previous 4-week average of 28,425 metric tons. This leaves cumulative sales up 8% from last year's pace at 444,600 metric tons. Carcass cutout values closed 71 cents lower yesterday afternoon and were up 24 cents this morning to 70.98. Ample short term supply and a pause in demand on the East Coast due to inclement weather were bearish fundamental factors this week for today's session. Apr hogs gapped lower for today's session, making new contract lows for the fifth session in a row. Jun hogs closed sharply lower but regained much of the session's losses to close about 1/3 of the way up their trading range. Prices are deeply oversold, but fundamental factors (trade issues) will keep the pressure on.

Market Commentary provided by:

137 South Main Street, West Bend, WI 53095
Phone: 800-334-9779