Top Farmer Closing Commentary 2-14-18

CORN HIGHLIGHTS: Corn futures edged higher today, gaining 1/4 to 1/2 cent with Mar leading the way, closing at 3.67-1/4, after reaching a high today of 3.68-1/2. The slow grind upward is in response to a weaker dollar, a firmer soybean and soybean meal market, and continued short-covering by funds. Yet, we cannot make the argument that corn is leading the complex of corn, beans, and wheat higher. Corn appears to be more of a follower. However, considering farmer selling has picked up, we are encouraged with the way futures are holding. Technical support continues to develop as well, as prices again were close to the 10-day moving average in the early morning hours, but managed to rally late in the session finishing positive. A continued recovery in the stock market may have some influence, but the likely catalyst is strength in soymeal. Grain used for ethanol production is, in part, priced through distiller's grain, which is a protein product and consequently is also rising in value.

SOYBEAN HIGHLIGHTS: Soybean futures finished with gains of 3/4 cent in Nov, closing at 10.20 to 5-1/2 higher in Mar, closing at 10.17-1/4. Today was the highest close in Mar beans since 12/5, when futures closed at 10.20-1/2. If prices break upward resistance, 10.27 in Mar, look for a retest of the summer high price of 10.50-1/2. The catalyst is dry conditions in Argentina and strength in soybean meal, which gained another 2.00 to 5.00 a day, as futures continue to reach in the new contract highs. Bull spreading was noted in the meal market, as traders were buying front months and selling deferred, anticipating tightening near-term supplies. Argentina supplies the world with soymeal and more than doubles its next competitor on the export market, which is Brazil.

WHEAT HIGHLIGHTS: Wheat futures seem to be the recipient of traders buying beans and selling wheat, or buying corn and selling wheat, as wheat futures finished with losses of 4-1/2 to 5 cents in both KC and Chi. Mar Chi closed 5 lower, closing at 4.55-3/4. Prices closed lower for the second consecutive session, but there was no technical damage noted on charts today. In fact, the Mar contract managed to hold the 10-day moving average quite well. Commercial selling was noted, which would imply that farmer selling has picked up and commercial firms, once owners of wheat, are hedging. A general warm up for most of the Plains states is neither bullish nor bearish for prices, but it does imply that extreme cold is out of the near-term forecast. Therefore, concerns about winter wheat damage are minimal due to cold weather.

CATTLE HIGHLIGHTS: Cattle futures closed moderately higher today, trading off support, but unable to make any notable moves higher. The nearby Feb contract closed 82 cents higher to 127.65, Apr closed 45 cents higher to 125.22, and Jun closed 40 cents higher to 117.05. Today's Online Fed Cattle Exchange was uneventful, with no sales and one lot passed over at 124. Cash bids have since been seen at 124, but asking prices are thought to be hovering around 130, as another day passes without cash trade. The lack of solid trade online or in the country limited gains today, but support was drawn from the firming stock market and mostly steady beef values. Choice cuts closed 88 cents lower yesterday afternoon to 207.36, and select cuts were 84 cents lower to 203.13. Choice cuts bounced 9 cents higher by mid-session today to 207.45, but select cuts were down another 50 cents to 202.63. The resilience of beef demand fundamentals continue to clash with a heavy cattle supply. Trading ranges today were tight, and buying interest surfaced after prices were able to bounce off of nearby support levels.

LEAN HOG HIGHLIGHTS: Hog futures saw a nice pop today, as traders found technical support on the discount of futures to cash. The spot month Feb went off the board this afternoon 15 cents higher to 73.50, Apr closed 1.22 higher to 70.65, and May closed 1.30 higher to 76.42. Weekly average weights for IA/MN hogs were reported today at 284.9 pounds versus 285.1 pounds last week. This is not a massive drop, and it is still above last year, but it is a positive sign nonetheless. Yesterday afternoon, carcass cutouts closed 79 cents higher to 77.50, but were down 30 cents at mid-session today to 77.20. Without much in the way of major fundamental developments, today's surge higher was mostly technical in nature. Prices coming into today were heavily oversold and when futures traded slightly lower on the open, buyers swept in to begin to close the gap between the Apr futures and Lean Hog Index. The discount Apr futures to cash is still much wider than normal, but given the heavy supply fundamentals, upside is probably limited.

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