Stewart-Peterson Market Commentary

Closing Commentary - August 28, 2015

Top Farmer Closing Commentary 8-28-15

CORN HIGHLIGHTS: After fireworks early in the week, corn prices settled down and traded range-bound today, finishing virtually unchanged. Nearby Sept lost 1/2 cent closing at 3.63-1/4 while Dec closed unchanged to 3.75, and March up 1/4 to 3.86-1/2. For the week, Dec corn lost 2-1/4 cents. Since the close on Aug 11, the day before the USDA report, Dec corn futures have lost a total of 12 cents. Our point, despite a negative report, devaluation of the Chinese currency, mostly good weather and a collapse in the Chinese stock market, futures have held together rather well. Farmer selling remains light. The market is marking time, awaiting further news to provide direction. On the one hand, beans were supportive today, gaining 7 cents, but wheat was negative closing 6 lower, and so direction from competing commodities has been virtually nil. News of consequence is lacking as well. The next big report will be the Sept Supply and Demand report, due out on Sept 11. Until then, expect prices to drift.

SOYBEAN HIGHLIGHTS: Soybean futures, for the second consecutive session, closed with a firm tone with small gains of 6-1/2 to 7-1/4 cents as March led today's push higher. Nov closed at 8.85-1/2, up 6-1/2 cents, and for the week, only down 4 cents from last Friday's close. Considering new contract lows were reached on Monday at 8.55, the market seems to have been more responsive to the idea that prices may have sold off too quick, and buyers took this as an opportunity to more aggressively own inventory. A jump I crude oil prices was viewed as supportive, and this in turn had traders aggressively buying soybean oil today. Yet, the trend is still downward for beans since peaking in mid-July. The recovery late in this week looks like nothing more than a technical bounce in a downward trend. All arrows still point to 8.50 as a downside objective if, in fact, projected carryout is 470 mil bu. We have doubt with that figure as we believe the USDA estimate was too high and that demand for old crop could make for a smaller carryin figure and, therefore, begin to reduce next year's numbers as well.  

WHEAT HIGHLIGHTS: Wheat futures continued to look soft with another round of losses today for the fourth consecutive session. Futures closed anywhere from 6 to 7-1/4 lower with Sept leading today's drop, closing at 4.77. The contract low on Sept Chi wheat is 4.69-1/4 with today's low at 4.76. However, on Dec wheat, a new contract low was established with today's low of 4.82-3/4 and a new contract low close of 4.83-3/4. After showing early strength on Tuesday with Dec reaching a high of 5.16, prices have been on the slide since, dropping more than 30 cents from the high of this week. U.S. prices are considered high enough that strong demand will not likely come toward the U.S. A rebound in the dollar, after its harsh selloff on Monday, was also viewed as supportive. In fact, the dollar chart and wheat price chart are exact inverses to each other. Traders were likely also buying corn and selling wheat, and buying beans and selling wheat this past week as corn and beans may yet have some uncertainty with crop production while most all variables are known for wheat production.

CATTLE HIGHLIGHTS: As of this writing, livestock futures were higher again today, gaining 100 to 145 points with Oct leading today's rally, closing at 144.00. After a sharp spike lower on Wednesday, in which a low of 139.65 was posted, prices have made up well over 4.00. As we argued then, we thought cutout values were firm enough to suggest futures were undervalued and that a turnaround at hand could occur. That being said, we're going to stay with our defensive posture as the overall trend remains sharply lower. Daily slaughters, however, remain manageable with today's figure estimated at 105,000 versus 115,000 a year ago. Cutout values were softer this morning, losing 58 in choice and 29 in select, after losing 3 and 48 cents, respectively, yesterday. Our bias is that the cattle market has strong fundamental support, but is still in a longer-term trend in which prices will likely be working lower over time. We believe that from a cattle cycle perspective, the herd contraction occurred due to drought conditions in 2011 and 2012, and since, especially in the last year, has been increasing.

LEAN HOG HIGHLIGHTS: Hog futures ended the week with generally soft price activity with futures, as of this writing, anywhere from steady to down 40. For the week, though, most contracts picked up solid ground despite much economic turmoil and uncertainty early on Monday. A very impressive bullish key reversal was posted on Monday, and prices held this reversal which would suggest the trade will likely find more and more buying interest on price setbacks. In addition, competing cattle had an excellent turnaround today, and they, too, look as though they have likely found a near, if not longer-term, bottom. Lastly, slaughter numbers, while larger than a year ago, shouldn't be enough to suffocate the market. Today's estimated slaughter was 402,000. AM carcass cutout values gained 58 cents. 

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