Top Farmer Closing Commentary 9-30-19

CORN HIGHLIGHTS: Corn futures received a surprise on today’s quarterly Stocks report, as today’s figure came in much lower than expected at 2.114 billion, compared to the pre-report estimate of 2.428 billion. This is a drop of nearly 13% and a big drop in the bucket as far as a game changer. Prices moved higher, closing above the 40 and 50-day moving averages for the first time since July 15. Undoubtedly, short covering was a primary feature in today’s trade, as prices pushed through these levels after the release of the report. Expectations are that the USDA will (likely in January) make revisions to last year’s crop size, demand or likely both. What today’s number does seem to confirm is a more rational reason why basis levels have firmed over the last six to eight weeks, as end users have been having trouble sourcing corn. 2.114 billion is still a lot of corn, but this reduction of over 300 million will likely suggest a decrease in projected carryout for next year, which could now be near 1.8 billion. If yield or harvested acres trend downward, it is likely that carryout may trend to under 1.5 billion. While there is no killing frost of magnitude in near term forecasts, continuous wet weather will likely delay harvest.

SOYBEAN HIGHLIGHTS: Soybean futures finished with solid gains of 13-3/4 to 23 cents as today’s stocks figure was viewed as supportive. Strength in wheat and corn were also helped push prices higher. Meal gained 5.00 to 6.00, and soybean oil 4-37 points. The catalyst behind today’s rally, however, was twofold with a bout of wet weather again forecast that will limit harvest potential in the northern half of the Midwest. Copious rains are making it difficult for producers to get in the fields, and a delay in harvest at this time of the year is more of a logistical mess. Dry weather in the southern third of the Midwest is making harvest difficult as well, as temperatures continue to soar well above average with many experiencing mid 90s for the last couple of weeks. Beans are drying down quickly. Today’s stocks number was supportive at 913 million, as the market was anticipating 982 million. On a cautionary note, this number is still well above last year’s 438 million for the same time period.

WHEAT HIGHLIGHTS: Wheat futures moved higher today in Chi and KC, as traders seem to be willing to reverse long Mpls / short HRW and SRW wheat contracts. Dec Chi finished up 8-1/2 to 4.95-3/4, an impressive move and its highest close since August 12. Prices ran into heavy resistance at the 100-day moving average at 5.01. KC wheat closed 6-3/4 to 7-1/2 cents higher. Today was an impressive technical day, as it was a very large outside trading day compared to Friday, with a very solid close above the 40-day moving average and a close at or slightly above the 50-day moving average. Mpls wheat in Dec and Mar posted outside days as well but with negative closes, which might suggest the recent rally could be running out of steam. The rally has been predicated on the growing reality that some of the spring wheat acres will not be harvested due to wet weather.

CATTLE HIGHLIGHTS: Cattle markets finished mixed to mostly lower. Oct lives were down 45 cents to 104.57; Dec lives were down 27 cents to 110.30 and Feb lives were up 42 cents to 116.62. Oct feeders were down 1.92 to 142.40, and Nov feeders were down 1.05 to 141.92. Choice beef made its lowest close on Friday since July 26, down 93 cents to 212.58. Choice beef was up 21 cents this morning to 212.79. Cash cattle traded in the country last Friday 2.00 to 3.00 higher than the previous week, as the cash markets generally rally at this time of year. Beef production last week was 1.6% behind the same week last year due to lower slaughter counts and lower weights. Rainy weather in the Plains for the next two weeks should keep weight gain at a minimum. Despite the positive fundamental picture, cattle markets were mostly lower today on technical selling. The best-traded Dec live cattle contract has gained nearly 11.00 over the past three weeks. The best-traded Nov feeder contract has gained nearly 13.00 over the past three weeks. Stochastics are giving sharply overbought readings, so a correction may be due. Still, the Dec live cattle contract managed to close above its 100-day moving average level for the second session in a row. The last time the Dec lives were above the 100-day moving average level was late April.

LEAN HOG HIGHLIGHTS: Hog markets had an impressive start to the week, with Oct up 17 cents to 65.45. Dec hogs were up 2.75 to 72.60, and Feb hogs were up 2.20 to 78.00. Carcass cutout values were up 96 cents this morning to 74.22 but only closed 47 cents higher to 73.73. There was more talk today that China was actively buying U.S. pork, and China’s spot pig prices are up 5.8% for the month of September and up 112.9% year to date. The rallying cash index likely gave Oct and Dec some reason to rally today despite the huge premium of futures to cash. Dec, Feb and Apr all made outside days higher today, a positive technical sign despite the overbought condition. The best traded Dec contract made its first close above its 100-day moving average level since July 24, and this opens Dec hogs for further upside potential.




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