Stewart-Peterson Market Commentary

Closing Commentary - November 19, 2018

Top Farmer Closing Commentary 11-19-18

CORN HIGHLIGHTS: Corn futures saw selling pressure with contracts 1-2 cents lower in today's trade. Front month Dec was down 2-1/2 to 3.62-1/4, while Mar was down 2-1/2 to 3.73-1/4. Relatively quiet news is pressuring grain futures on this holiday-shortened trade week. On the demand side, the USDA announced weekly export inspections at 31.4 million bushels, slightly lower in expectations, but total inspections are up 80% from a year ago. The USDA announced a sale of 5.4 million bushels to South Korea for the 18/19 marketing year. Despite relatively positive demand news, corn futures continue to push toward the lower end of the most recent sideways trading range in which the market has been holding the past few weeks. As harvest continues to make steady progress, additional selling pressure may be weighing on the market. The USDA is expected to announce harvest between 90-91% complete. In today's crop progress numbers, this would be slightly below the 5-year average of 93%. Overall weather forecasts are mostly dry as harvest wraps up.

SOYBEAN HIGHLIGHTS: Soybean futures were the pressure in the grain markets today, as contracts lost 15-18 cents. Front month Jan was down 18-1/2 to 8.73-3/4, while Mar was down 18-1/4 to 8.78-1/2. Over the weekend, ongoing barbs regarding trade between U.S. and China provided selling pressure in the marketplace. Any negative tone regarding the potential trade between the two countries will obviously bring soybean bears forward, eliminating buying. Buyers in the market are hoping to hear next week that President Trump and Chines President Xi will be meeting at the G20 to bring some resolution on November 30. The demand side of the equation continues to show the lack of Chinese presence in the marketplace, as USDA announced soybean shipments for the week at 38.8 million bushels, down from the previous week. This continues to be a bearish weight on top of the marketplace, as total inspections are down 43% for the 18/19 crop year from year ago levels. Despite trade concerns, the other supportive factor in the market has been the long harvest. The USDA expects to announce harvest at 92-93% complete, versus a 5-year average of 96%. As harvest has drawn out, the potential for additional yield loss could show up again in January. Regardless, total carryout at 855 million bushels is still extremely large, and no reduction of yield will likely change that bearish picture.

WHEAT HIGHLIGHTS: Wheat futures saw selling pressure, as contracts pushed 6-8 cents lower in Chi. Front month Chi Dec wheat was down 8-1/4 to 4.98-1/2, while the Mar contract lost 8-3/4 cents to 5.06-1/2. Selling weakness was seen across the wheat complex, as KC HRW was down 8-1/2 cents in the Dec contract to 4.74-1/4, while Mpls HRS wheat saw a 4-cent drop in the Mar contract to 5.69-1/2. The Mar KC wheat contract pushed 7-3/4 cents lower and established a new low for 2018 on a close of 4.98-3/4 today, despite concerns regarding planting progress and crop quality. Later today, the USDA will be announcing plant progress for winter wheat, but at this late of date, very little planting is likely to have occurred. At this time of year, ample supplies of wheat seem to be available across the world, so the focus stays on the demand side of the equation. The USDA did show an increase in weekly export inspections in today's numbers, with total inspections at 18.7 million bushels for the week ending 11/15. This was slightly short of doubling last week's numbers a year ago, but overall, total inspections are 360 million bushels for the crop year, down 18% on a year over year basis and still below the USDA projected 14% increase. At this stage, until further demand comes to U.S. shores based on a perceived tighter global supply, wheat inspection and sales numbers are bearish on the overall market.

CATTLE HIGHLIGHTS: Live cattle futures were mixed with strength seen in the front month contracts, as Dec gained 80 cents to 116.15, while Feb was up 27-1/2 cents to 120. Live volume was the order of the day moving into the Thanksgiving holiday, but firm gains held through front month cattle contracts in mostly 2-sided trade during the day. Cash trade last week stayed relatively steady with the majority of trade at 114 and dressed trade at 178. Dressed trade was slightly softer than the previous week at 180, but there is a significant amount of pressure in the market. Retail values saw some strength at midday, as overall carcass values have been seen firming over the past week. Today, choice carcasses were 83 cents higher to 213.74, while select carcasses gained 65 cents to 198.22. Cattle prices have been in consolidation and gravitating higher in the front month contracts since posting reversal last week on Monday. Typically, cattle may be looking toward a seasonal pushback as we move past Thanksgiving with the completion of potential holiday demand. Cattle futures also saw spillover support with follow through buying in hogs today, giving strength to the cattle market.

LEAN HOG HIGHLIGHTS: Lean hog futures saw buying support follow through from Friday's strong limit up move in front month contracts. Dec hogs were 90 cents higher to 61.02-1/2, while Feb hogs were the strength of the market, up 2.27-1/2 to 69.02-1/2. Strength continued through deferred contracts, as all lean hog futures contracts posted new highs in today's trade. Ongoing news about African swine fever has been providing buying influence underneath the hog market the past few weeks. Today saw continued strength of Friday's strong close. Front month support was provided by strong export sales. Weekly export shipments were the second highest in history and the highest since June 2015 at 85.6 million pounds. While the market has been dealing with a large amount of supply with slaughter numbers running near record paces, seeing strong product movement overseas may be a reflection of the potential for additional demand coming to U.S. shores. South Korea saw the biggest jump on a week over week basis, as imports have surged to that country since the beginning of October. Despite the strong movement of pork product overseas, cash prices are forecast to be softer in today's trade, but pork carcass value countered the trend, adding 1.43 per cut weight to 69.61. A combination of strong export movements and value at the carcass level may help provide support to the cash market in the weeks ahead.

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