Stewart-Peterson Market Commentary

Closing Commentary - May 06, 2015

Stewart-Peterson Closing Commentary 5-6-15

CORN HIGHLIGHTS: For the second consecutive session, corn prices rallied toward the close finishing with modest gains of 3-1/2 to 5-1/4 cents as May led today's rally higher. New crop Dec closed at 3.82-1/2, up 3-1/2 cents and well off of yesterday's low of 3.72-1/4. Today's high was 3.85. Corn prices have a long way to recover from recent losses. The turnaround yesterday and today's follow-through is at least somewhat encouraging to producers. Yet, it's probably nothing more than an opportunity for farmers to continue to dribble old crop inventory into the marketplace as many are holding too much corn. We don't see a lot of upward potential. Support came today from a sharp break in the dollar and gains in the wheat market. In addition, rain has delayed planting in areas. Whether or not that is supportive or not can be debated. Planting progress is probably 60% or more completed, and often rain delays in early May, or even late April, spread the crop out and reduced the risk of the entire crop trying to mature or at least go through pollination at the same time.

SOYBEAN HIGHLIGHTS: Soybean futures finished uneventful with nearby May losing 3 cents while new crop Nov gained 1-1/2 closing at 9.56. News of consequence was lacking. Prices traded both sides of steady for most of the session, eventually turning weaker late. Crush margins are said to be improving. Demand has a solid foothold in beans, and despite large southern hemisphere production, the world is still looking at U.S. beans. Export sales have already exceeded USDA projections. Cancellations could occur, but as of now, the market appears well supported in the near-term. May reached the 10.00 level today but ran out of gas and eventually closed at 9.90-1/2. The western Bean Belt will be somewhat slow in planting beans this week due to wet weather conditions. However, we don't expect to see any concerns over major planting delays at this time.

WHEAT HIGHLIGHTS: Wheat futures had an impressive day with short covering a primary feature. A sharp break in the U.S. dollar had wheat prices on the offensive with futures gaining anywhere from 11-1/2 to 12-3/4 as Dec led today's rally. New crop July Chi closed up 12-3/4 at 4.79-1/4. Wheat can be a finicky crop, and parts of the South and West, yes the same region that were drying out not long ago, are now concerned about excess moisture as there is rain in the forecast for much of the next week. This could raise disease concerns. With prices as low as they are, we're not surprised to see a bounce, and today was the day. 

CATTLE HIGHLIGHTS: After a strong push upward in recent sessions, cattle futures set back today with losses of 45 to 122 points as June led today's drop closing at 150.22. We continue to see a nice triangular formation on charts which would suggest a breakout to the topside with upside potential in June to 156 to 158. Estimated slaughter was light at 106,000 versus last year's 121,000. Cutout values were higher this morning with choice gaining 107 and select 64. Choice now rests at 256.63 which would suggest prices are likely well supported at current levels. The futures market anticipates the futures prices of cattle and not necessarily today's price. Therefore, June near 150 is undervalued compared to cash. The question is whether or not it's undervalued compared to what cash will be in June. We believe so. Nonetheless, rally potential is likely limited until more time passes and traders have better confidence in buying June and beyond contracts.

LEAN HOG HIGHLIGHTS: Hog futures gained 80 to 135 points as May led today's rally closing at 80.35. June continues to look strong closing at 130 higher at 84.05 and is now even with July which closed 95 higher at 84.07. We've argued that we thought the summer months could potentially hit the mid-80's, and they are currently knocking on the door. Today's technical close was especially impressive as June closed at its highest level since late Jan. More importantly, June closed above the highs from late Feb which would suggest that prices may have some room yet to work higher, potentially to 86.50 or 87.00. That being said, daily slaughter numbers will likely prohibit significant rally. Today's slaughter was 422,000 which was 4,000 less than a week ago, but still 14,000 more than a year ago.

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