Stewart-Peterson Market Commentary

Closing Commentary - October 26, 2016

Top Farmer Closing Commentary 10-26-16

CORN HIGHLIGHTS:Corn futures ended with gains of 3-1/4 to 4-3/4 cents as Dec led today's rally closing at 3.54. Rain delays, along with technical strength and another round of gains in soybeans, helped provide underlying support as did a slightly lower U.S. dollar. Technicals are looking firmer with today's close in Dec corn, the highest in 5 sessions. However, the 100-day moving average again held prices in check as it did last week. An inverted head-and-shoulders formation continues to suggest Dec corn has the potential to rally to 3.75. Good demand is noted by strong export sales activity, and funds moving out of short positions have been supportive as well. Soybean meal was up over 10.00 today, helping to provide support as well as wheat which gained 7-1/4 in Dec.

SOYBEAN HIGHLIGHTS:Soybean futures had a significant day with a solid close with strong gains noted. Nov closed up 19-1/4, leading today's rally, finishing at 10.10, its highest close since Aug 23. The 100-day moving average at 10.13 is the next upside resistance point for Nov as is the Aug 22 high of 10.20. Prices have been, for the most part, in a sideways range in the Nov contract with 10.20 the noted nearest high and 9.34 the nearest low. If one uses what is termed a swing and band objective, you basically take this range and swing it on top of itself, and that would give you an upside objective of 11.06. The last time prices were near that level was back in July when prices peaked at 11.23 at mid-month. Given the excellent yield results we've heard since harvest has begun, we have a tough time believing that prices have this upside objective as a realistic figure the market can move to. Yet, as noted on previous reports, when asked nearly two weeks ago, our bias was that the path of least resistance appeared to be lower with 9.00 in its sight. Bottom line is that prices are on the move, and funds continue to buy. Meal was the leader of today's movement, gaining 10.00/ton and breaking above the 50-day moving average for the first time since July.

WHEAT HIGHLIGHTS:Wheat futures followed beans higher as well as corn gaining 4-1/2 to 7-1/4 cents as prices moved higher for the second consecutive session. More importantly, wheat may be showing its strength by pushing back above the 50-day moving average today after sliding decisively through this level on Monday. Spillover support from other row crops as well as a slight drop in the U.S. dollar helped provide underlying support. Yet, we also believe farmer selling is next to zero at current price levels, and the market will need to start pushing higher in order to pull wheat out of farmer's hands. The world is not ready to run out of wheat, and in fact, supplies are more than ample. Yet, wheat prices from a value perspective continue to remain cheap, and from an investor's perspective, this could provide opportunity for them to accumulate long contracts. Funds are still net short by 109,000 contracts, but this number is beginning to shrink.

CATTLE HIGHLIGHTS:Traders in live cattle markets capitalized on oversold conditions today, pushing futures prices moderately higher. The Oct contract gained 32 cents to 103.05, Dec picked up 50 cents to 104.40, and Feb closed 60 cents higher to 105.15. Slaughter was estimated today at 115,000 head. Last year's figure was 111,000. Boxed beef values were mixed today. Choice cuts were up 41 cents to 182.48, and select was down 53 cents to 168.39. This puts the choice-select spread at 14.09, the second widest in over 5 weeks. Cash sales were around 4.00 to 5.00 from last week with sales reported today at 103 to 105. Analysts are starting to believe that strong demand will continue to support retails. Some are also predicting 1.76 mil cattle will be finished in big lots in Jan. This would be 8% less than the five-year average, suggesting tightening supplies. The three near-month cattle contracts traded in very similar ranges to Monday and Tuesday of this week. The 50-day moving averages served as bearish resistance today with none of the remaining contracts being able to trade above it. Support tomorrow for the Oct contract will be at 102.40 and resistance at the 50-day moving average of 103.70. Support for the Dec contract will be at 103.70 and resistance at 104.80. Remember that Oct live cattle futures go off the board on Monday, Oct 31.

LEAN HOG HIGHLIGHTS:Hog futures finished moderately lower today, primarily on profit taking and technical selling. Dec futures lost 42 cents to 44.20, Feb lost 25 cents to 51.12, and Apr lost a nickel to 58.67. Slaughter was estimated today at just 424,000 versus 441,000 last Wednesday and 430,000 last year. Carcass cutout values were down slightly, losing 11 cents to 73.35. Most are viewing today's losses as just a correction of the recent leap in prices as the near-month Dec contract gained 3.00 in three sessions. No significant chart damage was done today, and closing prices were far enough off the lows to alleviate any concerns of a huge selloff. Support for the Dec contract will be at the 20-day moving average of 43.00 and resistance at 45.00. Support for Feb will be at 50.65 and resistance at 51.75.

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