Stewart-Peterson Market Commentary

Closing Commentary - October 20, 2014

Stewart-Peterson Closing Commentary 10-20-14

CORN HIGHLIGHTS: Corn futures edged higher today gaining 1/4 to 1-1/4 cents with Dec 2015 leading today's small gains. Dec 2014 closed at 3.48-1/4. While the close wasn't all that impressive, the idea that prices tested the 40-day moving average at 3.42 and eventually closed at 3.48-1/4, down 3/4 of a cent from today's high, was impressive. Prices closed right at the 50-day moving average. Our point, prices looked soft, but somebody came in and once again bought, a common theme, over the last two weeks when prices look as though they are on the verge of really falling apart. Harvest pressure will resume in a more aggressive fashion this week as producers wrap up soybeans in parts and dryer weather allows others to more aggressively pick up progress with corn. We don't see much in the form of news to provide direction necessarily one way or the other, but with harvest, we believe the path of least resistance is still likely lower. We'll stay with a defensive bias.

SOYBEAN HIGHLIGHTS: Increased harvest pressure and a lack of positive news allowed bean prices to slip today, closing down anywhere from 6-1/4 to 7-3/4 with Mar leading today's drop. Nov closed at 9.44-1/4, down 7-1/2, but perhaps more importantly, a close back underneath the even 1/2 century mark of 9.50. The good news is once prices sold off today with futures down near 14 cents, the 21-day moving average acted as support and generated buying interest. With harvest kicking in full steam for much of the Midwest this week, we expect some pressure prices. Export inspections were considered neutral or perhaps even a little friendly at 73.2 mil bu. Year to date, inspections are running well ahead of last year by 19.2%. The good news here is that beans are not only being sold, but they're being shipped out. That makes this year's bean crop, despite record large, quickly evaporated into the pipeline, which could ultimately mean prices could rally significantly should anything less than ideal weather in the southern hemisphere develop. General drying in Brazil is expected to provide some support, yet forecasters are suggesting a northern 2/3 of Brazil could see more normal type rain in the week ahead.

WHEAT HIGHLIGHTS: Wheat futures ended quietly trading both sides of steady, but eventually finishing with losses of 1 to 2-1/2 cents. Bullish traders would argue that today's close was encouraging considering wheat struggled earlier in the session with losses of 8 or more cents. Yet, by day's end, it appeared the market is content to continue its near term consolidation with prices trying to find support above 5.00. Today's low was 5.07-1/4. New news of consequence was lacking. Export inspections, however, were considered somewhat subdued and not supportive at 17.7 mil bu as the market needs to see 23 mil bu on a weekly basis.

CATTLE HIGHLIGHTS: Coming into today we felt cattle prices were on the fence, but the strong close both on Thursday and Friday suggested traders might be taking a friendly bias. That's the way prices went today with sharp gains as futures closed anywhere from 217 to 295 points higher in feeders, and the live market 205 to 297 points higher as Dec led today's rally, closing at 168.02. This is the second highest close for Dec live cattle, just shy of the contract high close from October 8 at 168.75. It looks like the market will now try and take out the contract high established on October 9 at 169.50. As we indicated last week, the inverted head-and-shoulders formation suggests a rally closer to 172.00. We'll try and allow the market to run. The big bearish key reversal that sits at top of the market still looms large and the market has to get above this previous high when the reversal was established in order to negate the reversal. Limited supplies is noted on the daily slaughter numbers and continue to suggest there just aren't as many cattle out there. Today's figure is 114,000, which is 10,000 less than a year ago at this same time. Corn prices backing off at the end of last week also firmed prices in auction barns for feeders. Cutout values were mixed on this morning's trade with choice up 64 and select up 11.

LEAN HOG HIGHLIGHTS: Hog futures were on the defensive again. A large slaughter closing in at 430,000, along with poor technical showing after the prices opened weaker today, after a good comeback on Friday, suggests that the trade wasn't ready to go long. We might counter that and believe that hogs are now undervalued, especially to beef. We feel it's just a matter of time, despite an increase in hog supplies, where retailers will back away from beef. Hog production should be up this year anywhere from 4% to 6%, but we'll likely just make up the shortfall from last year. Nonetheless, the trend of increasing supply is strong and that perception alone will likely keep rally potential in check and hedge pressure strong. 

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