Stewart-Peterson Market Commentary

Closing Commentary - December 04, 2019

Top Farmer Closing Commentary 12-4-19

CORN HIGHLIGHTS: Corn futures weakened today, losing 1 to 3-1/4 cents, as nearby Dec led today’s drop, closing at 3.68-3/4 with a range today of 3.73-1/2 to 3.67-3/4. Mar corn closed down 2-1/4 to 3.78-1/2 in new crop Dec 20, down 1/4 to 3.92. Bear spreading was noted again today, as the market had little fresh news on which to trade, and consequently, drifted. Perhaps an overriding factor this year is the amount of corn exported out of Brazil, which is expected to reach 41 million tonnes, an 80% increase from last year’s 22.8 million metric tonnes. The U.S. dollar against the Brazilian real continues to reach into new highs, and this too has been a negative force for U.S. corn prices. Basis levels continue to hold strong, which suggests light farmer selling, a lack of supply or both. Harvest continues to push along in the northern tier states, yet high moisture content and snow continue to hinder progress.

SOYBEAN HIGHLIGHTS: Soybean futures finished with gains of 7 in nearby Jan and Mar. The Nov 20 contract finished 3-3/4 higher to 9.29-1/4. Bull spreading was a noted feature, as was buying beans and selling corn, as traders were exiting short beans and exiting long corn positions. After yesterday’s stability and thoughts of oversold conditions, traders appeared to be willing to step aside short positions today. Therefore, the rally today was likely more predicated on short covering and management of gains than anything else that we could see from a fundamental perspective. Little new news on the tariff front and expectations that Brazilian weather next week looks sufficient for production could keep price rallies in check. Drier spots are developing in Argentina, yet it is too early to attach any potential yield loss. Nonetheless, it is being monitored and could be supportive. Bean prices may have been on the defensive the last week or so on concerns over human rights issues in Hong Kong and President Trump’s comments yesterday suggesting there was not a sense of urgency to make a deal may be downplayed. Others are suggesting these two events have little to do with negotiations that are in progress, and that a Phase 1 deal could be completed before December 15, when American tariffs are set to rise.

WHEAT HIGHLIGHTS: Wheat futures continued their erratic ways with two-sided trade, eventually finishing firmer on all three exchanges with gains of 1-1/2 to 4-1/2 cents, as Dec Chi led today’s rally. Mar Chi closed up 2-1/4 at 5.27-1/2, and Mar KC was up 3-3/4 at 4.40-1/2. New news was lacking, but prices climbed higher anyway, perhaps on lack of deliveries in both Chi and Mpls wheat. Dry weather in Argentina is showing up on maps but probably not enough to have much bearing. Australian dry weather has impact, yet the world has ample inventory. The big question marks that need to be answered for the upcoming year are U.S. winter wheat planted acres and, in some areas of Europe, winter wheat planted acres. Both are struggling with wet conditions. Ultimately, these numbers could be down from historical figures and viewed as friendly.

CATTLE HIGHLIGHTS: Cattle markets posted triple-digit losses today, breaking below nearby support levels. Dec lives closed 1.10 lower to 119.45. Feb lives were down 1.47 to 124.17, and Apr lives were down 1.22 to 125.00. Jan and Mar feeders were both down 1.50 to 140.87 and 141.42 respectively. Choice beef values made their biggest daily decline yesterday since November 21, down 2.46 to 230.15. Choice beef was down another 2.57 this morning to 227.58. I few head of cattle in Nebraska were sold today at 1.19, steady with last week. Today’s online fed cattle exchange saw 860 head sold of 1,189 total head offered at a weighted average price of 118.36. This seems to have made traders nervous that the cash cattle market could stagnate this week after impressive strength lately. The premium of the futures market to the cash market also seems a bit rich, especially if beef values are making a sharp turn lower. Feb live cattle closed below their 10 and 20-day moving average levels for the first time since November 22 and for just the second time since September 10. If February lives cannot push back above these levels during tomorrow’s session, a high for the move may be in place. Jan feeders fell below their 10, 50 and 200-day moving average support levels today and made their lowest close since November 22. Momentum in both the live and feeder markets is pointing lower.

LEAN HOG HIGHLIGHTS: Hog markets closed mixed to mostly higher, with Dec down 62 cents to 61.87. Feb hogs were up 5 cents to 68.42, and Apr hogs were up 47 cents to 74.75. The CME lean hog index was up 3 cents to 57.38. China’s spot pig prices were up again overnight and are now up 8.4% so far this week. Carcass cutout values closed 2.25 lower yesterday afternoon to 80.61, their lowest value since November 28. Carcass values were able to bounce 74 cents this morning 81.35. A renewed sense of trade optimism overnight was supportive for the hog markets today, but only to a very limited degree. Technically, today’s closes were somewhat disappointing, with the best traded contract not able to attract much new buying interest despite yesterday’s solid close above nearby resistance, as well as a Stochastics crossover into a buy signal. The Apr hog chart looks a little better, at least closing above the opening trades of today’s session.

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