Stewart-Peterson Market Commentary

Closing Commentary - October 30, 2014

Stewart-Peterson Closing Commentary 10-30-14

CORN HIGHLIGHTS: Corn futures ended quietly losing 1-1/4 cents in Dec closing at 3.74. Prices reached as high as 3.81 on the overnight trade, matching the high from Aug 18 of 3.81. That's the highest price for Dec corn since July 18. That seemed to be enough to hold prices in check as the market reversed downward finishing with a minor hook reversal. Still, prices held together well despite heavy harvest pressure. Soybean prices moved lower today losing 18 to 20 cents and wheat a couple of cents. Corn seemed to have a mind of its own today, trying hold together while these markets weakened, but eventually turned negative in the closing minutes. Export sales of 19.3 mil bu were less than stellar and below the 22.9 mil needed on a weekly pace to stay with the USDA projections. It could very well be that the export market is beginning to show signs of reluctance when corn prices rally along with a stronger US dollar. Nonetheless, exports will likely ebb and flow, but the emphasis right now from end users seems to be more focused on soybeans as today's number was again stellar at over 48 mil bu.

SOYBEAN HIGHLIGHTS: Bean futures went on the defensive today losing anywhere from 8-1/2 to 20 cents. Prices pushed higher on the overnight with Nov reaching a high of 10.53-3/4, pushing through the 100-day moving average. Prices failed to sustain this rally and reversed downward posting a hook reversal which could be suggesting a near-term top is in place. Soybean meal has continued to lead the surge higher as prices have made a magnificent run, but meal, too, reversed downward today after pushing into new highs. Dec hit a high of 408-1/2 before eventually closing at 380. The contract high was in May at 411.40. From a long-term perspective, the meal market has made a magnificent rally in a short window of time, and we believe this has been due mainly to logistical issues and overestimating of carryout from the USDA. Therefore, if carryout was in fact overestimated, that would imply that carryout is lower. This could ultimately lead to reduction in projected carryout in beans. For now though, it looks like the rail systems are picking up significantly and the movement of grain products.

WHEAT HIGHLIGHTS: Wheat futures posted gains throughout the session but slumped into the close finishing with losses of 1 to 2-1/4 cents with Dec closing at 5.36. Dec wheat pushed right exactly to the 100-day moving average at 5.45-3/4 and promptly ran out of buying interest. Today's minor hook reversal may mean little if prices can recover, yet it could be a warning flag that the near-term rally is beginning to run out of steam. Keep in mind on the last Friday, Oct 24, prices posted a bearish key reversal. If it were not for higher corn and bean prices this week, wheat futures may have struggled to even turn positive. News is lacking. Export sales at 16.3 mil were above the 12 mil needed on a weekly pace to meet USDA projections. This provided minor support.

CATTLE HIGHLIGHTS: Live cattle futures turned positive today, gaining 10 to 150 points as Oct led today's rally. In the electronic after trade session, Oct traded as high as 171.35,up 235 points. Tomorrow is the last trading day. Dec will take over and may be viewed as likely undervalued. Yet, keep in mind, by Dec, not only will hog production continually increase but also poultry. In fact, we believe the Dec contract as well Feb have exhibited a number of potential topping signals. While prices are holding together well based on support from excellent demand, it could be a matter of time before prices come under pressure. Cutout values have firmed this week. Today's morning cuts, however, were basically unchanged. Choice cuts are trading at 253.61 and select at 239.74. We believe these values will support current futures prices. It's the next two to four weeks that could be troublesome. This is especially so if the trade begins to see liquidation of long cattle. This could very well occur toward the fourth quarter as funds that have been long most of the year move out of the market, looking to show profits. From a long-term perspective, the market is in the throes of excellent longer-term support based on tight inventories. Yet, all bull markets eventually end.

LEAN HOG HIGHLIGHTS: Hog futures were under pressure again with front month Dec breaking support, dropping 140 points closing at 87.20. Feb lost 1.10 closing at 86.95. After showing life on Tuesday and pushing to the highest level in nearly two weeks, hog futures have since backed up and now look challenged to recover. This is especially true in the Dec contract. Daily slaughters have continued to creep higher, and we feel that's the big key that PED has had little impact on hogs other than summer months. Today's slaughter was 432,000 which was the same as a year ago as well as yesterday. Carcass cutouts were down 1.45 at 97.90. 

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