Stewart-Peterson Market Commentary

Closing Commentary - May 22, 2018

Top Farmer Closing Commentary 5-22-18

CORN HIGHLIGHTS: Corn futures edged higher today closing 2 to 2-1/4 cents higher as Jul gained 2, closing at 4.04-3/4 and Dec 2-1/4, closing at 4.23-1/4. Dec reached a high of 4.25, its highest price for the calendar year. Undoubtedly, farmers were more aggressive selling corn at this quarter century mark, and that may have capped rally potential in the near-term. Spill over support from sharply higher wheat prices throughout the session, as well as supportive action in the bean market, helped provide underlying support as well. The U.S. dollar, however, did edge higher again, after trading lower briefly during the session. Yesterday's Crop Progress indicated this year's crop is on schedule at 81% planted, in line with the 5-year average. Talk of drier weather in Brazil is providing underlying support, as is the near-term forecast which suggests warmer-than-normal for most of the Midwest. In areas that are in need of moisture, drier weather is a growing concern.

SOYBEAN HIGHLIGHTS: Soybean futures moved higher today gaining 5-1/4 to 5-1/2 cents with Nov closing at 10.39, its highest close since May 4. Renewed optimism for export activity to China, as well as trade as usual for the rest of the world, seems to be the theme again providing support for beans today, as did a push above the 40 and 50-day moving averages likely uncovering buy-stop orders. Strength in wheat may have helped provide support as well, not to mention corn trading in positive territory. Soybean meal, however, finished with small losses of 40 cents to 1.20, while soybean oil finished with small gains. With the South American currencies, both the Brazilian real and Argentine peso, near record low levels, it may be difficult for the U.S. to capture additional business, at least in the near-term. All attention, however, will focus on U.S. weather in the weeks and months ahead. Anything less-than-ideal could see strong import buying as world supplies are on a teeter-totter in which they could either grow significantly or with weather issues, contract and create a rationing issue.

WHEAT HIGHLIGHTS: A return to hot/dry weather was enough to give wheat prices a major boost today, as futures gained more than 20 cents throughout the session on both KC and Chi. By days end, however, prices did drift back still finishing with solid gains of 13 to 14-1/4 cents, as Jul Chi led today's gains closing at 5.21-1/2, its highest close since May 4. A return to weather uncertainty and speculative buying on the last price dip would suggest the trend in commodities continues to recognize value when prices dip. As harvest approaches, wheat may have trouble to move upward, in particular with the dollar higher and harvest pressure. Yet, from a world perspective attention will focus on major contributors to the world export sector, which is primarily the Black Sea regions, as well as Australia. Both have been struggling with bouts of dry weather.

CATTLE HIGHLIGHTS: Cattle futures put in mixed and quiet sessions today. Jun futures closed 2 cents lower to 104.90, Aug closed 2 cents higher to 100.65, and Oct closed 12 cents higher to 103.85. Trade was very choppy all day in anticipation of this afternoon's Cold Storage report. Total pounds of beef in freezers were reported today, up 2% from last month and up 3% from last year. This is fairly neutral to cattle. Beef exports have slipped a little bit over the past couple of months, but heavier weights and increased kill indicates that beef is still moving at a good clip. It is also a good sign that this beef has been contracted and not put into storage. Beef values were mixed to negative for today's session, with choice cuts closing 1.39 lower yesterday afternoon to 230.82, but up 27 cents today to 231.09. Yesterday's choice cut value was the lowest close since May 7. Friday's Cattle on Feed is expected to show the on feed supply at 104.9% ahead of last year, but placements at just 90.9% of last year. The nearby Jun contract was unable to push through its overhead barrier at the 20 and 50-day moving average levels. The deferred contracts are still oversold with overhead resistance at the 10-day moving average levels.

LEAN HOG HIGHLIGHTS: Hog futures closed sharply lower today despite depreciating carcass values and cash values in the country. The nearby Jun contract closed 87 cents lower to 73.12, Jul closed 1.72 lower to 75.12, and Aug closed 1.70 lower to 74.35. The CME Lean Hog Index was up 60 cents to 68.36. This is the highest value since March 2. Unlike other agricultural markets, hog futures have not found any relief from recent China trade news. China still has an overwhelming hog and pork supply, and would likely not import much if any U.S. pork, even without a tariff. Cold Storage today was negative for hog markets. Frozen pork supplies were up 5% from last month, and up 9% from last year. While pork belly stocks were up 9% from last month, and up 93% from last year. With exports falling behind, this should not be a surprise, and the third month in a row of large belly stocks is not positive. Price action today was very weak, though the Jun contract did make a small recovery off the lows. Jul futures made a new low for the move, closing below the most recent low put in on May 7. Aug futures showed similar bearish price action, putting in their second lowest close of the contract's life.

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