Stewart-Peterson Market Commentary

Closing Commentary - November 20, 2019

Top Farmer Closing Commentary 11-20-19

CORN HIGHLIGHTS: Corn futures fell back under selling pressure after Tuesday’s gains as contracts were 1 to 3 cents lower in Wednesday’s trade. Front-month Dec corn was down 3-1/4 to 3.66-3/4, while Mar was down 3-1/2 to 3.77-1/4. Corn futures continued their downward trend in Wednesday’s session as the negative tone in the market stems from ongoing pressure on corn futures due to demand despite this week seeing a couple posted sales of corn exports, showing that U.S. prices are starting to be more competitive against global competition. Also bringing selling pressure has been the prospect of improving South American weather, which is aiding in the development of their crop for next season. Weighing as a constant cloud over the market are U.S./Chinese trade negotiations which seem to be taking a back and forth tone, with the article today stating that the Phase 1 deal may not likely occur within the next year. Ongoing concerns regarding demand outweigh the potential prospects of this year’s crop being smaller due to difficult weather conditions in planting and this year’s ongoing harvest. An outlier supportive factor was this week’s USDA Energy Department Ethanol report, which saw production increase slightly to 1.033 million barrels per day, but inventory levels dropped to 20.5 million barrels, the lowest total in nearly three years. This has kept strength in cash markets as the delayed harvest has end users and ethanol producers bidding aggressively for this year’s supplies.

SOYBEAN HIGHLIGHTS: Soybean futures failed to hold onto early-session gains then broke support finishing 2 to 6 cents lower. Front-month Jan soybeans finished 6-1/2 cents lower to 9.05, while Mar beans were 5-1/2 cents lower to 9.19. For the second consecutive day, early-session strength gave way as prices finished well off of early-session highs. Jan soybean futures broke through the previous two trading days low of 9.10, and technical weakness led to additional long liquidation. Bean futures lost their support as a Reuters headline stated that U.S. and Chinese potential trade deal will not occur until next year, which added a negative sentiment overall in the market. Also, improving South American weather is helping to aid their next year’s bean crop making it difficult for prices to move higher in today’s session. With today’s close at 9.05 in Jan, this is our lowest close dating back to September 30 on the Jan beans. Demand has stayed supportive overall, tomorrow’s weekly export sales will be anticipated if we see continued strength in U.S. bean sales in a window where we have the cheapest beans globally and end users, and China, are looking for supplies.

WHEAT HIGHLIGHTS: Chi and KC wheat futures were the sole strength in grain markets in today’s trade, as Chi contracts were 1 to 3 cents higher. Front-month Dec Chi was up 3-1/2 to 5.15-1/2, while KC Dec contract was up 1/4 cent to 4.26. Weakness was noted in Mpls spring wheat futures with the Dec contract down 2 cents to 5.01-1/4. Despite an overall large bearish picture in global wheat supplies, Chi KC wheat futures did find some traction in what is typically a quiet time for wheat markets. Prospects of improving demand and an improved technical picture on Chi charts this week helped bring some additional short covering. KC wheat futures are being supported by less-than-ideal precipitation forecasts in the southern Plains, which is seeing winter wheat crop quality estimates slip the past couple of weeks. With acres already in short supply on a year-over-year basis, crops with poor stands and limited production due to potential weather issues helped bring some buying into the wheat markets. Mpls futures struggled to find any traction today, likely as a product of spreading vs the other two classes of wheat.

CATTLE HIGHLIGHTS: Live cattle futures finished today mixed with front-month contracts showing strength, as the Dec contract was up 52 cents to 119.30 and Feb was up 42 cents to 125.47. The cattle markets have stayed in overall consolidation mode over the past couple of weeks since the Oct contract has expired. Strength in the market today was fueled by continued firmness in the retail values as choice carcasses traded 61 cents higher and select was up 73 cents on midday price. In addition, the firmer retail values helped fuel speculation of a potential firmer cash trade again this week. We did see some starting cash trade in the south, with Texas trading at $116, which is $1 higher than last week’s levels. Most overall cash trade has stayed undeveloped at this stage, but the initial trend looks supportive of the markets. Technically, the Dec contract has been building a potential bullish flag pattern, and today’s close above the 10-day moving average would deem as supportive if we see some follow through in Thursday’s session.

LEAN HOG HIGHLIGHTS: Lean hog futures broke aggressively to the downside in today’s trade as contracts posted triple-digit losses across the board. Front-month Dec hogs were down 1.70 to 60.45, while Feb hogs were down 2.85 to 66.77. With today’s close, the Dec contract has traded to its lowest price point since early September. Despite a favorable close off of lows in Tuesday’s trade, selling pressure returned quickly into the hog market in Wednesday’s session. This was fueled by a drop in retail values in yesterday afternoon’s trade as carcasses lost 4.47 in yesterday’s cutout close. This brought selling pressure into the market, as prices broke through yesterday’s lows triggering an additional round of stops and long liquidation. At midday today, carcass values did pop back 2.93, which may have helped ease some pressure on the front months. Regardless, the combination of heavy slaughter with last week’s total estimated to be near 2.75 million head and near-record production on a week-over-week basis in pounds of pork have made it difficult for this market to rally. The market will also be anticipating Thursday morning’s weekly USDA Export Sales to see if any additional activity was seen by China or other exporters to help work through large pork supplies.

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