Stewart-Peterson Market Commentary

Closing Commentary - July 23, 2019

Top Farmer Closing Commentary 7-23-19

CORN HIGHLIGHTS: Corn futures moved higher today with gains of 3-1/4 in Sep to 4-3/4 in new crop Dec closing at 4.31-1/2. Today's low in Dec was 4.24, close to reaching the most recent low of 4.20-1/2 from July 2. A gap in the charts still exists at 4.20 to 4.20-1/2. Today's hook reversal was encouraging and would likely argue that last night's crop ratings figure, down 1% and now at 57% in the good and excellent category, was viewed as supportive. Many were expecting a 2% to 3% increase in the good and excellent category instead poor to very poor category increased 1% to 13%. There is no doubt the weather has been conducive the last three weeks for corn production, yet ratings haven't shown improvement. The market is marking time awaiting further news, which is crop development, which is a function of weather and future USDA reports. The general consensus is that acreage will be down, but there's many estimates as to what this will actually look like. Bear in mind, all estimates are pivoted off of the March 31 planting intentions number. Therefore, if farmers were low in March, this could be a difference if acre numbers are not as reduced as anticipated. On the other hand, if farmers were intending to plant 92.6 mil acres in March and were really only intending to plant 91 mil, then a further reduction in acres could be substantial.

SOYBEAN HIGHLIGHTS: Soybean futures suffered small losses today of 2 to 2-1/2 cents as a relatively range bound market of near 11 cents from high to low was reflective more of a market apparently drifting today than anything else. Yesterday afternoon's Crop Progress reports indicated 40% of the crop in the blooming stage vs a 5-year average of 66%, and 7% of the crop in the setting pod stage vs 28% on a 5-year average. Ratings indicated that 54% of the crop is in good to excellent shape, unchanged from the previous week with the poor to very poor category remaining at 12%. From a technical perspective, prices continue to hold support. Today's test of the 50-day moving average and bounce off of this level is the third time in the last four sessions this has occurred.

WHEAT HIGHLIGHTS: Wheat futures traded on both sides of unchanged for most of the session and finished without much differential. Nearby Sep closed unchanged at 4.87-1/4, while Sep KC gained 2-1/4 closing at 4.31-1/2, while Mpls Sep closed down 3/4 at 5.20-1/2. The technical picture in wheat continues to look soft and today's close at the 100-day moving average is a sign the market seems to be hanging onto something. A slip under this level could send prices another 10 to 15 cents lower. When looking out to next year, Jul Chi at 5.29-1/2 may offer and opportunity to begin making cash sales if you have not done so yet. You may also consider hedge to arrive contracts. As we look ahead, expectations for a drawdown in Canada, Europe, Russia, and Australia all could contribute to the possibility that wheat prices extend an uptrend into next year. Yet, there was such a surplus of wheat available to the world in this past year that it is unlikely that a substantial rally is ahead of the market as a price recovery will likely lead, initially, to strong selling for those who have been storing. Harvest progress should pick up in a more strong fashion this week as it appears most of the wet weather pattern has pushed beyond the Plains and Midwestern states. There are only scattered chances of showers.

CATTLE HIGHLIGHTS: Cattle futures moved higher today with gains of 25 in Apr to 72 in Oct, closing at 109.87. Nearby Aug closed 60 higher at 109.05. Prices continue to hold their recent upturn with Aug futures closing at its highest level today since May 6. A very classic double bottom, or by some accounts what is termed a 1-2-3 bottom, along with follow through buying to the topside looks encouraging. Nearby Aug contracts is up against resistance which is the most recent high on May 17 at 109.77. There was good consolidation from late April through May. Should prices move above this level, look for a move to 110.90, the 100-day moving average. From a long term perspective, we remain supportive the cattle market as we expect higher grain prices, and now an improvement in cattle prices will likely keep producers fairly close to the knife. Ultimately, this helps provide underlying support. Recent hot temperatures probably effected weight gain as well. The question now is whether or not cattle prices moved high enough to defend or hedge. We think fence strategies are a good move.

LEAN HOG HIGHLIGHTS: Hog futures ended the day firmer and with strong gains of 120 to 295 points as Aug led today's gains closing at 86.17. The rally has been impressive with a solid close above the 50-day moving average for the first time since early May. Technical short covering and expectations of a decline in supplies as summer wears on help provide underlying support. We might argue we don't expect much of a decline in inventory, but higher corn prices and a big push lower in the hog market over the last three months may be enough catalyst to reduce the breeding herd and consequently hogs into the fourth quarter. All months were positive today with Aug holding a premium to all futures between now and next April. Keep an eye on summer months for next year as well as they are creating back above 90.00., an encouraging level from a long term historical pricing level.

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