Stewart-Peterson Market Commentary

Closing Commentary - December 14, 2018

Top Farmer Closing Commentary 12-14-18

CORN HIGHLIGHTS: Corn futures closed just a hair higher, with the Dec contract up 1-1/4 cents to 3.76-3/4, Mar corn up 1/2 cent to 3.84-3/4 and May corn up 1/2 cent to 3.92-1/4. U.S. exporters sold 125,000 tons of corn to Japan this morning. The Mar contract traded as high today as 3.87-1/2, likely on talk that China could buy significant amounts of U.S. corn starting in January. The rumors seemed to think that 3 million metric tons of corn was the starting amount. China has not bought more than three million metric tons of corn from the U.S. since 2013. China's 2018 corn production was its lowest since 2014 and could be in a major production deficit situation for next year. The closes well off the high were likely due to the soybean market, which sagged into the closing hour. Despite the late session weakness, the best traded Mar contract was able to close above its 10-day moving average support level. Corn markets have still not closed the gap created two weeks ago after trade talks at the G20 Summit between China and the U.S. went well.

SOYBEAN HIGHLIGHTS: Soybean markets ended the week on a somewhat disappointing note, with the Jan contract down 6-1/2 cents to 9.00-1/2, Mar down 6-3/4 cents to 9.13-3/4 and May down 6-1/4 to 9.27. Even though China bought another 300,000 tons of U.S. soybeans this morning, bringing the two-day total to 1.43 million tons, weak Chinese economic data has contributed to the negativity in the soybean markets. Chinese Nov retail sales growth was reported at 8.1% versus 8.8% expected. Industrial output in China was reported at 5.4% versus expectations of 5.9%. The recent Chinese purchases of U.S. beans are no doubt a positive, but they are just a fraction of what China would buy from the U.S. in a normal year. In addition, these purchases do not change the amount of soybeans in global stockpiles. Thus, they are likely still some traders selling beans from a big picture fundamental perspective. Mar beans traded slightly higher early during today's session, testing and failing to break through their 10-dasy moving average support, and since falling lower. Prices have yet to close the gap created from the positive G20 reaction, but momentum may be turning lower.

WHEAT HIGHLIGHTS: Wheat markets posted small to moderate losses today, giving back much of yesterday's solid gains. Mar Chi wheat closed 6 cents lower to 5.30, Mar KC closed 1-3/4 cents lower to 5.18-1/4 and Mar Mpls wheat closed 4-1/4 cents lower to 5.84. The KC / Chi spread in Mar picked up 3-3/4 cents today to close at 12-1/4 under. That spread gained 7 cents this week. Chi and Mpls losses were likely due to spillover uncertainty from the other grains. KC wheat had a comparatively stronger close today due to Argentine production issues. Farms in Cordoba and La Pampa are likely to see harvestable wheat area declining due to excess rain. In addition, speculative buying persists due to an upcoming meeting between the Russian Agricultural Ministry and grain exports next Friday. Russian domestic wheat prices are at their highest levels in almost ten years, and with Russian wheat producers and millers competing for supplies with exporters, there is renewed speculation of Russian export curbs. Both winter wheat contracts only put in inside sessions today, which does not really imply a technical breakdown. Yesterday's surge likely left prices overbought anyway, so the technical correction today is not overly negative. Both the Mar Chi and Mar KC contracts closed above their 50-day moving average support levels today, keeping the trend higher.

CATTLE HIGHLIGHTS: Cattle futures closed mostly lower today, as technical indicators have started to roll over and point lower. The nearby Dec live cattle contract closed 12 cents higher to 119.57, Feb lives closed 45 cents lower to 122.40 and Apr lives closed 30 cents lower to 124.50. Jan feeders were down 40 cents to 147.57, and Mar feeders were down 15 cents to 145.77. Choice beef values closed 22 cents higher yesterday afternoon to 212.47 and were up another quarter today to 212.72, down from 214.29 this time last week. The lower beef prices have tightened packer margins and have likely contributed to the slow cash movement so far this week. Keep in mind that two of the next three weeks are short kill weeks and will likely impact packer demand. This may be especially negative, considering the market appears to have priced in expectations for higher cash trade again this week. The 6-10 day forecasts show above normal temperatures and below normal precipitation for the Plains. This should allow cattle to add weight rather easily. The best traded Feb live cattle contract tested and failed to break through yesterday's highs and, subsequently, reversed lower. The Feb live contract closed just off the day's lows with momentum studies pointing lower. Feeder markets saw similar price action, hitting overhead moving average resistance and closing lower on the day.

LEAN HOG HIGHLIGHTS: Hog markets closed choppy to lower, under performing with the soybean market despite apparent progress with U.S./China trade talks. Dec futures went off the board 15 cents higher to 54.5, Feb closed 32 cents lower to 64.50, Apr closed 30 cents lower to 70.05 and Jun was up 20 cents to 83.17. The CME lean hog index was down 18 cents to 55.36. Carcass cutout values closed 73 cents higher yesterday afternoon to 73.17 but were down 97 cents this morning to 72.20. Today's price action was very disappointing considering recent developments with pork exports. Yesterday's weekly export sales total of almost 19,000 tons was the highest since 9/20, not to mention the purchase of U.S. pork by China. China bought U.S. soybeans again today, so even though U.S. and China trade talks are progressing, it is looking as though traders need larger purchases of U.S. pork by China to start taking the markets higher. Price action today was not exactly pretty with the best traded Feb contract at first rallying up to test its 10 and 20-day moving average levels but quickly falling to close below its 50-day moving average support level. Today's close below that was the first since 11/15. The Apr contract saw similar price action, testing and failing to push through its 10 and 20-day moving average resistance levels and closing directly at its 50-day moving average support.

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