Top Farmer Closing Commentary 1-23-19

CORN HIGHLIGHTS: Corn futures finished mixed. Front month Mar corn was down 1/4 cent to 3.78-3/4, while May corn was unchanged on the day at 3.87-1/4. Slight strength was noted in deferred contracts with Dec corn up 1-1/2 cents to 4.02-1/4. The trading range was a narrow 3-3/4 cents Mar, as overall news is lacking. Weakness in the crude oil market during today's session helped put selling pressure on the corn futures despite strength in beans and wheat markets today. Pressure in the corn market was slight but came from multiple points in today's trade. The lack of USDA information regarding export sales and the demand side for U.S. corn has kept traders in the dark. Argentina recently posted a sale of corn to Mexico at a discount to U.S. bushels, showing competition from our South American neighbors. The demand side of the equation has stayed supportive underneath the corn market, and yesterday's weekly export inspections still have the current U.S. pace running nearly 61% ahead last year and well above USDA's crop forecast. Strength in deferred contracts came from outside estimates for acreage from Informa Economics, which tabbed next year's corn acres at 91.5 million acres, up 2.4 million acres from last year. Though an increase was noted, this keeps the overall supply relatively tight moving into the end of next year.

SOYBEAN HIGHLIGHTS: Soybean futures finished with modest gains of 4-6 cents. Front month Mar beans are 5-3/4 higher to 9.15, while May was 6 cents higher to 9.28-3/4. With today's trade, most bean futures picked up yesterday's losses as prices continue to consolidate near the top end of the trading range. Overhead resistance stays as a cap on prices, as lack of information and concerns of U.S. / China trade relations keep sellers active at these levels. The soybean market is prone to headline risk with Chinese rumors of buying beans or trade problems bringing sellers forward, as we saw yesterday. South American weather stays as a positive force supporting prices, as hot, dry weather in central and northeastern Brazil continues to diminish yield potential. The majority of private analyst estimates have the Brazilian bean crop leaning closer to the 115 million metric ton level, while the USDA is currently at 122. Informa Economics released 2019 acreage estimates for soybeans during today's trade session, putting this year's bean acres down 2.9 million acres to 86.2 million acres versus 89.1 last year. Even with this acreage drop, assuming normal production and weather, U.S. supplies will stay burdensome into the 2019/20 crop year.

WHEAT HIGHLIGHTS: Wheat futures posted their highest closes since the end of December, as the Chi contracts were 3-4 cents higher. Front month Mar wheat was up 4-3/4 to 5.26, while May gained 4-3/4 cents to 5.31-3/4. KC HRW wheat followed suit, up 5-1/4 cents in the Mar contract to 5.15, while Mar spring wheat was up 3- 1/2 cents to 5.75-1/4. A combination of potential purchases of U.S. wheat by China, as well as the limiting of Russian and Ukrainian supplies, have added some bullish enthusiasm. Yesterday, rumors stated that China intended to buy up to 7 million metric tons of U.S. wheat as a goodwill gesture before next week's meetings, which helped boost the market. Indications that HRW has been sold to Egyptian buyers brings the optimism of demand finally moving to U.S. exporters. Russian wheat values are currently trading at 4-year highs, which may be reflecting tight supplies in that country. Charts improved technically, as the Mar Chi contract closed above the 100-day moving average today for the first time since August. Additional upside strength may bring some further short covering, as money may move into the wheat market on the long side, given its technical strength and potential demand improvement.

CATTLE HIGHLIGHTS: Cattle markets staged an impressive recovery today after some weakness and technical breakdown over the past few sessions. The nearby Feb contract closed 42 cents higher to 125.55, Apr closed 42 cents higher to 126.50 and Jun closed 42 cents higher to 116.85. Jan feeders were up 1.97 to 143.02, Mar feeders were up 2.15 to 143.65 and Apr feeders were up 1.72 to 144.67. Choice beef values closed 1.08 higher yesterday afternoon to 216.34. Choice beef was up another 40 cents this morning to 216.74, a major stabilizing force in the face of unimpressive cash trade recently. Some cash cattle were traded yesterday in Kansas at 122, and some were sold in Nebraska at 123. These are both lower than last week's trade at 124, but considering they were early-week sales, the market will be looking for some improvement tomorrow into Friday. It is unclear at this point how much stress cattle in feedlots will be facing this week. Cold temperatures should show up everywhere, but the amount of moisture cattle will have to deal with is still unclear. After Feb live cattle's gap lower session to start the week, the market was anticipating further long liquidation with high open interest and lackluster beef and cash values. Selling pressure was noted early in the session, but without follow through selling later on, traders bought cattle with increasing retail beef demand.

LEAN HOG HIGHLIGHTS: Hog markets closed lower today but ultimately saved themselves from an early session breakdown. The nearby Feb contract closed 70 cents lower to 60.77, Apr closed 1.25 lower to 64.85 and Jun closed 40 cents lower to 79.27. The CME lean hog index is up 26 cents today to 58.33, a stabilizing sign after a lower close yesterday. Carcass cutout values dropped 1.20 yesterday afternoon to 69.63 and were down 8 cents again this morning to 69.55. With strong pork values and a rallying cash index the main fundamental sources of support lately, it is not difficult to see whey hog futures faltered early in the session. Especially considering U.S. pork production is currently running 7.3% ahead of last year's pace. The near term supply looks heavy and will likely pressure carcass values in the near term. Some are concerned that weather this week could slow the marketing and production pace, but this would only back up market-ready hogs for additional slaughter in the future. Technically, today's session started out much uglier than it closed. The Apr contract since 8/16 and the Jun contract briefly fell below its 200-day moving average support level. Global uncertainty in the hog markets will likely keep buyers interested when the market dips, hence today's price action.

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