Stewart-Peterson Market Commentary

Closing Commentary - May 21, 2015

Stewart-Peterson Closing Commentary 5-21-15

CORN HIGHLIGHTS: Corn futures moved higher today gaining 3 to 5 cents. Prices continue to gyrate in a sideways trading pattern since reaching a nearby low on May 5. July gained 5 today, closing at 5.65, while new crop Dec gained 5, closing at 3.82-1/4. The technical picture has an interesting chart formation. A downward channel line has kept prices in check since peaking in late March. However, a push above this key line late last week and then a set back this week has prices holding above the line. This could signal that there's a potential recovery in store. Upward resistance holds at 3.92 on Dec, the 40-day moving average and a level in which prices held above in March and mid-April. When prices slide through this support, it becomes new resistance. News of consequence is lacking. Both planting progress and emergence would suggest that, as a whole, this year's start should produce an average to above average crop. However, that might be naïve thinking at this time of the year. The trend is down for now, and the money in the investment community has been short. But as more critical weather approaches from mid-June to mid-Aug, all bets are off.

SOYBEAN HIGHLIGHTS: Soybean futures, despite higher wheat and corn, couldn't find much footing today to gather upward traction and instead ended with small losses of 1-1/4 in Nov to 2-3/4 in July which closed at 9.38-1/2. Today's close in Nov at 9.18-1/2 was another new contract low close. Both corn and beans are on a slippery slope, and beans have been the recipient of more of a downward slide as of late. Good crop conditions in the southern hemisphere have allowed for big inventory, and harvest continues to move along. The dollar was a little softer today, but that didn't seem to provide much support for beans which appear to be more focused now on the longer-term picture which suggests record carryout for 2015/16 and, consequently, the real possibility that bean prices could trade sub-9.00 for some time to come. That being said, weather would be the most dominant factor in the weeks and months ahead. We believe there's little premium in any row crop commodities from a weather perspective. However, the trend remains down, and we'll stay aggressively short. We don't see a compelling reason to suggest otherwise.

WHEAT HIGHLIGHTS: Wheat futures had an impressive close today with futures gaining anywhere from 7-1/2 to 9-1/2 cents in Chicago. July closed at 5.22, up 9 cents, and at its highest close since early April. More importantly, July wheat closed above the 100-day moving average, a feat it hasn't accomplished since Jan 12. Forecasts for wet weather, especially in key growing regions of the South and north Texas, Oklahoma and elsewhere where recent rains have been excessive, helped provide underlying support. Quality issues could be a concern as excessive moisture continues to suggest less-than-ideal conditions. The western Wheat Belt certainly has been helped with rain over the last three weeks, but after last week's negative USDA report, prices moved higher regardless. It appears fund money is continuing to move out of wheat after posting record short positions. A downward channel line offered resistance until prices pushed through this level on May 13. The market has not looked back, pushing above the 40 and 50-day moving averages, and today, once again, above the key and critical 100-day moving average. The dollar has rebounded some this week, but overall, has remained in a downtrend since peaking on March 13. The dollar weakened today after failing to push through the 100-day moving average which, once again, may have given traders opportunity to jump on-board long wheat positions.

CATTLE HIGHLIGHTS: Cattle futures continued their back-and-forth movement with gains today of 97 to 122 points in the live market as Oct led today's rally. Nearby June closed up 1.02 to 152.37. Feeders gained anywhere from 95 to 102 with Aug leading today's rally. Slaughter at 113,000 continues to remain light and below year ago levels. Last year was 117,000. This morning's cutout value report indicated choice cuts down 76 cents and select down 49. However, at 264.22, we expect that choice cuts are priced high enough to support current futures prices. In fact, we'd argue that with cash likely to trade in the upper 150's next week or possibly low 160's, that June is still at a discount. As the calendar gets closer to June, we expect either futures to move higher, cash to move lower, or likely both. We wouldn't be surprised to see June make a move more toward the high from Jan. of 158.again, may have given traders opportunity to jump on-board long wheat positions. 

LEAN HOG HIGHLIGHTS: Hog futures finished mixed with nearby June gaining 122 points, closing at 83.77, posting a very friendly-looking upward bounce after testing support early in the week. Support comes in play near 81.50, and once prices held this level on Tuesday, prices have moved higher since. Bull spreading was noted with strength in front months and weakness in Dec and Feb, each closing down a nickel. We like the consolidation, and we like the entire meat complex. Both cattle and hogs are at near-term uptrends with both trying to break to the topside. We've made the argument that we think hogs could have trouble moving much above the 85.00 mark. The first area of resistance comes in from last week's high of 85.20 June. Daily slaughters, while smaller than they were in the first quarter, are still more than adequate at 425,000 today. This compares to 372,000 a year ago. The AM carcass cutout report indicated a 1.30 increase to 87.43. 

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