Stewart-Peterson Market Commentary

Closing Commentary - April 25, 2018

Top Farmer Closing Commentary 4-25-18

CORN HIGHLIGHTS: Corn futures finished with solid gains of 3-1/2 to 5-3/4 cents as Jul led today's gains closing at 3.95-3/4, its highest close since April 12. Prices rallied through the 21 and 10-day moving average levels by mid-morning, and we believe this uncovered buy stop orders accelerating prices upward. Support came on the heels of stronger wheat prices, as well as continued strength in soymeal and soybeans. General weakness in equities could suggest money flow into corn as funds become more aggressive buyers. Field work will likely expand in the week ahead, but will also be limited due to scattered rains. Continued concern in areas of second crop corn in Brazil are viewed as supportive. Longer range forecasts suggest this dry weather could be temporary. Nonetheless, what is interesting is the general theme that row crop commodities continue to be viewed as a buy opportunity on setbacks rather than generating additional weakness. This is encouraging for the long term perspective. Prices are relatively low compared to prices over the last 15 years, and with long term demand continuing to grow and world supplies expected to decline versus world demand in the year ahead, traders seem to be more interested in buying value moving into the growing season. Will it last?

SOYBEAN HIGHLIGHTS: Soybean futures moved higher today with gains of 5 to 6 cents as Nov led today's rally closing at 10.34-3/4. Prices seem to be more of a follower of higher corn and wheat, but nonetheless found buying interest more so in soymeal as concerns over Argentina inventory were heightened. Reports that a dock was damaged in one of Argentina's ports was viewed as supportive. Yet, as we indicated yesterday the bean market looks somewhat tired, and despite prices finishing positive yesterday and again today, the net change has been minimal as compared to gains in wheat and corn. Soymeal gained anywhere from 2.50 to 4.20, while soybean oil struggled, finishing with losses of near 25 cents and new contract lows. We've also concerned ourselves that without soybean oil support, the bean complex may have a difficult time moving upward, as crushers are active due to demand from meal, but not oil.

WHEAT HIGHLIGHTS: Wheat futures had another impressive and nearly explosive day with Chi gaining anywhere from 12-1/4 to 14-3/4 cents, while KC gained 14-1/2 to 15 cents. Spring wheat gained 6-3/4 to 8 cents, and it is more of a follower than a leader. Today's surge caught the market somewhat off guard and we believe that once prices push through the 40 and 50-day moving averages, buy stops were uncovered. Prices also took out the high from last week, and this too may have uncovered buy stops. Today was impressive, because the dollar was showing strength, as well. Varying forecasts, but a growing trend, that much needed rain in parts of the hard red winter wheat belt may be missed, and consequently prices wasted little time moving upward today. Wheat charts could show a very friendly-looking weekly reversal. The key, of course, is how prices close by Friday.

CATTLE HIGHLIGHTS: Cattle futures moved moderately higher today, drawing buying interest after holding technical support levels. Nearby Apr live cattle contract closed 82 cents higher to 121.92, Jun closed 52 cents higher to 105.57, and Aug closed 35 cents higher to 105.27. All 2018 feeder cattle contracts were up 60 cents to 1.20. Today's Online Fed Cattle Exchange saw nearly 3,200 head offered for sale, with 2 lots passed over at $121 and $120.25. Since then, bids in KS have surfaced at $119. Boxed beef values continue to provide strong fundamental support. Yesterday afternoon, choice cuts were up 2.54 to 217.65, and select cuts were up 39 cents to 202.11. This was the highest choice value since April 4. By mid-session today, choice cuts were up another 96 cents to 218.61, and select cuts another 1.55 to 203.66. This leaves choice values almost 7.00 higher in just a week's time, illustrating the effects that good weather can have on meat demand. The best traded Jun contract opened lower, traded down near its 10-day moving average support level, and then found buying interest to rally and finish near the highs. The Aug contract showed similar price action, touching its 10-day moving average, and then rallying to close higher. For the Jun contract, a close below 104.00 will likely signal another downtrend, so price action above that level was supportive.

LEAN HOG HIGHLIGHTS: Hog futures were able to close higher today, stabilizing after sustaining some technical damage in the past week. The nearby May contract closed 1.10 higher to 68.55, Jun closed 52 cents higher to 75.35, and Jul closed 42 cents higher to 78.42. The CME Lean Hog Index was up 1.12 today to 59.00. Carcass values were able to rally today, as well, on improving weather. Yesterday afternoon, carcass values closed 21 cents higher to 68.08, and were up another 1.46 today to 69.54. Picnics rallied 2.09 to 46.01, and bellies were up a whopping 6.51 to 92.65. In addition to improving retail demand, the market is trying to find support from the possibility that the U.S. could re-enter the TPP Trade Agreement. Technical support today was also important, with the Jun close yesterday, almost directly at the 50% retracement of the most recent bounce. Prices did move lower this morning, but found technical buying support to close higher. Hog markets will be contending with some overhead resistance soon, but gaps created on Monday look to be the next target higher.

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