Stewart-Peterson Market Commentary

Closing Commentary - October 23, 2019

Top Farmer Closing Commentary 10-23-19

CORN HIGHLIGHTS: It was another ho-hum day in the corn market, as futures finished down 1/4 in Dec at 3.87-3/4 and a penny weaker in Jul at 4.12. Next Dec corn finished down 1/4 at 4.09-1/4. The same could be said for the bean and wheat markets, which basically finished unchanged to slightly higher. Harvest is in full force, which is keeping rally potential in check and likely exerting some downward pressure. On the other hand, we are of the opinion farmer selling will not be overly aggressive, and with such a delayed harvest, basis levels could stay firmer than usual in order to bring corn into the pipeline. From a big picture perspective, we are cornered the demand side of the market is not living up to expectations, and the USDA could reflect this in the Nov Supply and Demand report. Although they did make a substantial 150 million bushel cut to exports in September, there is an equal chance that an additional reduction in exports may be at hand. That being said, it is very early in the marketing year. Making significant cuts in demand could prove to be a mistake. One has to wonder if the bigger picture suggests that African swine flu is cutting the need for world corn this year, and consequently, end users don’t feel the urgency to chase the market.

SOYBEAN HIGHLIGHTS: It was a quiet session, as prices traded range-bound and ended the day uneventfully. Futures finished steady to down 1/4 cent on the front three futures contracts, with May leading today’s drop, closing down 1/2 at 9.68. Nearby Nov lost 1/4 at 9.33-3/4, and Nov ’20 was down a cent at 9.72-1/4. On a positive note, futures closed off their low by 6 cents after trading through the 10-day moving average, which may have uncovered sell stops. Prices edged back above this key support level that has held prices in check since the beginning of the month. Supportive factors are strong crush margins, wet weather in the forecast and continued concerns that yield will be downgraded. There is also the continued expectation, or hope, that prices will be moving higher on strong export activity with China.

WHEAT HIGHLIGHTS: Wheat futures finished with gains of 1 to 4-1/4 cents on all three exchanges. Dec Chi closed 2-3/4 higher at 5.20-3/4. Dec KC was 2 higher at 4.23-1/4, and Mpls was up 3-1/4 at 5.42-1/4. A slightly weaker dollar and supportive technical trade had prices finding buyers near the 10-day moving average. After two consecutive down sessions and weak finishes, today was refreshing. Small gains are not likely strong enough to lead to follow through buying tomorrow, and unless there is new friendly news, prices are vulnerable to fall lower.

CATTLE HIGHLIGHTS: Cattle markets put together an impressive session today, pushing into new highs for the move on the live cattle contracts. Oct lives were up 32 cents to 110.20, Dec lives were up 1.55 to 115.25 and Feb lives were up 1.32 to 120.42. Oct feeders were up 1.32 to 145.02, and Nov feeders were up 1.25 to 144.75. Choice beef values closed 80 cents higher yesterday afternoon to 220.93, the highest value since September 10. Choice beef was up another 2.46 this morning to 223.39. Today’s online fed cattle exchange posted one sale of 131 head of the 231 head offered. These cattle were moved at 109, and given the positive trend in beef values, most are expecting cash trade to restart its advance later this week. Weather in the Plains should be relatively clear over the next few days, but 6-10 day forecasts are still showing above normal precipitation and below normal temperatures, which should keep weight gain in check. Technical price action today was impressive with the best traded Dec live cattle contract posting its highest close since May 1 and Feb lives making their highest close since April 25. Buyers quickly swept in this morning after prices again tested their 10-day moving average support levels, especially after the positive movement in retail beef prices and fed cattle exchange. Nov feeders posted their highest close since October 16 and put in an unsuccessful test of their overhead 200-day moving average resistance level.

LEAN HOG HIGHLIGHTS: Hog markets posted a mixed to mostly negative session, with Dec up 32 cents to 65.82, Feb down 1.17 to 75.10 and Apr down 1.50 to 81.62. The CME lean hog index was down for the second session in a row, off 6 cents to 65.47. China’s spot pig price index was up 0.69% overnight, which leaves the market up 12.5% for the week, up 41.8% for the month and up 202% year to date. Carcass cutout values closed 2.43 lower yesterday afternoon to 76.10, their lowest value since October 4. Pork values were down another 32 cents this morning to 75.78, as excess production continues to overwhelm domestic demand. The correction in pork values may also hint at a dip in exports this week. The best-traded Dec contract retested its 50-day moving average resistance level today, but was unable to close above it. This is the first time since early September that Dec hogs have closed two consecutive sessions below their 50-day moving average level. Feb hogs took sharp losses early in the session but then were able to rally back and close near the middle of the day’s range at the 100-day moving average level.

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