Top Farmer Closing Commentary 12-5-18

CORN HIGHLIGHTS: Corn futures ended quietly with Dec unchanged at 3.74-1/4 and Jul closing 3/4 cent lower at 3.97-1/2. A pick up in farmer selling may be keeping rally potential in check as was a rather quiet day in commodities in general with beans gaining less than 2 cents and wheat down a nickel. New news is lacking and the market is awaiting further developments of talks with China to see if in fact exports are going to pick up in beans and there's considerable talk about corn or corn products, as well as wheat. Yet, for now the recent recovery is likely pulling some corn out of farmer's hands. We also believe traders are likely to be more aggressive selling if prices don't sustain a near-term recovery on ideas that there is a gap on charts to be filled from Sunday night, as well as prices running into overhead resistance near 4.00 Jul, which the market has failed to get through since early August. Last week, corn futures posted a friendly weekly reversal, and follow-through so far this week would suggest the technical picture has a chance to make a breakout to the top side. From a long-term and macro perspective, we think this is highly likely. Historical studies indicate a probability of over 80% that futures could move another 20 or more cents higher.

SOYBEAN HIGHLIGHTS: Soybean futures traded both sides of steady, but generally traded firmer with small gains by days end as nearby Jan closed up 1-3/4 at 9.13-1/2 and new crop Nov 1 higher at 9.56-3/4. New crop Nov bears watching, not from the perspective that prices are so high, but from the perspective that they have bounced off their lows established earlier in summer with a November of 19 futures reaching 8.64-3/4. With a move of 1.00 to this week's high of 9.60, it is starting to raise some eyebrows. If prices were to move another 25 to 50 cents higher it is certainly likely to keep farmers interested in growing soybeans next year and perhaps as many acres. Time will only tell, but it is becoming an interesting story. If you're thinking of remaining strong on bean production for next year, the more aggressive option strategy may be helpful in the sense of buying a put and selling a call. We'll put that in today's recommendation.

WHEAT HIGHLIGHTS: Wheat futures ended the day on a weak note losing anywhere from 4 to 5 cents in Chi, 7 cents in KC, and 3 to 4-3/4 cents in Mpls. A lack of new positive news and failure to follow-through to the topside led to a disappointing close. After a strong open on Monday morning, the failure to hold above the 40 and 50-day moving averages led to, what we believe, traders taking off long positions that may have been established over the last few weeks. Yet today's close, while on a weak note, did finish in the upper half of today's trading range with prices finding support in Mar Chi at both the 21 and 10-day moving averages. One could argue the wheat market is in a tight consolidation range since late October and that eventually a breakout to the top side is likely as prices sooner or later push above critical moving averages and uncover buy stops. We agree with this assessment. That has not occurred yet, and until it does we'll stay with a defensive posture.

CATTLE HIGHLIGHTS: Cattle futures moved moderately higher today, with feeder posting a solid rebound from recent losses. The nearby Dec live cattle contract closed 52 cents higher to 118.30, Feb closed 72 cents higher to 122.37, and Apr closed 97 cents higher to 123.87. Jan feeders were up 1.07 to 145.47 and Mar feeders were up 1.20 to 143.05. Choice beef values were down 12 cents from yesterday's close by mid-session today at 213.74, but the recent stabilization has been a positive influence. Today's Online Fed Cattle Exchange had all 219 head offered actually sold at a weighted average price of 117.83. This is steady to just slightly lower than the best cash results from last week, so the market is anticipating more supportive trade later on this week. Stormy weather in the forecast for the southern Plains later on this week into the weekend is also supportive. Price action in both the live and feeder cattle markets was very impressive despite the moderate gains. The Feb live cattle futures contract traded down to its 50-day moving average support level, then surged back to make its highest close since November 2. Apr futures showed similar price action, making their highest close since October 26. Feeder contracts made their second higher close in a row, stabilizing after last week's sharp losses.

LEAN HOG HIGHLIGHTS: Hog markets made bullish outside sessions today, attracting buying interest after positive trade rhetoric from China's Trade Ministry was seen overnight. The nearby Dec contract was down 1.02 to 55.85, Feb was up 1.70 to 67.75, and Apr was up 1.37 to 72.12. The CME Lean Hog Index was up 2 cents today to 56.38. This was its first move higher since November 5. Carcass cutout values were up 23 cents at yesterday's close to 70.88 and built on that strength today, up 1.62 to 72.50. Bellies jumped 5.57 to 126.55 and picnics were up 4.59 to 50.34. Overnight, officials from China's Commerce Ministry indicated that trade negotiations will progress quickly on items where there is some consensus with the U.S. While they did not list specific commodities, this was a positive force because it indicates that China is optimistic on trade negotiations and is ready to move things along where possible. More African swine fever outbreaks were reported overnight, so many believe that pork tariffs may be among the first to be canceled. Today's outside day higher could give technical traders the signal to increase buying activity for tomorrow's session. While price action is still range-bound at this point, these type of signals can lead to retests of the tops of the ranges, and even breakouts if fundamentals look to be moving in the right direction.

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