Top Farmer Closing Commentary 7-19-19

CORN HIGHLIGHTS: After plunging near 12 cents yesterday, futures gained back half of this ground today with nearby Sep gaining 6-1/4 closing at 4.30-3/4. Weekly charts, however, show damage with prices posting a reversal for the week. Bullish traders will argue that a decline in acreage, along with expectations for lower yield, have set the stage for a potential run to 5.00 or higher. This we agree with. On the other hand, the market is marking time waiting for the August 12 report to get a confirmation on acreage. In the meantime, weather has likely taken a turn for the better between this week and next week with a cool down expected as pollination gets underway. Parts of the Midwest, however, remain dry and hot temperatures are stressing crops. On the other hand, timely rain helps to solidify good growth for the past week as heat units were sorely needed. Export sales remains slow and concerns over ethanol production are also in the background.

SOYBEAN HIGHLIGHTS: Soybean futures had a big day with solid gains of 13-1/4 to 20-1/4 cents as both old and new crop led the day higher as Aug closed 20-1/4 higher at 9.01-1/2, and Nov 20-1/4 higher at 9.19-1/4. Today's strong upturn was said to be on renewed hopes that China and the U.S. are moving toward negotiations and potential resolutions. We've been down this road before, but believe the market was shot in the arm today. Some rumors have it that China may have already purchased some U.S. beans.

WHEAT HIGHLIGHTS: Wheat futures had a good day with gains of 3-3/4 in Mpls to 7-1/4 in KC and 9 cents in Sep Chi. Chi closed at 5.02-1/2, an encouraging close after a poor showing yesterday. A head and shoulders formation looks as though prices may be ready to plunge and today's turnaround looks encouraging and hopeful. Yet, in Sep Chi prices, while closing 9 higher, still finished well of the high of 5.16-1/4 with today's close at 5.02-1/2. In other words, futures ran through critical buy stop orders and slid toward the day's end. Does today's activity mean anything? A bullish key reversal after a downtrend certainly looks hopeful, but the market will need to see follow through buying. If not, today's activity will not mean much other than end of the week short covering. In general, there was not a whole lot of new friendly news for prices this week. Dry conditions in Canada, as well as Russia, are supportive, but didn't seem to have much impact this week. The recent pullback in world production as indicated by the USDA could not seem to trump the idea that U.S. prices remain under pressure due to harvest of better than expected wheat in KS and elsewhere.

CATTLE HIGHLIGHTS: Cattle markets closed slightly higher to end a choppy and sideways week. Aug lives were up 20 cents to 107.60, Oct lives were up 25 cents to 108.50, and Dec lives were up 37 cents to 113.17. Aug feeders were up 55 cents to 139.97, and Sep feeders were up 32 cents to 139.80. Choice beef values closed 77 cents higher on Thursday afternoon to 213.34 and were up another 8 cents this morning to 213.42. Cash trade today so far has been quiet with bids seen in KS, NE, and TX between 111 and 113. Weekly average weights for the week ending July 6 came in 7 pounds heavier than the previous week, though still 6.4 pounds behind the average for that week. Today's Cattle on Feed report came in nearly exactly where the market was expecting. Marketings were reported at 97%, placements at 98%, and on feed supply at 102%. Technical action was mostly quiet today with the live cattle contract testing and failing to break through nearby resistance at the 10-day moving average level. The 10-day moving average has been support until yesterday's move below. The feeder markets tested nearby support, but were able to hold and close between their 10 and 50-day moving average levels.

LEAN HOG HIGHLIGHTS: Hog markets made another day of triple digit gains, capping off the best week since April. Aug hogs closed 1.10 higher to 83.87, Oct hogs closed 2.02 higher to 78.92, and Dec hogs closed 1.47 higher to 76.75. The CME lean hog index was up 73 cents to 71.52. Carcass cutout values closed 12 cents higher yesterday afternoon to 76.60, their best value since June 24. Carcass cutouts were up another 78 cents this morning to 77.38. China's spot pig prices were up 5.6% for the week, 8.5% for the month, and 40.9% for the year. A bit of optimism today regarding U.S. China trade relations is also a good sign. Hong Kong bought pork last week and Chinese officials are expecting the tight pork supplies to become even more important during the second half of the year. If China can restart purchases of U.S. pork, futures should find a surge of buying. Today's price action was not only impressive from a fundamental perspective, but also from a technical view. The Aug contract made its highest close today since June 10 and briefly tested its 50-day moving average for the first time since May 20. Oct futures closed above their 50-day moving average for the first time since May 10. Momentum indicators are showing that hog futures are overbought, but there appears to be a fundamental justification for the sharp rally lately.

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