Top Farmer Closing Commentary 1-17-19

CORN HIGHLIGHTS: Corn futures had life today, finishing with gains of 3-1/2 to 6 cents as Mar led today's rally closing at 3.80. Today's strong close above critical moving averages reverses the losses from Tuesday when prices had a very difficult session closing 5 or more cents lower on futures. Today's turnaround came on news that the U.S. is considering lifting tariffs against China to hasten a trade deal. Whether this has merit or not, only time will tell in the days ahead, but it is positive for the market today. There were also rumors that China could be buying U.S. wheat and that too sparked a rally in the wheat market which gained 5 to 8 cents. Soybeans also came to life, adding support and gaining anywhere from 8 to 13-1/4 cents. While today was an encouraging day, we don't want to get overly excited or buy into the idea that prices have to move higher. Nonetheless, the market is starved for news, and for that matter positive news, and when it does come it doesn't take long for prices to react.

SOYBEAN HIGHLIGHTS: Soybean futures had an encouraging day with solid gains of 10-1/4 to 13-1/4 cents as Mar led today's rally closing at 9.07-3/4. For the third-consecutive session, prices held the 100-day moving average and by midday rallied on positive potential news that the U.S. is considering lifting tariffs on China to hasten a trade deal. Time will tell if this is nothing more than rhetoric or if it has some substance. Hopes and expectations are that China will be an aggressive and strong buyer of U.S. soybeans in the months ahead. In addition, noon hour forecasts were turning drier for Brazil.

WHEAT HIGHLIGHTS: Wheat prices had a quiet morning but gained steam late mid-morning on rumors that China may be buying U.S. wheat. It didn't take long for prices to respond with futures gaining 8 to more than 10 cents. By day's end, Mar Chi closed 5-1/4 higher at 5.17-3/4 and Mar KC 8-1/2 higher at 5.04. Mpls gained 7 cents on most futures. Short covering was noted. Whether China actually has bought wheat remains to be seen, but there were additional rumors circulating that the U.S. is weighing the possibility of lifting tariffs to hasten a trade deal with China. The markets responded favorably. Our overall bias is that prices will continue to find support on expectations that the U.S. will pick up more export activity in the weeks ahead.

CATTLE HIGHLIGHTS: Cattle markets sagged off of recent strength today, falling victim to some profit taking and shaky cash fundamentals. The nearby Feb live cattle contract closed 72 cents lower to 127.10, Apr closed 82 cents lower to 126.90, and Jun closed 67 cents lower to 116.82. Jan feeders were down 2.35 to 141.42 and Mar feeders were down 1.77 to 142.92. Choice beef values were down 28 cents yesterday afternoon to 211.93 but bounced 61 cents higher this morning to 212.54. Beef values were at 213.84 the same time last week, and yesterday's close was the lowest since December 19. With still no published cash bids this week and beef values drifting mostly lower, many traders are concerned that the futures rally may be coming to an end if the cash fundamentals cannot lend support. There is also talk that weather in the Plains this weekend may not be as threatening as feared and winter storms on the East coast could further pressure beef markets. The Feb and Apr live cattle contracts have corrected back within their Bollinger band ranges, though both are still showing overbought status from stochastic indicators. The Apr live contract traded down to its 10-day moving average support level today and ended up closing about halfway up the trading range. Mar, the best traded feeder cattle contract, fell below its Bollinger band range today but was able to hold its lower Bollinger band support at the close.

LEAN HOG HIGHLIGHTS: Hog markets made mixed closes today, only partly successful in stabilizing after a very weak start to the week. The nearby Feb contract closed 80 cents higher to 60.82, Apr closed 45 cents lower to 64.62, and Jun closed 30 cents lower to 77.87. The CME Lean Hog Index closed 37 cents higher to 58.02. This was its highest level since November 26, and just shy of the 100-day moving average level. Carcass cutout values were down 64 cents by yesterday's close to 69.64 but jumped 90 cents this morning to 70.54. With the recent strength in the cash hog fundamentals, futures premium to the cash market is at a much more normal level seasonally than over the past few weeks. This could also be viewed in a negative light as futures have failed to rally despite the recent strength in pork and cash hog values. The likely reason for the weakness despite fundamental strength has been a lack of confirmed U.S. pork sales to China. Speculative length is liquidating without the expected surge higher. Technically, the Apr contract is still oversold, closing below its lower Bollinger band the second session in a row. The Jun contract traded above its 200-day moving average level for much of the session today, but ultimately closed below that moving average support level and its lower Bollinger band.

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