Stewart-Peterson Market Commentary

Closing Commentary - April 17, 2014

Stewart-Peterson Closing Commentary 4-17-14

CORN HIGHLIGHTS: Corn futures edged lower on what appears to be a better forecast for fieldwork next week. Futures lost anywhere from 2-1/4 cents in Dec to 3 cents in July, which closed at 5.00-1/2 cent. Dec closed at 4.96-3/4, its lowest close since April 2. After spiking on April 9 when the USDA released a favorable USDA Supply and Demand report, Dec futures have now lost 20 cents after peaking at 5.17. Is it cause for concern? We certainly think it reflects, at least over the last week, a general bias that new positive news could be lacking and that the market will focus on fieldwork. Being that it is only mid-April, concerns over late planting are probably overblown. Conditions remain cool, and in parts of the West dry. Other parts of the Midwest are on the wet side, but general, considering the date, there isn't anything of major consequence that would suggest that the majority of the corn crop would not be planted in a timely fashion. Export activity was uneventful this week. Today's close in Dec at 4.96-3/4 was right at the 21-day moving average. A slide below this level might suggest a test of 4.88, the 40-day moving average, as well as an area of general better support.

SOYBEAN HIGHLIGHTS: Bean futures finished mixed and relatively quiet. May lost 4-3/4, July 6-1/2, and Nov gained 2, closing at 12.39-1/4. Nov closed into another new high and has continued to extend its upward rally since bottoming in late January at 11.88-1/4. A rally of over 1.50 looks encouraging and impressive and more importantly, prices moved above the highs established in September. The next area of resistance for Nov beans is just above 12.50, the high that occurred on July 16 at 12.55. Tight old crop inventory and a fight for acres continues to push beans higher. With old crop breaching 15.00 this week, the need for enough acres in the US is paramount and Nov is certainly doing its best to try and earn those acres, potentially away from corn. On the other hand, a lack of cancelations that were expected from China on US imports has also provided underlying support. Yet, our bigger overriding concern for old crop and potentially for new crop beans is that the marketplace is becoming more comfortable with higher prices and yet, world supplies could be close or at record levels. Our point, the market could easily tip over.

WHEAT HIGHLIGHTS: Wheat futures ended the week on a firm note, gaining anywhere from 3 to 4-1/2 cents as Mar 2015 led the way higher on Chi wheat. Nearby May closed at 6.91-1/4, well above last week's close of 6.60-1/4. Renewed uncertainty in Ukraine, along with a cold snap this past week, and continued dry weather has provided underlying support. Yet, prices posted a hook reversal downward yesterday with July reaching a peak of 7.18-1/4. Prices today were trading in positive territory with double digit gains before finally closing at 6.99 July. Our point, the last two sessions prices have rallied, but failed to muster strength into the close. Moving into a three day weekend, it looks likely that traders were taking positions off and heading for the sidelines. If weather chances next week increase for rainfall, or weather just improves in general, or tensions ease in the Ukraine, it's easy to argue for wheat prices to eventually move back under 6.50 July.

CATTLE HIGHLIGHTS: Cattle futures finished weaker, as did feeder cattle. Both saw sharp losses on front months with Apr cattle losing 1.55, closing at 144.20, and May feeders closing down 1.85 at 178.05. We've made the argument that we thought that the feeder market may be overvalued and traders seemed to buy into that today, exiting long positions in front of a three day weekend. Traders also appear to be busy purchasing hogs and spreading this against live cattle. Cutout values in the cattle market are holding, but down from where they were six weeks ago. Improved weather conditions and weight gain, as well as anticipation that consumer demand is slowing into the late spring months is providing some rationale for cattle prices to weaken. As for feeders, end users have been chasing the feeder market for some time, pushing it higher and higher, yet without strength in deferred live cattle, we have a challenging time believing that the feeder uptrend can hold.

LEAN HOG HIGHLIGHTS: Hog futures finished mostly higher today with nearby May gaining 62 at 123.50, and Aug leading today's rally, gaining 1.65 and closing at 121.90. Look for continued high volatility. It appears the markets are well supported near 120.00, and buyers took this as a cue to jump onboard this week. We were encouraged with today's stronger recovery, yet prices managed to run out of gas at the 21-day moving average in June. However, July did close above this key level. Nonetheless, the stage is set for potential recovery to the upper 120.00s, but we have high doubts on whether the market can sustain a rally unless new concerns over PED arise. The market is figuring a very significant decline of production, as well as anticipating that demand will likely hold up. We don't see that as a strong probability. Weights are heavy and demand will likely diminish. 

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