Top Farmer Closing Commentary 3-13-18

CORN HIGHLIGHTS: Corn futures edged higher, gaining 1-2 cents as Dec led today's rally, closing at 4.09-3/4 after reaching a new yearly high of 4.11-1/2. The contract high for Dec corn futures occurred on 7/11, when Dec peaked at 4.29-1/2. We use this as a reference that, if the market, which appears to be building upward momentum, decides to make a run for an upward target, the trade may shoot for this point. Our historical probability studies indicate a 69% chance that Dec corn futures will trade above 4.25. There is not a clear consensus as to how South American weather will affect final yield numbers, but suffice it to say, this month's USDA report did reduce that Argentine crop 3 million metric tons, and currently the crop is estimated at 5 million metric tons below last year's 41 million. This is a 12.2% change. The Brazilian corn crop, now estimated at 94.5 million metric tons versus last year's 98.5, indicates a drop of 4%. The point is to suggest that world inventories continue to edge inward, while world demand continues to expand.

SOYBEAN HIGHLIGHTS: Soybean futures had an impressive showing across the complex. Beans were up 7-1/4 to 8-1/2, as Jul led today's recovery for the second consecutive session, closing at 10.59-1/2. Soymeal closed up $3.00 to $5.00 and soybean oil 42-47 points higher. It was an impressive showing after a rough end of the week last week when prices slid aggressively with double digit losses. We will call yesterday's reversal and today's activity a bounce. This bounce is impressive, but the key will be follow through from here. Forecasters continue to suggest increased chances of rain events in Argentina this week, and where dry weather has been dominant in recent weeks. The USDA echoed this sentiment, dropping the Argentine crop 7 million metric tons from its February estimate of 54 million to the March estimate of 47 million metric tons. Last year's crop was 57.8 million.

WHEAT HIGHLIGHTS: Wheat futures came under pressure throughout the session as traders appeared willing to buy beans and sell wheat, as forecasters are upping the chances for rain through parts of the central Plains. By day's end, wheat futures finished 1-1/2 to 2 lower in KC, 2-1/2 to 4-1/4 lower in Chi and mixed in Mpls. Jul Chi closed down 3 at 5.04-1/2, a disappointing close after prices tried to recover earlier this morning, following yesterday's minor hook reversal. Futures ran out of gas at the 10-day moving average at 5.14 before closing at 5.04-1/2. In general, we believe that news is mostly negative for wheat prices as this month's world inventory numbers increased 2.7 million metric tons from last month.

CATTLE HIGHLIGHTS: Cattle futures finished mixed, as strength in cash trade continues to hold Apr futures higher. The Apr contract closed 35 cents higher to 121.90, Jun closed 12 cents lower to 113.15 and Aug closed 5 cents lower to 110.77. Beef cutouts were essentially steady for today's session, with choice cuts up 11 cents higher morning to 224.01. This is the highest level since late June and is unseasonably strong. Cash bids were noted today at 125, but by early this afternoon, we had seen cash trade as high as 126, steady with last week. Technical price action was quiet today. The Apr contract did trade up to its 10-day moving average resistance level but was stopped. Jun and Aug futures both dipped below their 200-day moving average support levels but ultimately closed above them. Short term technical indicators are oversold, but incoming second quarter beef supply is likely enough justification for the lower trend.

LEAN HOG HIGHLIGHTS: Hog futures finished with very moderate gains after showing a solid bounce early in the session. The nearby Apr contract closed 5 cents higher to 67.72, May closed 62 cents higher to 71.85, and Jun closed 42 cents higher to 77.47. Carcass cutouts closed 1.45 higher yesterday afternoon to 74.88 and were up another 97 cents this morning to 75.85. Loins led the way higher, up 2.54 to 76.54. Bellies and hams also showed gains of over 1.00. While hog and pork supplies still look heavy, the fact that Mexico and Canada, two major importers of US pork, will be excluded from tariffs, which has at least tempered fears of a huge demand drop-off. Technically, the downside momentum is waning, and a short covering bounce could be seen soon. However, the Apr contract still has to fill a gap from late August, and the heavy supply picture does not quite inspire much sustained buying interest.

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