Top Farmer Closing Commentary 10-17-19

CORN HIGHLIGHTS: Corn futures closed higher by 2 to 3 cents as sharp gains in Chi wheat, along with firmer bean prices provided underlying support, as did a weaker U.S. dollar. Drier weather in the near term is allowing harvest to pick up steam but wet weather into the weekend and beyond would suggest that harvest overall will continue to slug along at a pace that has many producers well behind schedule, and frankly uncomfortable. The good news is that there doesn’t appear to be any winter storm systems brewing and consequently farmers will continue to pick away where they can. Analysts are busy trying to peg losses in the Dakotas and Minnesota from the winter storm system that pushed through last week. Some estimates are suggesting between 100 and 200 million bushels of corn may have been lost due to either freezing or high winds. Harvested acres could change on the November report as well, as it looks like the USDA will be re-asking about harvested acres for operators already scheduled to be contracted for yield expectations.

SOYBEAN HIGHLIGHTS: Soybean futures ended quietly but firmer with gains of 1/2 in Nov 2020 to 3-1/2 higher in Nov 2019. Consolidation continues with today’s trading range of near 13 cents but yet prices finishing just north of even. This tells us the market is entrenched in an uptrend and consequently sellers are having trouble pushing prices through the 10-day moving average, a level that has held as support the last two sessions. Uncertainty with weather into the weekend and beyond as wet conditions could slow harvest significantly again. It’s been a long fall and a steady flow of beans to the marketplace has been challenging to come by. That being said, weather over the next 2 or 3 days and farmers pushing against a wet forecast could add additional beans into the pipeline by the weekend. South American weather conditions are suggesting the crop is not off to the most ideal start and consequently could take longer for beans out of Brazil to reach into the pipeline. With the U.S. crop being shorter than expected prior to the planting season this year, this could mean improving prices into the winter. Nonetheless, there is too much vulnerability with prices at their current level so if behind on sales get current. One disruptive news report that developments with China are not going well and prices could quickly lose 20 or 30 cents. Look to re-own with fixed risk call options.

WHEAT HIGHLIGHTS: A weaker U.S. dollar may have contributed to another round of strong gains in the wheat market, as Chi led the way closing 9 to 12-1/4 cents with Dec finishing at 5.25-1/2. Today’s the highest close in Dec Chi wheat since July 15. Jul contracts closed 9 to 12-1/4 higher, KC 4 to 6-1/4 higher, and Mpls 1 to 1-1/2 cents higher. Short covering was again noted with a decisive move above last week’s high. Pesky dry conditions in Australia are noted as well. Wheat is an interesting market, on the surface this month’s Supply and Demand report had a negative tone, yet the market has continued to move upward. This points to the inverse relationship with the U.S. dollar and U.S. wheat prices. The dollar has been on the slide losing more than 2% over the last three weeks and consequently wheat prices have inversely gained near 30 cents in Dec Chi. As indicated yesterday, however, the untold story may be a lack of winter wheat acres planted due to a tough harvest season for producers in the Midwest as crops have been delayed by 2 to 4 weeks and, consequently, the timetable to plant winter wheat for many has passed.

CATTLE HIGHLIGHTS: Cattle markets posted mixed to mostly lower closes today, with Oct lives up 5 cents to 112.40, Dec lives were up 50 cents to 114.37, and Feb lives were down 5 cents to 119.55. Oct feeders were down 1.02 to 144.20 and Nov feeders were down 1.60 to 144.32. Choice beef values closed 26 cents higher yesterday afternoon to 218.28, their highest value since September 17. Choice beef was up another 51 cents this morning to 218.79. Cash wires have been very quiet so far this week, with only a handful of dressed bids showing up in Iowa and Nebraska at $175. Given the strength in beef and smaller show lists this week, most are expecting cash prices to rally from last week. While 6-10 day forecasts are showing mixed precipitation levels in the Plains, the 2-week outlook is dry which means that cattle should be able to gain weight, a bearish factor. The best traded Dec live cattle contract extended its rally further today above its 200-day moving average level. Dec lives closed just a nickel off of the session highs which indicates that there is still solid buyer interest. Nov feeders fell below their 200-day moving average support level but tested and held their 10-day moving average support level.

LEAN HOG HIGHLIGHTS: Hog markets posted a second consecutive down day with sharp losses, with Dec hogs down 2.47 to 68.15, Feb hogs were down 1.20 to 77.65, and Apr hogs were down 1.07 to 83.80. The CME Lean Hog Index was up 1.02 to 63.94 which leaves Dec hogs at a premium of nearly 5.00. This is sharply higher than the normal seasonal discount of Dec hogs to the cash index of about 10.00. China pig prices are up 25% for the month so far and are up 166.2% year to date. Carcass cutout values were down 34 cents yesterday afternoon to 77.72 and were down another 1.04 this morning to 76.68. Though the lower pork prices are a bit disappointing, it is somewhat understandable given the 9.2% increase in pork production last week from the same week last year. Tomorrow’s Export Sales report will be watched very closely to see how much pork China, Mexico, and Japan have purchased for the week. A new wave of optimism regarding U.S./China trade negotiations today was not enough to keep prices supported. The best traded Dec lean hog contract fell below its nearby support levels and made its lowest close since October 8. If pressure continues, 66.10 is the next downside target for Dec hogs.

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