Stewart-Peterson Market Commentary

Closing Commentary - March 19, 2018

Top Farmer Closing Commentary 3-19-18

CORN HIGHLIGHTS: Despite a solid export inspection figure at 55.5 million bushels, corn prices finished with sharp losses of 5-3/4 to 7-3/4 cents, as both May and Mar led today's drop. May closed at 3.75 after plunging for the second consecutive session and finishing lower 3 consecutive sessions. Most of today's weakness likely came from another sharp sell-off in wheat as well as a huge drawdown in soybean and soymeal prices. The row crop commodity complex was under heavy selling pressure, as traders were liquidating long positions. Friday's Commitment of Traders report indicated that corn was net long 233,000 contracts by managed money. This is near historic levels. Soybeans were also long, over 200,000 and near historic levels. These levels were at lofty points as of last Tuesday. The Commitment of Traders report indicates positions through the end of trade Tuesday. Rain in South America, along with rain in the Plains stated provided additional weakness as liquidation seemed to be the general theme for today. Probably an overriding factor for the corn market simply is the amount of corn that has been pushed into the pipeline. Commercial firms last week were well over 230,000 contracts short, reflecting hedging by elevators.

SOYBEAN HIGHLIGHTS: Soybean prices plunged as welcomed rain fell in parts of Argentina, and significant sell stops were triggered. Friday's Commitment of Traders report showed a larger than anticipated buildup of long positions in soybeans with managed money estimated 208,000 contracts to the buy side. This left the market vulnerable to a break, and that is what occurred. Rain in the central Plains also suggests a potential weather shift in the US. Whatever the case, bean prices had a rough day, taking back significant gains in recent weeks. That being said, new crop Nov closed down 18-1/4 at 10.22-3/4 but held support at the 40-day moving average. Today was the lowest close since mid-February. The chart looks tired, and we have argued that in recent sessions, more so for old crop than new. Nov looks tired today as well. Be sure to get current if you are behind with our recommendations. Accelerating today's downturn was weakness in the stock market, as well as sharply lower wheat and weaker corn prices. Weaker corn prices suggest farmers will not likely be moving to more corn acres as may have been the thought last week when Dec futures traded as high as 412. Trade tensions were also viewed as a potential negative.

WHEAT HIGHLIGHTS: Wheat futures had a difficult session. KC closed 18 to 29-1/4 cents lower with May leading today's drop. Chi closed 15-3/4 to 17-1/2 lower, as Sep led the drop, closing at 4.84-1/2, right at the 100-day moving average and at its lowest level since early Feb. Rains in the Plains states and heavy liquidation by funds, which were said to be adding to short positions as well as exiting long positions, weighed on futures as well. The backdrop to negativity in the wheat market is from last week's USDA report, which raised projected world carryout as well as increased chances for cooperative weather. Too much too soon? One might think so, but technicals look weak enough and the trade uncertain enough that those who are looking to go long may stay on the sideline until a better sign that prices may be going down.

CATTLE HIGHLIGHTS: Cattle futures started the week off with triple digit losses as a huge amount of cattle approach market-ready status. The nearby Apr contract closed 1.02 lower to 120.22, June closed 1.60 lower to 110.15, and Aug closed 1.42 lower to 107.70. Boxed beef values were mixed. On Friday, choice cuts closed 60 cents higher to 225.59, and select cuts closed 55 cents higher to 216.86. By mid-session, choice cuts were down 22 cents to 225.37, and select cuts were up 1.74 to 218.60. The recent strength in cash trade in the country has been due to a slightly tighter than expected cattle supply. Slaughter last week was up only 1% from the previous year, and last week was up 0.3% from the previous year. These are well below expectations. However, expectations for a surge in cattle supply is looming large. On the Dec Cattle on Feed report, placements were estimated at 114% for the month of Nov. The first few cattle of those placed in November are just now starting to hit the market. The 14% year over year increase in placed cattle will soon start to weigh on cash markets, and likely futures as well. The nearby Apr contract closed directly at its 200-day moving average support level. The Apr contract has never traded below its 200-day moving average, so a move lower could trigger some long liquidation. However, the market may be oversold, which could give futures a temporary bounce, especially considering the current discount of Apr futures to cash.

LEAN HOG HIGHLIGHTS: Hog futures sold off sharply today, reaching new contract lows on both bearish supply and demand fundamentals. The nearby Apr contract closed 2.30 lower to 63.15, May closed 2.12 lower to 70.62 and Jun closed 2.30 lower to 76.82. The CME lean hog index was down 41 cents to 65.52. Carcass cutout values closed 23 cents lower on Friday afternoon to 72.57 and were down another 54 cents this morning to 72.03. Bellies were down 4.56 to 101.90, while ribs and butts were up 1.00-2.00. Not only has demand recently been lackluster, but some traders still fear negative impacts from possible trade war situations. On the supply side, there is currently an ample supply of heavy, market-ready hogs. Pork production last week was up 4.2% from last year. The Apr contract gapped lower today, made new contract lows and settled just a few ticks off of the low trade. Jun futures don't look quite as bearish on the charts, still holding recent lows made on 3/12. Prices are oversold, so a technical bounce may be incoming.

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