Top Farmer Closing Commentary 10-11-18
Stewart-Peterson Commentary - SPC - Thu Oct 11, 3:49PM CDT

CORN HIGHLIGHTS: Corn futures rebounded today gaining 6 to 6-1/2 cents with nearby Dec leading the way closing at 3.69-1/4, its highest close since August 21. Prices posted a very significant outside day, which means today's high and low were larger than yesterdays, and a firmer close. Support came from a somewhat surprising USDA yield figure at 180.7 bushels an acre as the market was anticipating 181.8. This puts the October total crop production estimate at 14.778 billion bushels as compared to the September estimate of 14.827 billion and the average pre-report estimate of 14.851 billion. Carryout came in at 1.813 billion, down from the average estimate of 1.932 billion but still above the September estimate of 1.774 billion. Bear in mind, the Stocks report at the end of September found extra bushels and therefore those needed to be accounted for and were added into line items on today's report. The key, however, is that carryout and yield were less than anticipated and ultimately this suggests that corn prices may have found their low after the September report. From a technical perspective, the inverted head-and-shoulders formation mentioned in previous reports is alive and well with a topside objective between 3.94 and 3.96.

SOYBEAN HIGHLIGHTS: Soybean futures ended with gains of 6 to 6-1/2 cents. Nov closed 6 higher to 8.58-1/4, with a trading range of 8.64 on the high side to 8.47. Today's range was relatively quiet despite a USDA report. However, the report really didn't have anything new for beans. As anticipated, yield did increase to 53.1 bushels an acre from last month's 52.8 bushels. The average estimate was 53.4. A slight reduction in harvested acres to 88.3 million from 88.9 was viewed as slightly supportive. Carryout, however, was viewed as slightly negative at 885 million bushels as compared to the pre-report estimate of 860 and last month's 845 million. Bean production is now estimated at 4.690 billion, a record, and world carryout increased from the September estimate of 108.3 million metric tons to 110 million. The key now is for beans to be harvested. Much of the Midwest is saturated and while it'll take additional drying weather to help produce a harvest push, most producers may not be back into the field for another two to five days, if then. This extended harvest will likely keep prices supported from the concept or idea that there isn't a mad push of extra inventory into the marketplace. Yet at the same time, we do expect the crop to be harvested and that from a longer-term perspective are not overly concerned of significant field loss.

WHEAT HIGHLIGHTS: Wheat futures finished quietly and with small losses in Chi of 1/4 to 2 cents. KC 1 to 2-1/2 and Mpls 2 to 3 lower. Today's reports didn't contain a whole lot of new news for the market to sink its teeth into. We believe the world is focusing on projected world carryout with reductions made in Russian and European wheat, as well as Australian. Today's world projected carryout dropped about a million metric tons from the September estimate of 261.3 to 260.2 million. U.S. carryout at 956 million was slightly higher than the September estimate of 935 million but in line with the average estimate of 960 million. Wheat appeared to be more of a follower than anything else today. As the market continues to chop around, we believe it is base building and that more inventory will be purchased from the U.S. in the weeks and months ahead. We'll stay defensive for now, but we're getting close to pulling the pin on hedges for 2019.

CATTLE HIGHLIGHTS: Cattle futures put in mixed to higher closes today, finding some buying interest on technical support levels. The nearby Oct live cattle contract closed 55 cents higher to 112.62, Dec closed 30 cents higher to 116.77, and Feb closed 20 cents lower to 121.25. Feeders had similar results, with Oct up 82 cents to 156.72, Nov up 57 cents to 156.75, and Jan down 62 cents to 151.50. Choice cuts were mixed today, closing 74 cents lower yesterday afternoon to 202.11 and rebounding 86 cents this morning to 202.97. Cash trade was relatively neutral today as well. Live sales were reported in Kansas, Nebraska, and Texas, all between 110.50 and 111.00. This is steady with last week. Dressed trade at 173.00 is about 2.00 below last week's trade. Dec cattle remained at a wider-than-normal premium to the cash market for this time of year, so cash trade will remain at the forefront of tomorrow's trade. Today's ranges were very tight, an interesting factor considering the extreme volatility in the stock market over the past two days. So far today, the Dec Dow futures have had a trading range of almost 800 points, while Dec live cattle futures had a trading range of 70 cents. Similar to yesterday's session, the Dec live cattle contract held its lower Bollinger Band as strong support today. Currently, the 10-day moving average is about to cross down below its 20-day moving average, a bearish technical development and one that indicates momentum is turning lower.

LEAN HOG HIGHLIGHTS: Hog futures had an ugly session today, with the best traded futures closing sharply lower on weakening fundamentals. The nearby Oct contract closed 20 cents higher to 68.67, Dec closed 1.52 lower to 54.42, and Feb closed 2.10 lower to 62.42. The CME Lean Hog Index was down just 2 cents to 69.34. While this is still not positive, knowing when the index changes direction, it does so with a little more determination. Carcass cutout values were up 14 cents yesterday afternoon to 79.20 and were up another 11 cents this morning to 79.31. The strength in pork values is thought to be high enough to limit demand at some point in the near future, especially given the weakness in beef prices and record low chicken breast prices. The northeastern most Provence in China announced yet another case of African swine fever, its third case this week. The Dec contract traded to its lowest point since September 17 and made its lowest close today since September 11. Futures prices were able to hold where the 50 and 100-day moving averages converged. In addition, the Dec contract closed just above its lower Bollinger Band, insinuating that technical buyers stepped in to limit losses today.

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