Stewart-Peterson Market Commentary

Closing Commentary - October 18, 2019

Top Farmer Closing Commentary 10-18-19

CORN HIGHLIGHTS: Despite strength in the other grains, corn futures pushed lower in Friday’s session. Front month Dec was down 3-3/4 to 3.91 and Mar was down 3-3/4 to 4.02-3/4. For the week, the Dec contract lost 6-3/4 cents after a strong week last week, and Mar futures were down 5 cents. Despite a weakening U.S. dollar, and trading to its lowest point since early August, corn futures failed to find traction today. One of the largest concerns in the corn market is the demand side of the equation, and this week’s weekly export sales numbers have stayed disappointing. For the week ending October 10, corn sales were 14.5 million bushels, and shipments were 21.9 million bushels. This shipment number was below the 38.7 million bushels needed on a weekly level to meet the USDA’s export estimate of 1.90 billion bushels of corn for the marketing year. Total corn export commitments on sales is at 408 million bushels, down 51% from year ago levels. Let’s be reminded though, that last year export sales were front loaded due to weakness in supply in South America, which is the exact opposite of this year’s situation. In addition, with the relatively favorable weather across the Corn Belt has helped producers to continue on with this year’s harvest which may bring fresh corn supplies into the pipeline helping to also pressure on prices.

SOYBEAN HIGHLIGHTS: Soybean futures saw modest gains for the majority of the trading session before some late session profit taking pulled prices back. Nov beans were 2-1/2 cents higher to 9.34, while Jan beans were 2-1/4 cents higher to 9.47-1/2. For the week, prices stayed mostly in consolidation mode but the Nov contract lost 2 cents while the Jan contract was 3 cents lower. Today was typical of the entire trading week in beans as prices consolidated off of last week’s strength with the Nov contract holding above the 9.30 level. Prices saw support from weekly export sales, which stayed relatively strong. For the week ending October 10, net sales were pegged to 58.8 million bushels for the 2019/20 marketing year, this puts export commitments now at 661 million bushels for the 2019/20 year. Weekly export shipments were 35.1 million bushels, slightly above the necessary bushels to reach USDA’s yearly export estimates of 1.775 billion bushels. Given the current supply situation, this pace is considered relatively supportive in beans. Beyond improved demand tone, the market is still processing the impact of last week’s winter storm across the northern and western Corn Belt. The USDA will be looking to resurvey northern North Dakota and Minnesota regarding harvested acreage after last week’s storm, but with the amount of immature beans in that region, the market is staying supportive on the prospects of further losses in a tightening supply picture.

WHEAT HIGHLIGHTS: Chi wheat futures were the strength in the grain markets today as contracts pushed 6 to 8 cents higher. Front Chi Dec wheat was up 6-3/4 to 5.32-1/4, closing a strong week with a 24-1/4 cent gain on that Dec contract. Chi Mar wheat futures finished 6-3/4 cents higher to 5.37. Mild strength was noticed in KC hard red winter wheat contracts with Dec up 2-1/2 cents to 4.33-3/4. Mpls spring wheat Dec contract was down 7-1/2 cents to 5.44-1/2. The U.S. dollar trading to its lowest point since October helped provide some buying fuel again in the wheat market today. The U.S. Dollar Index has trended steadily lower since October 1, it’s not coincidental that wheat prices have accelerated their most recent turn higher since that window. In addition, continued concerns regarding the Australian wheat crop on the global scale help provide global price support as the National Australian Bank lowered its projection for this year’s Australian wheat crop from 20 million metric tonnes to 15.5 million metric tonnes due to dryness again this spring. This stays supportive on the overall demand side of the equation, as weekly export sales for wheat stay within expectations but still relatively friendly. For the week ending October 10, exporters sold an additional 14.5 million bushels of wheat as well as export shipments at 18.8 million bushels. The shipment pace was slightly above the necessary levels needed to reach the USDA’s export estimates and current weekly commitments are at 508 million bushels, up 15% from last year’s levels.

CATTLE HIGHLIGHTS: Live cattle futures saw selling pressure today as contracts ranged from triple-digit lows in the front month to modest losses in deferred contracts. Oct cattle is down 1.92 to 110.47, while Dec cattle finished 75 cents lower to 113.62. Today may have been a bit of profit taking after live cattle futures posted an approximately 16.00 rally off the September lows without much of a correction. Despite today’s weakness, for the week Oct still finished 1.02 higher while Dec finished 1.47 higher. Two negative factors in the cattle market today started with early morning export sales, which were again disappointing and weekly export sales for beef were at 13,000 metric tonnes, down lower from the previous week as well as from the 4-week average. This is the second consecutive week of disappointing export sales, and in a window where slaughter has a tendency to pick up, product movement will still be a key. A major driving force in the pressure on the Oct contract was cash trade and its development in today’s session. Cash in the South saw some preliminary action at the $108 level, which puts cash prices steady to 1.00, slightly lower than last week. This may be more of a product in a delayed reaction to yesterday’s announcement about the explosion at the cargo plant in Dodge City KS, which will close lines until probably early next week. While the company stated that cattle numbers will be shifted to other locations, concern was noted in the bids today which led to our weaker cash sales. Retail prices have stayed firmer, especially under the select contract this week which helped provide support in the cattle market in general, but with the market holding a slightly overbought condition some correction may be merited at this time.

LEAN HOG HIGHLIGHTS: Lean hog futures saw two-sided extremely choppy trade today as contracts finished with modest losses. Front month Dec was down 20 cents to 67.95, while Feb was down 17 cents to 77.47. For the week, the Dec contract saw some profit taking, losing 1.65, while the Feb contract stayed firm, up 42 cents. Early session enthusiasm regarding potentially strong export sales as net pork sales for the week of October 10 were at 292,200 metric tonnes, a marketing year high with Mexico and China being the largest buyers. That enthusiasm was tempered as the USDA announced that some of the sales were previously executed, but failed to be reported on the Sales report. That mentality meant that this strong demand was possibly priced in, which brought sellers forward into the hog market as prices traded over 3.00 off early session highs. Front month Dec was building a premium over the Lean Hog Index, and this week’s weakness seen in retail values towards the end of the week brought some concern on a seasonal turn that might be narrowing the Lean Hog Index with the Dec futures. The market is still digesting large slaughter numbers, with this week’s slaughter projected to be near 2.6 to 2.7 million head of hogs and with questionable demand, front month futures may have a hard time gaining much traction.




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