Stewart-Peterson Market Commentary

Closing Commentary - June 29, 2016

Top Farmer Closing Commentary 6-29-16

CORN HIGHLIGHTS:Corn futures suffered heavy losses with futures losing 10-1/4 to 12-1/2 cents as July led today's drop, closing at 3.7275, its lowest close since early May. New crop Dec closed at 3.83, down 11-1/4, also recording its weakest close since 5/10. Improved rain chances and a lack of searing heat was enough to send prices softly lower this morning. As the day wore on, traders became more defensive, peeling off long contracts. We do not believe farmer selling was strong, yet hedge pressure may have been a factor. It is likely, however, that heavy liquidation of long speculative positions, as well as establishing new short positions in front of tomorrow's report, were primary features. Tomorrow's reports could be market movers. Pre-report estimates suggest acreage at 92.3 mil, which compares to the March estimate of 93.6 mil. Quarterly stocks are estimated at 4.528 bil, which would be an increase over the 2015 figure of 4.453 bil.

SOYBEAN HIGHLIGHTS:Soybean futures edged lower today, losing 5-3/4 to 8-1/4 cents as January futures led today's decline. Prices traded both sides of steady and at day's end did not offer much for direction. Prices traded in what is termed an inside day; the high and low for today's trading range was within yesterday's range. Unlike corn and wheat, which fell apart, bean prices have rallied the previous two sessions and today finished with a small loss, as we believe traders were position squaring in front of tomorrow's reports. Acreage is expected at 83.83 mil acres, and this would be an increase from the March estimate of 82.24 mil. Quarterly stocks are estimated at 829 mil, which compares to 627 mil for 2015 at the same time a year ago. Meal firmed, and oil weakened as traders continue to work the meal/oil spread, anticipating tight inventories of meal. From a larger perspective, bean prices are at a critical crossroads. With a long range warm forecast, the market does not apparently feel comfortable selling at this time, anticipating that weather will have major impact.

WHEAT HIGHLIGHTS:Wheat futures continue to look terrible as prices slashed into new lows again. Prices saw sharp losses in Chi of 9-1/4 to 14-1/4 as Jul Chi led the way lower, closing into another new contract low. Prices have now disintegrated 95-1/2 cents since peaking on 6/8. After the first week of June, prices continue to look horrible on charts as harvest pressure mounts and yield numbers are encouraging. Add to that mix is the expectation that world supplies will stay large for some time to come, and there does not appear to be any reason for end users or speculators to buy wheat, other than hand to mouth.

CATTLE HIGHLIGHTS:For the third consecutive session, cattle futures finished with solid gains and near the top of their daily trading range. Nearby June gained 182 points today, closing at 118.90. A recent break in cutout values is expected to spur demand and help push supply through the pipeline. Feeders gained anywhere from 192-232 points on the heels of higher live cattle and a big push lower in corn prices in the last few weeks. Corn was down over 10 cents/bu today. Looking ahead, it will take good demand to keep the uptrend going. Prices are poised to run into overhead resistance in June near 119.20, close to the 50-day moving average and then at 118.85, the 40-day moving average. Next area of resistance is the 100-day at 121.82. While parts of the Midwest have suffered from high heat in June, as a whole, most would argue that the recent cool down has been good for cattle weight gain and survival; it has also been good for demand.

LEAN HOG HIGHLIGHTS:Dropped cutout values of 2.28 cents on the A.M. carcass report negates yesterday's positive 1.86 gain. Hog futures are beginning to consolidate with small losses noted today in July, closing at 83.10, down 5. Aug was down 65 at 83.32. Our bias is the market is consolidating and will likely find better demand now that prices have moved lower. Support came into play at the 50-day moving average on August at 83.10. Is there enough life to drive prices higher. Not unless cattle continue their upturn. We believe that demand is cycling in and out of pork and beef, and that while both are supported, it may be difficult for hog prices to recover unless we see solid gains in cutout values.

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