Top Farmer Closing Commentary 8-10-18
Stewart-Peterson Commentary - SPC - Fri Aug 10, 4:16PM CDT

CORN HIGHLIGHTS: Corn futures ended with sharp losses of 10-1/4 to 11-1/2 cents as nearby Sep led today's drop closing at 3.57-3/4, its lowest close since July 24. New crop Dec dropped 11 cents closing at 3.71-3/4, right at the 40-day moving average. A 50% retracement from the July 12 low to the most recent high of 3.88-1/2 Dec puts the target at 3.69-1/2. In other words, the market has made a healthy correction downward and now it’s a matter of trying to find direction from here. Today's down move was predicated on sharp losses in soybeans and wheat along with a slightly negative USDA Supply/Demand report. Yield was raised well above expectations at 178.4 bushels an acre as the market was anticipating 176.3. As indicated on recent reports, we believe weather the last 2-4 weeks has probably been less-than-ideal for many. Consequently, we're leaning towards today's yield figure as potentially the highest for the year. Nonetheless, this puts production at 14.586 billion. Yet, increases in demand help to keep carryout numbers about as projected. Carryout for the 2017-18 season was close to the average estimate of 2.016 billion with today's figure at 2.027. Next year's carryout is estimated at 1.684 billion as compared to the average estimate of 1.630.

SOYBEAN HIGHLIGHTS: Soybean futures plunged today as negative USDA reports had prices reeling with losses of 38-3/4 to 42-1/4 cents as Sep futures led today's losses. Sep closed at 8.50-3/4 and Nov down 42-1/4 closed at 8.61-3/4, while Nov 2019 closed down 32 at 9.05-1/2. The big negative was the yield estimate for soybeans, which increased substantially from July's report. Today's figure at 51.6 bushels an acre was well above the average estimate of 49.8 and the July estimate of 48.5 bushels an acre. 2017-18 carryout narrowed inward due to good demand and was lower than the pre-report estimate of 461 million with today's figure at 430 million and compared to July's figure of 465 million. However, projected carryout for next year was 205 million bushels more than the July estimate of 580, with today's figure at 785 million, also well above the average pre-report estimate of 641 million. The market was left vulnerable to a break after recovery the last 30 days and wasted little time running through sell stops, triggering additional selling as prices broke through the 10, 40, and 21-day moving average on its way down to its lowest close since mid-July. Recent rains were viewed as beneficial, which may have also weighed on prices. However, parts of the Midwest remain relatively, if not very dry and these owners will need moisture soon. The forecast, however, is mixed as the 6-10 day forecast keeps the northwestern regions of the Midwest above normal temperature and below normal precipitation, particularly northwestern MN and the northern regions of the Dakotas where the bean crop is deteriorating due to dry weather.

WHEAT HIGHLIGHTS: Wheat prices went on the defensive today with sharp losses on all three exchanges. Chi lost 13-1/2 to 17-3/4 as Sep led the way lower closing at 5.46-3/4, its lowest close since July 30. Today was the first close below the 10-day moving average since July 19. KC lost 16 to 19-1/4 cents as Dec led the way lower on that exchange, and Mpls lost 18-1/2 to 21 cents. Wheat followed corn and beans lower, but also had its struggles with negative news today. Projected carryout for all winter wheat came in at 1.189 billion bushels compared to the average estimate of 1.81. Carryout narrowed inward for the 2018-19 crop to 935 million bushels vs an average estimate of 959. Those were the supported numbers; the negative numbers came on the world front as projected world carryout for 2018-19 came in at 259 million metric tons compared to the average estimate of 255.6 million. This increase of near 4 million metric tons for next year reflects expectations for rebound in wheat production, and consequently the USDA took this into account on this report. Carryout still was lower than the July estimate of 260.8 million metric tons, but a mere decrease of just under 2 million metric tons was enough to disappoint the market when all other news seemed to be negative in row crops.

CATTLE HIGHLIGHTS: Live cattle futures finished mixed today, with front month Aug contract finishing unchanged at 108.25, while Oct cattle finished 20 cents higher to 109.25. Deferred contracts into 2019 saw slight losses as buyers stayed more active in the front months. For the week, the Aug contract posted a 2.425 cent loss, while Oct cattle finished 2.75 lower. This week ended a difficult for cattle markets, as the prospect of lower-trending cash trade given large supplies available weighed upon futures minds. This follows suit with a potential seasonal rotation to the downside on cash prices, as the surge of potential demand for the Labor Day Holiday window gets priced into the markets. Cash trade stayed relatively undeveloped today, but late trade saw NE and CO posting cash prices at $111 per cut weight, trading 3.00 below last week's levels. Overall, the cash market remains sluggish, with bids still developing around the $114 live basis, with asking prices remaining at $115 or higher. Retail values saw midday support as boxed beef cutouts were 28 cents higher on select carcasses and 24 cents on choice. This week's price action was disappointing and may leave some potential downside room if cash trade continues to stay softer than last week's numbers.

LEAN HOG HIGHLIGHTS: Hog futures finished mixed in trade this afternoon as the front month Aug contract dropped 0.175 to 54.80, Oct hogs lost 0.225 to 51.175. For the week, the Oct hog contract posted a gain of 40 cents, as futures traded both above and below last week's intra-week highs and lows. Early in the session, futures saw some additional follow-through buying after yesterday's limit high reversal off of both the Oct and near limit Dec closes. The Oct contracts have pushed over 2.00 higher today, with an intra-day high of 54.075 before seeing late afternoon profit taking. This may have set up a bit of a reversal on weekly charts but will need further confirmation with next week's trade as this hog market has been extremely oversold over the past weeks. Negative pressure continues to be pushed on by fundamentals of more than ample supplies, and cash prices trending lower. Midday carcass cutout values also softened, losing 38 cents to 73.11 per cut weight in the morning report. Hog futures may see some choppy trade action, with yesterday's reversal acting as a shorter-term bottom, only if the burdensome fundamentals are finally supported by technical action.

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