Stewart-Peterson Market Commentary

Closing Commentary - December 12, 2017

Top Farmer Closing Commentary 12-12-17

CORN HIGHLIGHTS: Corn futures ended the day with another round of losses, as futures were unable to hang onto gains from earlier in the session. By days-end, Dec corn closed 3/4 lower at 3.35-3/4, and Mar 1-1/4 lower at 3.47-3/4. Dec 2018 closed at 3.80-1/4 down a 1-1/4, a new low close for that contract. Overhead resistance at the 10 and 21-day moving averages stopped prices in their tracks after they tried to make a recovery once the USDA report was released. The report, in and of itself, was termed neutral to slightly friendly with U.S. ending stocks lowered from an average estimate of 2.477 billion to 2.437 billion. The November estimate was 2.487. Ethanol production was increased, raising corn used for ethanol by 50 million bushels. Higher sorghum export commitments suggested more corn usage, and consequently, this showed up on today's report. World carry-out, however, edged higher from the November estimate of 203.9 million metric tons to 204.1 million, and above the pre-report estimate of 202.7. It appeared traders tried to buy the report, anticipating that perhaps the lowest prices for the year were in. Yet, by days-end prices managed to give away gains of 3 or more cents, scoring new contract lows.

SOYBEAN HIGHLIGHTS: Soybean futures lost between 4-1/2 and 7 cents, as May led today's slide closing at 9.98-1/4. Soybeans, like corn and wheat, had a disappointing close after trading higher once the USDA report was released. The report, in itself, was termed neutral with carry-out in the U.S. now pegged at 445 million, the same figure as the pre-report estimate. However, this was an increase from the November estimate of 25 million bushels. Reductions came from lowering of export expectations. Rain in the forecast for South America continues to pressure prices, as well as forecasters keeping two rain events in place for the next 10 days in northern Argentina where conditions have turned abnormally dry. Should rainfall totals be greater than anticipated, prices could come under further pressure, but for now the market has factored in 30 to 35 cents of negative-weather premium after prices peaked last week. Today was the fifth consecutive lower close for soybean futures, and sets the stage for potentially lower prices. Many commodities have recently turned weaker, and rural crops are no exception. Stock market prices continue to reach an all-time new highs, and it appears money flow continues to move into this sector and out of commodities.

WHEAT HIGHLIGHTS: Wheat futures traded on both sides of steady, but eventually lost ground again with wheat futures losing 1/2 in Dec and 2-3/4 in Mar Chi. KC closed 1 to 2 lower, and Mpls steady to 3 lower. Mar Chi wheat has now closed lower 7 consecutive session, and in the last week alone has dropped from a high of 4.43 to now 4.13 for a loss of 30 cents. Since late-September, futures prices have lost over 70 cents. Today's USDA reports again, nearly like clockwork, raised world projected carry-out from last month's 267.5 million metric tons to 268.4, but more importantly, once again above pre-report estimates which averaged 266.3 million metric tons. Bottom line, there's no end in sight to increasing wheat supplies and the market-trend remains down.

CATTLE HIGHLIGHTS: Cattle futures bounced today on short covering and extremely oversold technical indicators. The nearby Dec contract closed 97 cents higher to 116.15, Feb closed 1.42 higher to 119.15, and Apr closed 1.35 higher to 120.97. Beef values were softer yesterday afternoon, with choice cuts closing 6 cents lower to 205.53, and select cuts down 31 cents to 185.66. By mid-session today, choice cuts were up 29 cents to 205.82, and select cuts were up 32 cents to 185.98. Forecasts still look warm and dry for the central Plains, likely contributing to counter-seasonal weight increases. However, as we approach the end of the year, short traders are probably beginning to exit positions on expectations for a massive drop in production for Q1 of 2018. In November, the USDA forecasted that U.S. beef production will decline by 530 million lbs in Q1 of 2018, from Q4 of 2017. Production does normally decline during that time, but this would be the second largest production drop since 1997. Another reason for the short covering today was extremely oversold technical indicators. The best traded Feb contract ended yesterday's session with the most oversold stochastic reading of the contract's entire life. In just over a month, the Feb contract had shaved almost 10.5% of its value, so the bounce today was not a massive shock. Prices today did close above the 100-day moving average levels, but only about halfway up the daily trading range. Prices still have room to bounce due to oversold conditions, but overall direction still looks negative.

LEAN HOG HIGHLIGHTS: Hog futures finished with mixed results today, as shorts roll out of the soon-to-expire Dec contract into deferred months. The nearby Dec closed 15 cents higher to 63.75, Feb closed 50 cents lower to 66.52, and Apr closed 65 cents lower to 71.17. A very weak close yesterday for pork values was the reason for early selling today. Carcass cutouts closed 2.01 lower yesterday afternoon to 169.00. This was led by a 7.20 drop in belly prices. By mid-session today carcass values were down another 12 cents to 81.57. Loins were up 2.52, butts were up 1.89, picnics up 1.69, ribs were up 4.32, and hams were up 2.04, but the carcass value is lower due to a 12.81 drop in belly values to 122.23. Increasing weight and increasing slaughter has been the story for a number of weeks, and doesn't appear to be changing as weather looks to appear friendly for weight gain. The best traded Feb contract closed below its 100-day moving average for the first time today since September 29, and broke its 50% retracement of the August to November rally, as well. Prices just held onto the 200-day moving average, but that may not hold tomorrow. A move below this level would be the first since September 29. Prices are approaching oversold levels, but could still have some wiggle room lower.

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