Stewart-Peterson Market Commentary

Closing Commentary - April 24, 2017

Top Farmer Closing Commentary 4-24-17

CORN HIGHLIGHTS:Corn futures gained ground today with futures closing 1-1/2 to 2-1/4 cents higher, as May led today's gains. Spillover strength from beans was noted, as well as what appears to be a relatively rainy and cool forecast for the entire Corn Belt starting on Wednesday. We were a bit surprised that futures didn't try to show more strength today, given the idea that some farmers are dealing with soil conditions that are near saturated. Another round of rain, predicted heavy in some areas, could put planting on the backburner, at least through the first week of May. It is only April, and history has said the market has over-reacted in past years when prices worried about wet weather in late April, or even early May. Yet, given the speed at which the crop can be planted, one still has to be concerned that too much of the crop could be planted in a very narrow window of time, and this could make for a very interesting scenario as either crop conditions are in excellent shape or not so good. Today's export inspection figure at 57.2 million was also viewed as supportive, as this was well above the average needed on a weekly pace to meet the USDA projection. Export inspections year-to-date are 62% higher than last year at this same time.

SOYBEAN HIGHLIGHTS:Soybean futures showed their muscle today, gaining 7-3/4 to 11-1/4 cents as Aug led today's rally closing at 9.73-1/4. Nearby May gained 10-1/4 and Nov 8 cents closing at 9.67-1/2, its highest close since 3/30. All futures contracts closed decisively above the 21-day moving average, something that has not occurred since early March. The weekly reversal of 2 weeks ago, followed by consolidation last week and now an up-turn this week, is painting a potentially friendly near-term picture. With farmers trying to punch corn acres in quickly, the worry of significant switched from corn to beans may be providing some underlying support. However, we think that might be a stretch. A bout of wet weather may hit the Midwest over the next 4-5 days, and this may have more impact on farmer decisions. Yet, it is early in the year, and the idea to switch the beans probably gains minimum traction at this point. Export inspections hit 23.3 million, which was viewed as supportive and continues to suggest not only is the US selling beans above expectations, but now moving them. Year-to-date inspections total 1.797 billion bushels, or close to 89%, which are currently exceeding USDA projections already by almost 2%. Today's technical picture looks impressive and would suggest that the market is poised for a near term correction. This could suggest new crop beans move up to first 9.81, the 40-day moving average, and then near 9.90, the bottom side of consolidation that occurred in late February and early March.

WHEAT HIGHLIGHTS:Despite firmer corn and soybean prices, wheat futures again faded late in the session, losing ground by the tune of 1-1/4 to 2-1/2 cents in Chi as May led today's drop closing 4.02-1/2, a new contract low close. KC wheat lost 2 to 3-1/2, and Mpls lost 3-1/2 to 5 cents. The near term downtrend continues as funds continue to add to short positions. Rain in the forecast is expected to be more beneficial then not and potentially boost yield. Export inspections at 22.5 million bushels were termed neutral. We believe this number may actually be supportive, as it exceeds 1 year ago at this date by nearly 7 million bushels and continues to suggest an improvement in this year's export activity with inspections so far at 874 million bushels, up 32% from last year. Wheat is the odd commodity out as of late, as traders seem to be interested in buying beans and selling wheat. Yet, wheat near 4.00 a bushel in Chi should be viewed as a strong long term value. Nonetheless, we are untrusting of the wheat market in the very short term, so we will stay with short positions as the market has yet to give a better sign that it may be done going down.

CATTLE HIGHLIGHTS:Cattle futures closed the day with moderate losses after Friday's bearish Cattle on Feed report. The March placements number of 111.1% was a record high and caused many traders with long positions to liquidate and step aside. For the week ending 4/22, beef production for the 2017 calendar year is currently running 4.7% ahead of last year, also pressuring prices today. Slaughter is also running 6% ahead of last year, though average dressed weights are down 1.3% from last year. As of late last week, cattle futures were approaching heavily over bought levels, and managed money held a net long position of over 131,000 contracts as of last Tuesday. Both of these levels were alleviated today with the lower finishes. Most contracts gapped down on the open, fell below the 10-day moving averages and closed back above them. Carcass cutouts were mostly unchanged today, so the majority of the pressure was due to last Friday's report. Apr futures closed 80 cents lower to 129.00, Jun closed 1.85 lower to 114.85, and Aug closed 1.80 lower to 110.97. Holding the 10-day moving average levels, tomorrow will be key if cattle are to continue higher.

LEAN HOG HIGHLIGHTS:Hog futures closed with sharp to moderate gains today, alleviating some of the oversold conditions in the marketplace and in reaction to strong demand prospects. The nearby May contract closed 1.25 higher to 64.27, Jun closed 1.15 higher to 69.47, and Jul closed 85 cents higher to 70.37. As of 4/22, pork production for the 2017 calendar year is running 1.7% ahead of last year. With the recent decline in prices, many are expecting export demand to pick up, especially with carcass cutout values remaining relatively steady against the futures falling apart. Carcass cutouts were up 95 cent to 76.42, just under a dollar higher than last Monday. Technical buying entered the markets quickly today, and closes were near the highs of the day. The nearest point of resistance, the 10-day moving averages, are still 1.00-2.00 higher, so there is room to continue higher.

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