Stewart-Peterson Market Commentary
Closing Commentary - September 27, 2016
Top Farmer Closing Commentary 9-27-16
CORN HIGHLIGHTS:Corn futures gained 2-3/4 to 3 cents, following beans and wheat higher. Dec corn finished at the high end of its daily trading range, which was 5-1/4 cents with futures closing at 3.3175. After trading as low as 3.2725, its lowest price since 9/16, futures found little selling interest. Consequently, it didn't take long for traders to jump on the long side. Yesterday's down slide was primarily technical. Near term harvest progress will pick up steam with yesterday's crop progress report indicating that 15% of the crop is harvested through Sunday. This is behind the 5-year average by 4%. Yet, good weather the remainder of this week should allow harvest to rapidly move forward. The 6-10 day forecast indicates above normal precipitation for the western Corn Belt, and this could slow harvest beginning this weekend. Our overall bias is the market will continue to trade sideways. The market has had two negative USDA reports, as well as expectations for harvest pressure. Yet, futures are trading at basically the same level they were in mid to late July.
SOYBEAN HIGHLIGHTS:Soybean futures reversed losses early in the session and finished with gains of 7-1/4 to 8 cents. Nov closed today at 9.525, up 7-1/4 and more importantly, well above the low established at midsession at 9.34. Prices broke to their lowest level since 4/12 and ran out of selling interest. Buyers wasted little time jumping on board, viewing beans as a potential value. One half of a day may not make a turnaround for this market last for long as yield numbers continue to come in above expectations, and this alone could be a defensive negative for beans, let alone expectation of increased farmer selling. So while we are encouraged with today's activity and close back above 9.50, we are not necessarily encouraged that prices have found their near term bottom. The ability to break into a new low would suggest that, if prices cannot find additional follow through buying, the market will likely head lower with a downside objective of between 8.75 and 9.00 Nov. It also appeared the market today shrugged off concerns of a Chinese announcement last week that they would begin imposing anti-dumping duties on DDGs, which is a potential negative for meal.
WHEAT HIGHLIGHTS:Wheat futures showed real life by the close today, gaining 8 cents in Dec, closing at 4.04, and just as importantly indicated a strong technical signal with prices first trading to the negative side early in the session, reaching their lowest level in more than a week and then reversing upward. The close back above the 21-day moving average looks impressive as well. What we are continuing to see in the wheat market is a consolidation pattern that began once prices bottomed in August. While positive new news is lacking, expectations for much lower prices are beginning to wane, especially on the ideas of lower planted acres. A wet forecast on the 6-10 day outlook for the western regions of the Midwest would suggest that winter wheat planting may also be hampered by wet conditions. In the end, between low prices and weather, we expect winter wheat acreage to be down. Last year's crop was excellent from beginning to end, but this year could be a different story. We are encouraged with export inspections yesterday and export sales in recent weeks.
CATTLE HIGHLIGHTS:Live cattle futures underwent heavy fund liquidation and bear spreading in today's session causing big losses. Both of the remaining contracts for 2016 finished 3.00 lower, or limit-down. Oct closed at 103.825 and Dec closed at 103.125. Cash trade was quiet today and slaughter was steady. An estimated 113,000 head were killed at mid-day today versus 114,000 head last Tuesday and 112,000 head today of last year. Boxed beef cutouts were stronger, with Choice gaining 1.74 to 188.74 and Select gaining .47 to 180.12. Oct cattle were unable to hold both the 20-day moving average as daily support as well as the uptrend support level started Sep 7, so this could signal yet another downward move. The Dec contract did not even open above its daily support level, but today's close was directly on the uptrend support level started Sep 7. The Oct contract will try and hold 103.50 as support and resistance will be at the 20-day moving average of 105.40. Support for the Dec contract will be the close today in order to hold the uptrend, or the 102.55 area if it falls below, and resistance will come around 104.25.
LEAN HOG HIGHLIGHTS:Lean hog futures had a rough trading session today. The Oct contract lost 1.35 to close at 51.70 and the Dec contract closed down 2.15 to 46.45. Hog slaughter was again bearish today, with 440,000 estimated head killed at mid-day versus 439,000 head killed last Tuesday and 428,000 killed today of last year. Carcass cutouts were weaker, down 90 cents on the day to 77.71. Buyers continued to sit on the sidelines today because of more bearish fundamentals and most contracts either making new contract lows again or trading very near contract lows. There is also concern in the market that cheap corn will turn into heavier hogs later this fall. Nothing particularly interesting appeared on the technical price charts today other than the inability of the nearest month contracts to hold consolidation ranges. Prices fell definitively through the bottom with not much sign of rebounding. Support tomorrow for the Oct contract should be today's close of 51.70 and resistance will be at 53.90. Support for the Dec contract will be at today's close of 46.45 and resistance will be at 48.20.
Market Commentary provided by: Stewart-Peterson 137 South Main Street, West Bend, WI 53095