Stewart-Peterson Market Commentary

Closing Commentary - March 20, 2018

Top Farmer Closing Commentary 3-20-18

CORN HIGHLIGHTS: Corn futures looked for stability this afternoon after yesterday's aggressive sell-off, as prices pushed to their lowest level in nearly a month. The front month May contract lost 1/2 cent to 3.74-1/2, while Jul corn was down 3/4 cent to 3.82-1/2. Today's futures were in a tight trading range with the May contract 3-3/4 cents from intraday low to high. Choppy trade was noted as the marketplace was looking to see if follow through selling would occur. The news front was relatively quiet. Today's weakness was triggered by long liquidation, as speculative managed money contracts pushed to 230,000 long positions in the last Commitment of Traders report. These are near historic levels for this time frame, and with US supplies still relatively ample, prices weakened. The most recent strength in the corn market was bolstered by strong demand and reductions of US carryout projections due to the strong demand. The demand pace continued today with another round of USDA export sales. Peru bought 4.3 million bushels deliverable for this marketing year. This strong demand pace is supportive to corn prices.

SOYBEAN HIGHLIGHTS: Soybean futures paused off their negative slide from yesterday with contracts gaining 2-5 cents. Front month May beans gained 5-3/4 to 10.28-1/4, while Jul beans were up 5-1/2 to 10.39. New crop Nov beans gained 2-1/4 cents at 10.25 in today's trade. Like corn, bean futures posted a 7-8 cent trading range as prices look for direction after yesterday's strong sell-off. Soybean futures were supported by a bounce in the soymeal market, which saw gains of 2.00-3.00 per ton but failing to break through any key resistance levels in today's trade. Yesterday's sell-off was a combination of speculative money moving to the sidelines after last week's Commitment of Traders report posted the managed money position near 208,000 long contracts. Globally, South American weather has been the focus, and the trend seems to be changing moving closer to Argentina's soybean harvest. While moisture now will likely be too late for most beans, this portion of the news cycle seems to have priced in the stresses seen in that country. Fundamentally, the drought in South America has trimmed global surpluses, but supplies remain more than comfortable as long as weather cooperates for the US crop this summer.

WHEAT HIGHLIGHTS: Wheat futures saw mixed trade with Chi wheat posting slight gains as the front month May contract moving 2-1/4 cents to 4.53, while Jul wheat was 1 cent higher at 4.68-3/4. KC HRW wheat contracts saw mild losses with front month May down 1/4 cent to 4.70, while HRS wheat posted a 3-1/4 cent loss in May to 5.93-1/4. Despite winter wheat crop ratings slipping as a percentage of poor to very poor was up 2% to 55% in Kansas and Texas up 7% to 60% poor to very poor last week, recent rains and potential changing of the 7 -day forecast in some key areas kept prices from rallying this afternoon. The three states of Kansas, Oklahoma, Texas are still holding extremely poor crop ratings, and they represent roughly 40% of the US winter wheat crop. Despite negative prospects for this year's product, overall US wheat supplies and global wheat supplies are fundamentally heavy with plenty of wheat available to the world. This will keep rallies in check and may bring some additional long liquidation with the technical breakdown in charts seen in yesterday's sell-off.

CATTLE HIGHLIGHTS: Cattle futures saw more pressure as heavy supply fundamentals pushed prices past technical support levels. The nearby Apr contract closed 65 cents lower to 119.57, Jun closed 1.15 lower to 109, and Aug closed 1.00 lower to 106.70. Colorado, Texas and Kansas saw reported cash trade in the country today at 126. It is still early in the week to see much active trade, so this number was supportive. Apr futures did not make triple digit losses today, partly due to the wider than normal discount to the cash market with Apr futures becoming the spot month contract in just a week and a half. Choice cuts were down 72 cents yesterday afternoon to 224.87, and down another 3 cents this morning to 224.84. It is too early to say, but this could be the beginning of heavy expected beef supply weighing on retail prices. The Apr futures put in their first close below their 200-day moving average today, and the Jun and Aug contracts extended their run below their 200-day moving averages. Prices are technically oversold, but it may be justified considering the record beef production on tap for quarter two.

LEAN HOG HIGHLIGHTS: Hog futures were only able to muster mixed closes, trying to limit sharp losses seen yesterday. The nearby Apr contract closed 10 cents higher to 63.25, May closed 42 cents lower to 70.20, and June closed 7 cents lower to 76.75. The CME lean hog index was down 96 cents today to 64.97, the lowest since January 8. The downtrend in cash prices has been due to choppy to lower pork prices, ample supply of market-ready hogs and heavier than usual average hog weights. Carcass cutouts were down 59 cents yesterday to 71.98 but were up 97 cents today to 72.95. Loins and butts led the way higher, up 1.53 and 2.12 respectively. Bellies are trying to stabilize, up 22 cents today to 103.85. The nearby Apr futures contract did make another new low today but was able to close just a couple of ticks higher than yesterday. Technical traders may try to fade this downtrend, looking for a technical bounce on today's Doji star pattern, but the overall trend still looks lower.

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