Stewart-Peterson Market Commentary

Closing Commentary - June 28, 2017

Top Farmer Closing Commentary 6-28-17

CORN HIGHLIGHTS:More rain on the radar, more losses for corn. Futures finished 1 to 2-1/2 cents lower as Jul led today's drop, closing at 3.56-3/4, its lowest close since late September. As the end of month nears, we are hearing from many producers who are in a position where they need to move old crop, and we believe this has partially pressured prices. Expectations for genially normal weather with copious rain amounts being viewed as beneficial for yield potential have weighed on prices. Parts of the Midwest may be receiving too much moisture, and this could be suggesting the crop yield potential is declining. Rains again are expected for big portions of the eastern Corn Belt. With the crop late, this could have more impact than one might typically expect. Despite a weaker U.S. dollar, no change in crop ratings and higher wheat prices, corn continues to struggle. We stay defensive for the moment, but after Friday's Stocks and Acreage report and a new forecast for July, we may be reversing positions as the market has become a value to end users.

SOYBEAN HIGHLIGHTS:Soybean futures edged higher with gains of 2-3/4 to 4-1/4 cents as Nov led today's rally, closing at 9.21-3/4. Beans have now gained near 15 cents after recently bottoming at 9.07. The longer trend remains down, as well as the likelihood of slow farmer selling after a drop of more than 50 cents from the high of 9.58-1/4 established 6/19. Despite the U.S. dollar dropping to its lowest level this calendar year, soybean futures have failed to respond, and this is due to big inventories and expectations that Friday's Acreage report will show an increase from last year's 83.4 million to near 90 million this year. Big inventories out of the southern Hemisphere continue to be a concern for the marketplace as well. End users have likely noticed this and remain less than aggressive buying for new crop delivery.

WHEAT HIGHLIGHTS:Wheat futures moved higher, gaining 3 to 4 cents in Chi and 4-5 cents KC. However, the big winner again was Mpls wheat, which closed 18-1/2 to 23-1/4 cents higher with Jul leading today's rally, finishing the day at 7.04-3/4. New crop Sep closed 22 higher at 7.08 after reaching a high of 7.17-1/2. Continued concerns that quality and quantity will be well below expectations from early in the year, due to adverse weather, are providing support. Technical buying was noted as well. As we talk to producers who are harvesting, yield results are generally close to average to date.

CATTLE HIGHLIGHTS:Cattle futures closed sharply lower today after weakness in beef prices failed to justify moving prices higher after yesterday's limit up closes. Nearby Jun live cattle futures closed 1.87 lower to 119.60, Aug closed 3.25 lower to 115.02, and Oct closed 2.50 lower to 112.77. For feeder contracts, Aug closed 4.57 lower to 144.87, Sep closed 4.37 lower to 144.52, and Oct closed 4.22 lower to 142.97. Without any widespread belief that cattle prices should push higher, softness in boxed beef values sparked long liquidation. At yesterday's close, choice cuts were down 1.18 to 238.57, while select cuts were up 94 cents to 217.66. At midday, choice cuts were down 2.36 to 236.21, and select cuts were down 1.40 to 216.26. Cattle weights have increased quickly over the past few weeks, but 8-14 day forecasts suggest a large heat ridge could hinder weight gain. However, with a week or two until that heat arrives just is not at the front of the market's mind. On the technical side, much of the long liquidation was likely executed by managed money funds. As of 6/20, managed money was holding a net long position of almost 132,000 contracts, close to record. When large funds are positioned so heavily in one direction, the underlying market becomes vulnerable to a reversal when those positions are unwound.

LEAN HOG HIGHLIGHTS:Hog futures pushed higher today on further strength in pork values and position-taking ahead of tomorrow's Hogs and Pigs report. The nearby Jul contract closed 1.45 higher to 87.92, Aug closed 92 cents higher to 79.47, and Oct closed 52 cents higher to 68.17. Carcass cutouts closed 96 cents higher yesterday afternoon to 102.31 and were up another 1.76 to 104.07 by mid-session today. Bellies were valued at 193.98 at mid-session, up almost 10.00 from last Wednesday. Strong ham and loin values recently suggest strong export activity. In addition, carcass cutouts driven by ham and loin values as opposed to just belly values is seen as a more stable source of strength. With pork product prices so high, packers are making fantastic margins and will keep purchases high. With the exception of the Jul contract making new highs in accordance with the bull spread market conditions, the Aug and Oct futures traded within their ranges between 10 and 50-day moving averages. Both contracts failed to make any meaningful break above the 10-day moving average resistance levels, but did hold major support levels.

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