Stewart-Peterson Market Commentary

Closing Commentary - May 23, 2018

Top Farmer Closing Commentary 5-23-18

CORN HIGHLIGHTS: Corn futures continued their upward trend as prices gained 2 to 3-3/4 cents as both Jul and Sep led today's gains. Jul closed at 4.08-1/2, another new high close for the calendar year. New crop Dec closed 3-1/4 higher at 4.26-1/2, also another new high for the calendar year. Dec's target is now 4.29-1/2, the high from July 11. Strength in wheat and beans, despite a higher U.S. dollar, was supportive for corn futures as renewed enthusiasm over potential exports, as well as a growing concern that drier weather in parts of the world, including the U.S., could affect yield on crops in general. For May 23, it's too early to argue that dry weather is an issue, but this year's drought map looks very different than a year ago. Consequently, timely rains will be needed throughout the entire season unless much rain accumulates soon. At the same time, there are parts of the Midwest, particularly in the Minnesota, Wisconsin, and South Dakota regions, that have areas that remain wet and planting progress at a minimum. Typically, however, this is not a concern. Prevent plant date will likely come, but with prices now trading over 4.25, farmers will likely press forward with planting through the first week of June.

SOYBEAN HIGHLIGHTS: Bean futures had another impressive showing, finishing at the top end of today's trading range. Nearby Jul gained 8-3/4 closing at 10.39-1/4, while Nov gained 9-3/4 closing at 10.48-3/4. Strength in corn and wheat, despite a higher U.S. dollar, provided underlying support. Meal picked up over 3.00, while oil finished with gains of 20. Short covering was a noted feature today as forecasts varied on rainfall totals, as generally dry weather continues to develop in most of the Midwest. Renewed optimism that trade with China will take place soon was noted when Chinese buyers were said to have requested U.S. grain prices. With prices moving higher, it is very likely that buy stops were uncovered as well, especially after prices moved above yesterday's high. There is no doubt the last three days look impressive, with Monday's price action leaving a gap on charts. The overall sideways trend continues. We think it's too early to point to weather to have significant impact on beans, but in this environment where commodities are finding ready buyers on dips, forecasts for less-than-ideal weather will likely keep buying interest alive.

WHEAT HIGHLIGHTS: Wheat futures, like other commodities, seem to ignore the firmer trade in the U.S. dollar today and moved higher with solid gains of 7-1/2 to 9-1/2 cents in Chi, as Jul led today's gains closing at 5.31, its highest close since May 2. Dry weather concerns both domestically and abroad are providing underlying support, as is spillover strength from higher row crop commodities such as corn, beans, and cotton. While world inventories were again confirmed as large on this month's USDA reports, the focus will turn to weather and potential for crop shortages elsewhere. Primary exporters, Australia and the Black Sea Regions, are experiencing dry weather patterns such as parts of the U.S. have experienced in recent months. While this can dissipate in a hurry, the market seems to be finding strength in willing buyers and setbacks.

CATTLE HIGHLIGHTS: Cattle futures put in a solid session of gains today, though surprisingly with the back months gaining on the nearby Jun. Jun futures closed 55 cents higher to 105.45, Aug closed 2.15 higher to 102.80, and Oct closed 1.90 higher to 105.75. Today's Fed Cattle Exchange did not give the market a good start to the week on the cash front. Only 225 head were offered, with no sales at a minimum bid of $112. Bids in the country are centered around $108 with no sales yet. Beef values collapsed yesterday, with choice cuts closing 1.47 lower to 229.35. This was the lowest close since May 7. A small bounce in choice values today, up 27 cents to 231.09, provided some optimism that beef values could stabilize into the Memorial Day weekend. Technical price action today was impressive, especially in the deferred contracts. Jun futures were able to push through and close above their 20 and 50-day moving average levels, albeit with relatively modest gains. The Aug and Oct contracts traded mildly higher, and then drew significant buying interest and short covering after futures pushed through their 10-day moving average resistance level. Both the Aug and Oct contracts were halted at their 20-day moving average levels.

LEAN HOG HIGHLIGHTS: Hog futures put in triple-digit gains today, finding support from higher cash prices, higher cattle prices, and what should be a good weekend for pork consumption. The nearby Jun contract closed 1.47 higher to 74.60, and Jul closed 1.10 higher to 76.22. Aug was up moderately, 67 cents higher to 75.02. Weekly average weights for Iowa/Minnesota hogs fell this week to 283.9 pounds versus 285.3 pounds the previous week. While still over 3 pounds heavier than the same week last year, weights are moving in the right direction. Lower weights and an abbreviated kill week next week should support carcass cutout prices despite the 1.62 dip today in pork values to 74.52. The CME Lean Hog Index was up 33 cents today to 68.69. Despite the dip in carcass values and rallying cash hog prices, packer margins remain strong. Gains in hog futures markets today were solid, though no significant technical progress was made. Jun futures initially rallied past their 20-day moving average level, but were stopped at the 10-day moving average level to close directly at their 20-day. Jul futures pushed past their 20-day moving average level, though were unable to close above it, and the Aug futures only closed about halfway up the trading range and below yesterday's highs.

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