Stewart-Peterson Market Commentary

Closing Commentary - May 03, 2016

Top Farmer Closing Commentary 5-3-16

CORN HIGHLIGHTS:Corn futures posted negative reversals today, losing 9-12 cents as front months led the way lower. Nearby May closed at 3.7825, while Dec closed 9-1/2 lower at 9.87. After posting solid closes yesterday, prices saw follow through buying on overnight, only to reverse and head lower. Beans had significant gains on overnight, and they also reversed and finished weakly. The US dollar broke on the overnight trade, pushing downward for the 5th consecutive session but made a turnaround in the morning session, clawing back into positive territory. It appeared grains and many other commodities took the exact opposite approach, and once the dollar began to climb, they fell. Good planting progress at 45% complete vs a 5-year average of 30%, as well as a decent forecast for planting progress in the days and weeks ahead, suggests there may be little concern over late planted or too wet conditions. With prices pushing higher on overnight, this formation today looked very similar to the same formation that occurred on April 21, when prices pushed higher, only to reverse downward, posting reversals. Our belief is farmers have many sell orders above the market, and once triggered, commercial firms are immediately selling.

SOYBEAN HIGHLIGHTS:Soybean futures posted strong gains on the overnight trade, with new highs for the uptrend experienced on all contracts. However, prices reversed in the morning session, pushing into negative territory, once the US dollar, which traded sharply lower on the overnight, began a comeback and pushed into positive territory. New news of consequence was lacking, and this may have been enough to keep prices on the defensive, as commodities as a whole seem to go on the defensive. Energy was down over 1.00 per barrel in crude oil, and losses were experienced in corn and wheat as well. While prices did post a hook reversal, today's chart activity does not look as negative when comparing to corn, which posted a bearish key reversal. A bearish key reversal is where the trading range is larger than the previous day, and the close is lower than the previous day. Today's reversal in beans simply indicated prices pushed to a new high, ran out of buying interest and then weakened by day's end. Nov finished down 7-1/2, closing at 10.1025, while may lost 14, closing at 10.215. Bean meal went from positive to negative losing 4 to 5.80, and bean oil finished with losses of 6-9 cents. Expectations that the reduction in the South American crops due to excessive moisture in Argentina and too dry in parts of Brazil may be factored in.

WHEAT HIGHLIGHTS:Wheat futures were under pressure from early in the morning session as the dollar began to climb higher, and it did not take long for prices to slide into double digit losses. By day's end, May Chi lost 17-1/4, while Dec lost 18. It was a rough looking technical day, and with prices slicing through the 100, 21, 40 and 50 day moving averages, there is no doubt sell stops were triggered, pushing prices even lower. Crop ratings improved for the week with 61% of the crop rated good to excellent, up 2% from last week and 18% in the good to excellent category compared to a year ago.

CATTLE HIGHLIGHTS:It was the third consecutive day of positive values. Feeders closed with modest to strong gains of 67 points in Oct and 197 points as May led today's rally, closing at 143.40. While we were encouraged that cattle prices have begun to show some signs of life, the recovery the last few sessions has been relatively minor compared to the significant drop-off in prices since mid March. Nonetheless, bull markets need to get started somewhere, and while we are not calling for a bottom, at least not yet, we think that the cattle complex may be undervalued. A weak dollar and expectations for better grilling weather should help to clear inventories. Carcass weights continue to run on the high side, and slaughter numbers are in line with expectations for increased cattle. Today's slaughter was 113,000l, compared to 114,000 last week. Last year's figure was 114,000. Cutout values lost 1.68 in choice yesterday and 2.31 in select. This morning's A.M. report showed 1.54 loss in choice, trading now at 208.23 and select gaining 1.04 at 201.

LEAN HOG HIGHLIGHTS:Hog futures ended quietly with nearby May gaining 5, closing at 78.47, while deferred summer months gained 22 each in June and July. Hog prices continue to consolidate in what appears to be a good recovery, but prices have likely run out of steam to the topside. This is the 5th consecutive higher close for June, but with today's gain so small, we cannot help but think traders are running out of reason to buy. Slaughter numbers appear adequate as was evident in today's figure at 430,000, which compares to 419,000 a year ago. Weakness in beef cutout values would suggest retailers would likely switch to beef soon and would aggressively promote this product as it is considered a value. The grilling season is likely to kick in majorly in the next 4-6 weeks. Yet, hogs have held together well. We view this as an opportunity to take a more defensive posture in the summer months through the use of put options.

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