Stewart-Peterson Market Commentary

Closing Commentary - November 21, 2019

Top Farmer Closing Commentary 11-21-19

CORN HIGHLIGHTS: Corn futures saw mild gains today, as the front month contract was 1-3/4 higher in Dec to 3.68-1/2. Mar was up 1-3/4 to 3.79. The corn market continues its choppy, sideways to lower trade despite gains today and did not break through yesterday’s trading range. This keeps the technical picture in the corn market weak for the short term. Today’s news was about export sales, which have improved week over week. In this week’s export sales report, the USDA announced an increase of 31 million bushels for the 19/20 marketing year, as well as 1.8 million bushels for 20/21. Weekly export inspections were at 26.5 million bushels. While sales numbers improved week over week, shipments continue to be lackluster, running well below the pace needed to reach the USDA’s export estimate for the 19/20 marketing year. This may be more of a product of lack of sales on the books initially and having product to move, over short term lack of demand. Regardless, in a window where U.S. corn export sales numbers should improve, we have been well behind anticipated multi-year trend levels. The recent push lower in prices has made the U.S. more competitive on the export front, and this week we have seen three reported overnight sales, including 106,000 metric tonnes of corn sold to unknown destinations for the current marketing year. Cash basis on the countryside stays supportive and the market may be looking at longer term weather forecasts, which could make a late harvest even more difficult.

SOYBEAN HIGHLIGHTS: After a weak technical close in Wednesday’s trade, bean futures saw follow through selling with contracts down 3-4 cents today. Front month Jan beans are down 4 cents to 9.01, while Mar beans lost 3-3/4 cents to 9.15-1/4. the market continues to see long liquidation, as managed money positions pare back their long positioning in the market over the past month. Concerns regarding a potential phase one deal not being accomplished between the U.S. and China have brought a negative sentiment to the soybean market, as well as improved weather conditions in South America for the development of next year’s crop. Today’s news did seem more favorable, as Chinese negotiators invited the U.S. team to Beijing for talks before Thanksgiving. Regardless, the market is taking a wait and see mentality regarding any trade deals getting accomplished. Export sales have stayed supportive and have been running ahead of last year’s pace. Last week, the USDA announced an additional 55.7 million bushels of soybeans of added sales, with China maintaining its status as our top buyer. Export shipments stayed strong at 62.7 million bushels, which is higher than expected USDA pace for the 19/20 marketing year.

WHEAT HIGHLIGHTS: Wheat futures saw weakness across the board today, as Chi was down 5-6 cents. Front month Chi Dec was down 6-1/2 to 5.09, while the Mar contract lost 6-3/4 cents to 5.12. Dec KC wheat contracts lost 5 cents to 4.21, and spring wheat futures lost an additional 6 cents to 4.95-1/4. Wheat futures continue to struggle in price, reflective of global supplies. The International Grain Council made no major changes in their October production summaries, but the world still has ample supplies of wheat. Weekly export sales failed to provide any support, with weekly sales for the week of November 14 at 16.1 million bushels for the 19/20 marketing year. Export shipments last week were at 17.8 million bushels, which is running slightly behind pace needed to match the USDA’s estimate for the marketing year. Commitments are still trending slightly higher than year ago levels, but demand remains a bearish factor for wheat, given the global competition.

CATTLE HIGHLIGHTS: Live cattle futures saw mixed trade again today, as the front month Dec contract finished 1 tick higher to 119.32-1/2. Weakness was seen in deferred contracts, with Feb down 42-1/2 to 125.05. The cattle market has stayed in consolidation mode this week, as we prepare for tomorrow’s Cattle on Feed report. Expectations are for total cattle on feed to move back above last year’s level, with that number ranging 1.3% heavier than last year’s totals. According to analysts’ estimates, the number that will be most closely watched will be the placement number, which has been a laggard in previous months. This has helped keep total cattle on feed below 2018 levels. Expectations are for that number to be 12% over last year for Oct placements, as cattle have moved off favorable pasture conditions into feedlots. Front month Dec is also supported by positive trends in cash markets this week, which stayed relatively undeveloped through today’s trade but did see bids firming slightly over yesterday’s numbers. Likely, cash trade will develop later in the week, possibly even late tomorrow afternoon. Retail values were disappointing today, as choice carcasses dropped 2.08 in midday trade.

LEAN HOG HIGHLIGHTS: Lean hog futures started the day with strong gains but finished marginally higher with the front month Dec contract up 20 cents to 60.65. Feb hogs are up 67-1/2 cents to 67.45. The trading session began with strong triple-digit gains across the hog complex, as weekly export data proved favorable for the hog market. For the week ending November 14, the USDA sold over 90,000 metric tonnes of pork between 2019 and 2020 combined. China and Japan were our largest customers, and with strong shipments just short of 60,000 metric tonnes (of which China took 13,000) we saw a noticeable improvement in those export sales numbers over last week. Unfortunately, due to delayed reporting, 18,000 metric tonnes of this week’s sales occurred previously, which helped dilute what could have been a stellar week. In addition, gains quickly eroded in the hog complex, as retail values tumbled again at midday with carcass values losing 6.05.. This may be signaling an end to the strong run in carcass value, and with production staying large, it may be difficult to muster strong rallies in the hog market.

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