Stewart-Peterson Market CommentaryClosing Commentary - August 28, 2015
Top Farmer Closing Commentary 8-28-15
WHEAT HIGHLIGHTS: Wheat futures continued to look soft with another round of losses today for the fourth consecutive session. Futures closed anywhere from 6 to 7-1/4 lower with Sept leading today's drop, closing at 4.77. The contract low on Sept Chi wheat is 4.69-1/4 with today's low at 4.76. However, on Dec wheat, a new contract low was established with today's low of 4.82-3/4 and a new contract low close of 4.83-3/4. After showing early strength on Tuesday with Dec reaching a high of 5.16, prices have been on the slide since, dropping more than 30 cents from the high of this week. U.S. prices are considered high enough that strong demand will not likely come toward the U.S. A rebound in the dollar, after its harsh selloff on Monday, was also viewed as supportive. In fact, the dollar chart and wheat price chart are exact inverses to each other. Traders were likely also buying corn and selling wheat, and buying beans and selling wheat this past week as corn and beans may yet have some uncertainty with crop production while most all variables are known for wheat production.
CATTLE HIGHLIGHTS: As of this writing, livestock futures were higher again today, gaining 100 to 145 points with Oct leading today's rally, closing at 144.00. After a sharp spike lower on Wednesday, in which a low of 139.65 was posted, prices have made up well over 4.00. As we argued then, we thought cutout values were firm enough to suggest futures were undervalued and that a turnaround at hand could occur. That being said, we're going to stay with our defensive posture as the overall trend remains sharply lower. Daily slaughters, however, remain manageable with today's figure estimated at 105,000 versus 115,000 a year ago. Cutout values were softer this morning, losing 58 in choice and 29 in select, after losing 3 and 48 cents, respectively, yesterday. Our bias is that the cattle market has strong fundamental support, but is still in a longer-term trend in which prices will likely be working lower over time. We believe that from a cattle cycle perspective, the herd contraction occurred due to drought conditions in 2011 and 2012, and since, especially in the last year, has been increasing.
LEAN HOG HIGHLIGHTS: Hog futures ended the week with generally soft price activity with futures, as of this writing, anywhere from steady to down 40. For the week, though, most contracts picked up solid ground despite much economic turmoil and uncertainty early on Monday. A very impressive bullish key reversal was posted on Monday, and prices held this reversal which would suggest the trade will likely find more and more buying interest on price setbacks. In addition, competing cattle had an excellent turnaround today, and they, too, look as though they have likely found a near, if not longer-term, bottom. Lastly, slaughter numbers, while larger than a year ago, shouldn't be enough to suffocate the market. Today's estimated slaughter was 402,000. AM carcass cutout values gained 58 cents.
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