Stewart-Peterson Market Commentary

Closing Commentary - June 15, 2018

Top Farmer Closing Commentary 6-15-18

CORN HIGHLIGHTS: Corn futures finished with losses of 1-1/2 to 2 cents on the heels of another round of sharp losses in soybeans and weaker wheat prices. It was a difficult week for the corn market, as prices lost 16-1/2 cents in nearby Jul. New crop Dec lost 15-1/4 cents. An outstanding weather forecast for the week ahead, along with good rains throughout the Midwest, was the likely primary catalyst behind this week's losses. A washout in soybeans, lower wheat values and continued concerns over trade tariffs with China all weighed on futures, creating heavy liquidation, as funds were moving to the sidelines. Coming into today, managed money was said to be long 30,000 contracts, and we would not be surprised if they liquidated more. In the not so distant past, they were long over 200,000 contracts.

SOYBEAN HIGHLIGHTS: Soybean futures finished with losses of 15 to 21-3/4 cents, as Jul led today's market lower, closing at 9.05-1/2 after reaching a low of 9.03. This is another new round of contract lows for soybeans. Good weather, a rise in the US dollar this week, poor technical activity and tariff concerns all had traders running for the sidelines this week, as futures lost significant ground. New crop Nov closed at 9.31-1/2, down 19-1/2 cents and for the week 59.25 cents. This is a significant drop out and one of the reasons we have taken such an aggressive stance on being short soybeans, as we feel world inventories are still too large for3 10.00+ beans, not to mention expectations for higher acreage. The tariff news, however, has weighed heavily on the market. While many may consider bean prices oversold, we have to stick with our earlier expectations that Nov bean prices could trade down to 8.50 if more acreage and higher yield are noted. We are not too negative any longer, as we feel much of the negative news is already in the market, and now it is time to produce a crop. Good weather through the end of June will likely keep price recovery in check.

WHEAT HIGHLIGHTS: Wheat futures finished with a losses of 2 cents Jul Chi, 2-1/2 Jul KC and 8-3/4 Sep Mpls as a continued favorable forecast for spring wheat is pressuring spring wheat prices. Sep spring wheat has now lost more than 70 cents since peaking 5/29. As good weather develops, wheat prices have been pressured. At the same time, warmer and drier conditions in parts of the Plains are allowing for rapid maturity and harvest pressure. Yield results will be down this year due to extremely poor conditions and dry weather that engulfed most of the southwest Plains. However, both soft red and spring wheat could fare better than expected, as spring rains could bring higher than anticipated yields. The Black Sea region has struggled with weather, in particular dry stretches that have hampered and lowered estimated production. With large world inventories, there is plenty of room for the market to absorb losses this year and consequently why wheat prices may be challenged. A head and shoulders formation on Jul Chi looks very concerning. The good news is, prices, after slicing lower this morning and trading as much as 1`4 cents lower, bounced back and closed above the 100-day moving average. Nonetheless, wheat charts look challenged.

CATTLE HIGHLIGHTS: Cattle futures closed sharply higher today, drawing support from the futures discount to cash and news that additional American processors are now eligible to export beef to China. The nearby Jun contract closed 2.20 higher to 108.45, Aug closed 2.90 higher to 104.77 and Oct closed 22 cents higher to 107.02. Cash trade today was seen not much better than 110 to 111. While June's opening price of 105.70 was not an enormous discount to cash, Jun futures only have two weeks to close the gap. Some traders were also concerned about the Aug discount to cash. Beef values were down hard today, off 1.82 yesterday afternoon to 222.08 and down another 2 cents this morning to 222.06. News broke yesterday that China updated its facility registration list, adding 20 USDA approved facilities to reflect their eligibility to export beef to China. Previously, just two facilities were approved for Chinese exports. While this is positive news, the US levied tariffs on $50 billion worth of Chinese goods early this morning, and after the livestock closes, China retaliated with tariffs on $50 billion worth of US goods, including beef. This will likely pressure beef prices on Monday. Technical action was very impressive today. Multiple contracts touched limit higher, and many moving average resistance levels were breached.

LEAN HOG HIGHLIGHTS: Hog futures sagged today, without much enthusiasm to move higher or lower. The nearby Jul contract closed 10 cents higher to 81.72, Aug closed 35 cents lower to 78.25, and Oct closed 37 cents lower to 64.27. The hog market continues to discount the near term negative effects of potential trade issues stemming from the spat with Mexico. Fundamentals continue to point friendly, with the CME lean hog index up 1.38 today to 80.09. In addition, carcass cutouts closed 71 cents higher to 82.40 yesterday afternoon and this morning were up another 1.22 to 83.62. All primal cuts besides butts and picnics showed good strength today with loins and hams leading the way higher, up 2.27 and 1.66 respectively. Technical price action was relatively uneventful. Hog futures tried to push higher for part of the session and then pushed sharply lower, but closes very close to the opening trades of the day show that the market was in no hurry to go anywhere fast

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