Stewart-Peterson Market Commentary

Closing Commentary - September 18, 2017

Top Farmer Closing Commentary 9-18-17

CORN HIGHLIGHTS:Corn futures softened today with futures losing 3 to 3-1/4 cents, as Dec led today's slide closing at 3.51-1/2. We'll continue to use the term consolidation. Since bottoming on August 31, prices have recovered some, but ran out of gas at the 21-day moving average, with the most recent high at 3.62 (Dec). The 21-day moving average is a downward sloping line, and the market has tested this line 9 of the last 10 sessions. Today's close lower puts the market at nearly the same price as it was on the close of the September 12 USDA report. Harvest progress continues to push along, with generally drier weather allowing combines to roll in a big way in the southern regions of the Midwest. Showers pushing from west to east may limit harvest progress in the days ahead. Weekly export inspections at 26.7 million bushels were termed neutral and didn't provide much for price direction.

SOYBEAN HIGHLIGHTS:Soybean futures edged lower today, losing 1/2 to 1 cent. On one hand, bulls will argue this is a victory, as prices are holding well above the most recent lows in mid-August, which came on Nov futures at 9.25-1/4. With today's close at 9.67-3/4, the market is reflecting better demand and expectations for a potential reduction in yield due to dry weather. On the other hand, bears will argue that the market has repeatedly tested this 9.75 area and is unable to push through. Today's high was 9.76-1/2. Both arguments may have merit, but ultimately, bean prices trading well above their mid-June contract lows near 9.00 would suggest there is something bigger to this picture. Our bias is that weather in late August and early September has been less-than-ideal, and is likely chipping away at yield potential. If downward momentum from mid-August continued, we'd expect that bean prices at this time of year would be well under 9.00 and that hasn't been the case.

WHEAT HIGHLIGHTS:Weekly export inspections at 17 million bushels were termed neutral to slightly negative. The market seemed to reflect this, losing 4 to 5-1/2 cents in Chi, while KC lost 3 to 4-1/2. Mpls gained 1-1/4 to losing 1-3/4 on deferred futures. The wheat market continues to mark time, waiting further price direction. With that being said, we like the way the market has provided a few signals that suggest selling interest is either waning or not likely to reappear. A hook-reversal in late August, followed by a very prominent bullish key-reversal on September 12, suggest the market has grown tired of its bearish factors. Traders are looking for dips as a buy opportunity and we concur.

CATTLE HIGHLIGHTS:Cattle futures ended today's session with mixed closes, with most traders waiting for some cash direction for this week. The nearby Oct contract closed 17 cents lower to 107.57, Dec closed 12 cents higher to 112.95, and Feb closed 25 cents lower to 116.50. Prices were higher for the majority of the morning. Cash bids were up to 105 on Friday afternoon, but movement was slow as feedlots are holding out for higher bids. The market feels that cash prices will be steady to higher this week. It appears that beef prices are trying to form a short-term bottom. On Friday afternoon, choice cuts closed 42 cents higher to 191.42, and select cuts closed 87 cents lower to 185.85. By mid-session today, choice cuts were up another 1.25 to 192.67, and select cuts were up 2.10 to 187.95. Despite the early strength though, traders were unwilling to hold the positive finishes for the Oct and Feb contracts. The Oct contract traded above, then closed below, its 200-day moving average, while the selling pressure in the Feb contract was likely due to prices approaching overbought levels. The projected increase in production for Q4, over Q3, remains a weight on the market, but the projected drop in Q1 production is still supportive of the deferred contracts, primarily Feb.

LEAN HOG HIGHLIGHTS:Hog futures pushed lower again today in some consolidation-type price action. The nearby Oct contract closed 97 cents lower to 60.00, Dec closed 42 cents lower to 58.05, and Feb closed 45 cents lower to 63.65. The CME Lean Hog Index was down 1.08 today to 64.07, keeping basis right around the 4.00 level, versus normal seasonal levels of around 1.00. Pork prices, recently an anchor on hog prices were mixed indicators for today's session. On Friday afternoon, carcass cutouts closed 1.44 lower to 77.76, but after a jump in pork belly values this morning up 4.74 to 106.37, carcass cutout values at mid-session were up 1.30 to 79.06. Traders are still worried about the possible cancelation of NAFTA, which would hurt pork exports greatly. Overall uncertainty appears to be the lack of buying support today. Friday's bullish key-reversal was a positive sign, and though today's closes were lower, the price charts don't appear terribly damaged by price action for this session. The best traded Oct contract put in an inside day, suggesting a lack of direction, positive or negative. The Dec contract did trade above its 10 and 20-day moving average levels, but was unable to hold them into the close. The Feb contract did trade higher briefly on the day, then down to its 10 and 20-day moving average support levels, holding both for the close.

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