Stewart-Peterson Market Commentary

Closing Commentary - January 18, 2019

Top Farmer Midday Update 1-18-19

Corn: Corn futures are finding more buyers today on a slew of rumors regarding trade negotiations with China. The Mar contract is up 2-1/4 cents to 3.82-1/4, May is up 2-1/2 cents to 3.90-1/2, and Jul is up 2-1/4 to 3.97-3/4. There were rumors circulating yesterday afternoon that China purchased some U.S. corn, but those reports are unsubstantiated at this time. There are also rumblings that U.S. tariffs on China could be lifted soon to progress talks and there are other rumors suggesting a deal may be closer than was previously thought. The Dec contract closed above its 200-day moving average for the first time yesterday since January 9. Dec futures traded as high today as 4.06, its highest level since November 8. Funds bought 23,000 contracts of corn yesterday and are thought to be long about 120,000 contracts.

Soybeans: Soybean futures are rallying again today, showing impressive strength on rumors of improving trade relations with China. The Wall Street Journal published a report yesterday suggesting that the U.S. could lift trade tariffs on Chinese goods as a way to break the current stalemate. However, the U.S. Treasury Dept denied rumors that Steve Mnuchin or Robert Lighthizer have made any recommendations regarding tariffs. Nonetheless, the stock market was buying the rumors. Other trade talks suggest that the U.S. and China are working towards a deal where China would buy 50 billion dollars in U.S. ag goods over two years. Brazil rains this weekend will be spotty, with South American weather again looking supportive. Funds bought 10,000 contracts of soybeans yesterday and are net short about 13,000 contracts.

Wheat: Wheat markets are only moderately higher today after a very strong session on Thursday. Mar Chi wheat is up 1/4 cent to 5.18, Mar KC wheat is up 2 cents to 5.06, and Mar Mpls wheat is up 1-3/4 cents to 5.73-3/4. Rumors yesterday that China purchased U.S. wheat drew a lot of buyer interest. In addition, cold temps forecasted for this weekend could stress the soft red winter wheat crop. The threat of winter kill is causing Chi/KC wheat spreads to rally again today. The Mar spread is sharply above its 50-day moving average level for the first time since October. Funds bought 6,000 contracts of wheat yesterday and are short about 8,000 contracts.

Cattle: Cattle markets are mixed this morning in very tight trading ranges. The Feb live cattle contract is down 42 cents to 126.67, Apr lives are up 20 cents to 127.10, and Jun lives are up 45 cents to 117.27. Jan feeders are up 2 cents to 141.45, Mar feeders are up 20 cents to 143.12, and Apr feeders are up 27 cents to 144.50. Yesterday's weakness and today's lack of strength is likely due in part to weather in the Plains this weekend that may not be as threatening as was initially expected. In addition, winter storms on the East Coast have the potential to stifle beef demand. This could pull beef prices even lower after drifting over the past couple of weeks. Futures prices are still holding their 10-day moving average support levels in the nearby live cattle contracts.

Hogs: Hog markets are sharply higher this morning after weakness early in the week. The nearby Feb contract is up 1.20 to 62.05, Apr was up 2.57 to 67.20, and Jun is up 1.97 to 79.85. Yesterday's hook reversal on the Feb hog contract may be signaling a bottom. African swine fever continues to spread in China. Australian Border Security intercepted some illegally imported pork products yesterday, some of which was found to be contaminated with African swine fever. Reports like this will put hog traders and the pork industry on high alert. The majority of today's strength is linked to a feeling of positivity related to U.S./China trade talks.

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