Stewart-Peterson Market Commentary

Closing Commentary - April 21, 2017

Top Farmer Closing Commentary 4-21-17

CORN HIGHLIGHTS:Corn futures ended quietly, but with losses again anywhere from 1/2 - 3/4 of a cent, as May futures led today's drop closing at 3.57. New crop Dec closed down 1/2 cent to 3.82. For the week, May futures lost 14 cents and Dec was down 12-1/2. It was a difficult pill to swallow this week as rain delays plagued many producers, and it was a double-edged emotional sword watching prices drop and the inability to progress with spring work. Yet, it is April, and while rain delays can be emotional, it is too early to argue any significant concerns with crop loss. Forecasters appeared split on weather for next week, and the market seemed to side with the idea of a window of weather for better planting conditions for many. Yet, the 6-10 day forecast for 4/26 through 4/30 continues to show the entire Corn Belt at above normal precipitation. Export sales were solid this week. Most of the selling came in the form of funds adding to short positions.

SOYBEAN HIGHLIGHTS:Soybean futures firmed as the week ended, gaining 4 to 5-3/4 cents with Nov leading today's gains, closing at 9.59-1/2. For the week, May soybeans lost 4-1/2 cents, while new crop Nov lost 2-1/4 cents. This week's trade activity continued to suggest consolidation is the primary focus for beans with new crop. However, prices are running into resistance at the 21-day moving average, a level that prices have tested in 4 of the last 5 sessions and failed to get above. From a long-term perspective, we have some forecasters calling for a better planting window for corn producers next week. Bean prices may have found support on ideas of producers staying with corn acres intended rather than pushing this over to beans. Yet, from a pricing perspective, corn futures lost ground to Nov soybean futures, and consequently the corn to bean ratio is 2.51, which should favor additional bean plantings. We will stay with our defensive posture as the market doesn't show much ability to rally, yet we will argue that downside for here is likely limited as demand remains at a record pace. Export sales have already exceeded USDA projections.

WHEAT HIGHLIGHTS:Wheat futures finished today mixed as May Chi lost 1-1/4 closing at 4.05, while Mar closed 1/2 higher at 4.78-1/4. Today's closes were immaterial, but the damage for the week was done with prices reaching new contract lows in May today as it tested 4.00. It was a very challenging week for wheat prices, as a significant downturn occurred with May Chi futures losing 24-3/4 cents and new crop Jul losing 21-3/4 cents. Long liquidation, along with funds adding the short positions, continues to pressure prices. With the trend down, it is easy for those to be short but continue to add, as this continues to work in their favor. At some point this ends, sometimes violently. Futures are showing a potential for a double bottom now reaching the lowest levels since mid-Dec on most contracts. World supplies are more than adequate, and the market has been well aware of that for some time. Export sales remain solid and above a year ago, and acreage will be reduced in the US by a significant amount. Therefore, we think long term wheat prices are likely ahead of the game and are already factoring in harvest-type low prices.

CATTLE HIGHLIGHTS:Cattle futures finished just slightly higher to mixed on the day on some consolidation before this afternoon's Cattle on Feed report. The nearby Apr contract closed 17 cents higher to 129.80, Jun closed 22 cent higher to 116.70, and Aug closed 2 cents lower to 112.77. Carcass cutouts were firm at midday, with choice up 1.97 to 217.69 and select up 49 cents to 204.06. All three cattle on feed numbers came in bigger than expected. Placements came in at 111% versus the trade estimate of 106.5%, marketings came in at 110% versus the market estimate of 109.4%, and on feed came in at 100% versus the trade guess of 99.7%. The placement number was 1.5% above the top end of the estimate range, with a total of 2.10 million head placed on feed in the month of March. This is obviously a big number and will likely pressure the deferred contracts come Monday.

LEAN HOG HIGHLIGHTS:Hog futures closed lower, yet again, capping off losses on the week of over 4.00 for most contracts. With futures and cash markets down so heavily recently and carcass cutouts relatively steady, better demand than expected is likely. Carcass cutout values at midday were up 91 cents to 75.50 versus 74.96 last Friday. Over the past 6 months, China has been aggressively importing pork products from Europe and Canada, and with the recent washout, Chinese interest in US pork may quickly increase. With lower closes today, hog prices have walked further into oversold territory, increasing the likelihood of a bounce soon. However, it is unclear how much difference such a bounce will make. The overall direction is still decidedly lower.

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