Stewart-Peterson Market Commentary

Closing Commentary - February 27, 2015

Stewart-Peterson Closing Commentary 2-27-15

CORN HIGHLIGHTS: Corn futures ended the month of Feb with a little bit of buying strength, up 2 to 4 cents. Front-month March is up 4-1/2 to 3.84-1/2, followed by May up 4-3/4 to 3.93-1/4. New crop Dec was up 3-3/4 to 4.17-1/2. For the week, despite a couple of volatile days, March corn closed 3/4 cent lower while May posted a 1/4 cent gain. For the month of Feb, after rallying off the Jan lows 15 cents in the first trading day, March corn posted a 14-1/2 cent gain overall. The true meaning of what we've seen for the month of Feb has been sideways, rangebound fashion which also held true this afternoon. After starting the day coming off of and testing previous lows, March corn futures rallied to resistance levels and held, keeping us staying in the rangebound pattern. The news front was fairly quiet today, but corn did see some support from the bean market which also posted mild gains on the close this afternoon. Going forward, the month of Feb is now behind us, and now focus will be looking towards March which could have some activity given supply and demand numbers on March 10 as well as planting intentions and corn stocks numbers at the end of the month. Given where we are at price levels, we still feel that corn has the potential to get some lift as we look to buy acres against the bean prices that are still firm, if not higher, than where we were just a month or two ago. The two biggest focuses will be sell rate of unpriced grain in storage, as well as the demand pace for corn exports and the ethanol industry. Today, we did have a sale of 5.5 mil bu of corn to Saudi Arabia for old crop.

SOYBEAN HIGHLIGHTS: Soybean futures ended the day mixed with continued strength in the front-month contracts with March gaining 6-3/4 to 10.30-3/4, and May up 5-1/4 to 10.31-3/4. Nov beans finished the day unchanged at 9.97-1/2 but did post a high of the day at 10.04 trying to break through that 10.00 barrier for new crop beans. For the week, the March contract posted a strong 31-1/2 cent gain, as well as gaining nearly 70 cents for the month of Feb. This week's rally in beans was fueled by concerns regarding the Brazil truckers strike. Brazilian truckers are protesting high diesel taxes and have been establishing roadblocks limiting the ability of movement for both the harvested beans and diesel fuel to their harvesters. The latter is a bigger concern as Brazil is in the height of their harvest season, and that could grind to a halt in a handful of days as farmers are running out of diesel fuel to operate their equipment. In addition, demand continues to stay strong for US beans as we saw solid export sales and shipments again this week. With the possible disruption of beans in South America due to logistics concerns and not so much supply, the prospects of trades staying active in the US is still high and that is what is helping to bring the premium into the old crop contracts. Today's close on the March contract is our highest close in over 6 weeks.

WHEAT HIGHLIGHTS: Wheat futures saw an impressive bounce off of near-term lows as contracts posted double-digit gains this afternoon. Front-month March wheat was up 14-1/4 to 5.17-1/2, followed by May up 12-1/2 to 5.13. For the week, the May contract posted a 6 cent gain despite seeing heavy selling pressure for the majority of the week. After pushing through and testing contract lows yesterday, wheat rebounded at the end of the day and saw continued follow-through this afternoon. This may have been more of a profit-taking type rally after short stepped aside following an overall negative month for the commodity. The key going forward will be the demand pace on the US grain versus the world which is some of the reason we saw this month's pullback after testing the month highs. US wheat still runs at a premium to the global wheat price levels, and the strength of the US dollar is not aiding in that overall export picture. In addition, this week brought snow cover through parts of the HRW wheat belt which was in need of some excess moisture as that snow pack melts off in the weeks ahead. Globally, the supply picture continues to stay flush for wheat. Today's rally could be short-lived as we move forward into March. The focus, besides demand, will be the springtime as the US wheat breaks dormancy, and we get a healthy picture of what this spring's crop will look like.

CATTLE HIGHLIGHTS: Cattle futures finished the day mixed with strength seen in the front month contracts. As the Feb contract closed today, down 3.12 to 158.00, April cattle, as well as June, benefited from positions out to those months. April cattle were up 1.90 to 151.70, followed by June up 90 cents to 143.85. For the week, the April contract gained 3.17-1/2. Cattle futures held modest losses for the majority of the morning as profit taking and some tech selling held the direction of the market. But as mid-day boxed beef values came in firmer, some buyers stepped forward, lifting us to our finish on the day. At mid-day, choice carcasses were up 81 cents while select was up 1.03. In addition, the April contract is holding about a 9.00 discount to last week's cash price levels. As boxed beef values have firmed, the prospects of cash bids holding steady and keeping that discount intact offered some support to the April cattle. Cash trade was very quiet this week as bids and offers are still holding steady. Feeders also finished mixed with front-month contracts gaining triple-digits. March was up 1.60 to 201.90, followed by April feeders up 1.27-1/2 to 200.325. The remaining feeder cattle contracts saw mild losses this afternoon. Lack of direction in the live cattle market, as well as strength seen in grains helped limit any upside momentum for those feeder positions today.

LEAN HOG HIGHLIGHTS: Hog futures ended mixed this afternoon as April hogs posted a 32-1/2 cent gain to 67.47-1/2, followed by June up 25 cents to 82.87-1/2. Overall, it was a quiet week for the April hogs as they posted a 7-1/2 cent gain. Front months saw some profit taking as we ended the Feb trading month, also being supported by some strength in wholesale carcass values. Wholesale prices at mid-day were 1.85 higher after seeing a volatile week, mostly pressuring the price levels. Cash prices have been steady to firmer this week as cold as well as snowy weather throughout the Midwest has limited movement from the countryside having packers a bid up for hogs. Overall, front months have been seeing some gains but have hit resistance levels today, and next Monday's trade could be key in terms of what direction we may be headed. Deferred contracts continue to see expectations of large supply which is keeping the summer and later months in check in terms of any potential rallies. Going forward, the fundamental picture looks negative for hogs as producer expansion grows, bringing more hog supply forward. 




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