Stewart-Peterson Market Commentary

Closing Commentary - December 17, 2014

Stewart-Peterson Closing Commentary 12-17-14

CORN HIGHLIGHTS: Corn futures edged higher today with small gains of 1-1/4 to 2-1/4 with March closing at 4.08-1/4 leading today's recovery. After trading lower yesterday, prices picked up today and closed close to where they finished on Tuesday. General consolidation continues. The good news is the current formation after the break to the topside on Friday suggests a pennant formation which also points towards higher, and again most technical arrows are pointing toward filling a gap that was left on July 3 at 4.26. On the other hand, if you're friendly corn, you've got to be somewhat disappointed that a sharp rally in wheat offered little support for corn as wheat prices finished 20 to 25 cents higher on continued concern that Russia may diminish, or perhaps even totally, eliminate exports. Sinking energy prices have an energy-dependent Russian economy on the edge, and consequently, the general thought is that they will keep grains in-house.  

SOYBEAN HIGHLIGHTS: Soybean futures edged higher today gaining 3-1/2 to 5-1/4 cents, finishing in positive territory after trading weaker earlier in the session. Jan had a low of 10.15 and a high of 10.34, eventually closing at 10.27. Beans look neither bullish nor bearish. We're cautiously optimistic, but realize unless there's a weather event in the southern hemisphere, export attention may soon shift to Brazil and Argentina and away from the U.S. Weather conditions seem to be generally good with the exception of southern Argentina turning drier. That will need to be monitored closely as this could change the outlook for South American production, at least to some degree. As the market moves into next week, a holiday-type atmosphere could dominate trade which means mostly range-bound. Yet, with the southern hemisphere weather critical, we wouldn't necessarily suggest this has to be the case. Our point, always be on the alert, especially with beans. Big inventories would suggest rallies should still be viewed initially as opportunity to sell into.

WHEAT HIGHLIGHTS: Continued uncertainty in Russia seemed to be the catalyst today's prices, but markets shot higher finishing with sharp gains in all three exchanges. Chi finished anywhere from 20 to 25-1/4 cents higher, while KC gained 22 to 26-3/4, and Mpls gained 18 to 25-1/2. Heavy short covering, new concern that Russia may limit export activity, and traders buying the technical strength in wheat and selling corn and beans may have all aided in today's rally. In addition, we feel money has likely come out of the livestock market, looking for uptrending values in row crops, and it may have found a home this past week in the wheat market. The question now is whether prices can continue to accelerate upward. One has to be impressed with today's rally as prices reached their highest level since early June. Today's close near the high today was the same pattern that has been repeated in four of the last five sessions in which buying interest develops late in the session.

CATTLE HIGHLIGHTS: Cattle futures again were on the defensive today finishing mixed. Nearby futures lost anywhere from 292 points in Feb to 85 in Aug. Deferred Oct gained 32, and Dec 72. Bear spreading was noted. Heavy liquidation continues in the cattle complex as traders, especially funds who may have been long feeders were once again stuck in a limit-down move. The way to try and hedge this loss is through selling live cattle, and consequently, we feel the cattle market has been pressured primarily by liquidation and margin call requirements. With that being said, cash prices have weakened as well, but not to the point of considering live cattle down two days limit in a row. Futures traded limit-lower early in the day but bounced off of this level, trading black to steady on old crop contracts before coming under pressure late in the session in what we believe was continued liquidation. Feb cattle have now lost $17.00 over the last four weeks. 

LEAN HOG HIGHLIGHTS: Hog futures followed the live cattle and feeder markets downward with sharp losses of anywhere from 92 to 152 points with April leading today's drop closing at 81.90. The near-term downtrend continues to look incredibly weak with prices now dropping 13.00 on the April contract in less than a month. Weakness in the entire meat complex has traders heading for the sidelines. In addition, hedge pressure has developed along the way as well. As we've indicated before, we're comfortable being partially hedged as we don't believe the market has a wash out in front of it. However, the last correction downward would suggest a more aggressive hedging pattern in the future, especially after prices rally. 

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