Top Farmer Closing Commentary 01-12-18

CORN HIGHLIGHTS: After the release of the January USDA Grain Stocks, Supply/Demand, and Production numbers, corn futures finished lower as the Mar contract lost 2-1/2 cents to 3.46-1/4, while May corn dropped 2-1/4 cents at 3.54-3/4. For the week, Mar corn futures lost 5 cents. With today's close, Mar corn posted a new contract low close as prices pushed through the most recent lows of December 18. Despite supportive outside markets, the U.S. dollar traded to its lowest price point since May 2015, strength in crude oil futures, and the weight of burdensome supplies reported by the USDA, made it difficult for prices to gain any traction, and proceeded to drift lower. In addition, strong spillover selling from the wheat market weighed on corn prices this afternoon. In today's USDA report, this year's average corn yield was pushed to 176.6 bpa, up 1.2 bpa from the December report. This, despite losing 400,000 acres of harvested corn ground, helped push this year's corn production to 14.604 billion bushels, which was above expectations. This increase of overall crop size helped move carryout to 2.477 billion bushels for 2017-18, 60 billion bushels above market expectations and 40 million above last December's Supply/Demand report. That large production increase carried over into grain stocks for the quarter, and saw an accumulation of 12.516 billion bushels of grain in storage as of December 1. This was 110 million above market expectations, and 130 million above last year's record 12.386 billion bushel report. Obviously, this news was not supportive in the overall marketplace, as the already large potential supply picture, got larger. This will likely keep bearish pressure on corn prices, as burdensome supplies will weigh on any potential rallies as we continue to move into 2018. World ending stocks are still trending lower from last year's report at 206.6 million metric tons, but this too is above market expectations. Now that the supply picture is finalized, at least for this timeframe, focus will now shift towards the demand side of the equation. At this stage, exports have been lagging, but did get some support today with an announced sale of 12.6 million bushels of corn to unknown destinations for this marketing year.

SOYBEAN HIGHLIGHTS: Although the USDA Supply/Demand and Grain Stocks numbers stayed burdensome, soybean futures saw double-digit gains this afternoon, as contracts finished 10 to 12 cents higher. Mar soybeans were up 10-1/2 to 9.60-1/2, while May finished 11 cents higher to 9.72. Today was the last trading day on Jan soybean futures, which finished at 9.44. Mar soybean futures finished 10 cents lower on the week, but 16 cents off of weekly lows. Today's move higher posted a bullish reversal in bean futures, which have been strongly oversold since posting highs back in early December. The USDA released production numbers at 4.391 billion bushels for this last crop year, which was slightly below the average guesses of expectations. This reduced overall crop production came with a four-tenth of a bushel drop in yield to 49.1 bpa. Soybean production was enhanced by an 8% boost in harvested acreage from a year ago at 889.5 million acres. With adjustments on the demand side of the equation, despite reduced production, U.S. soybean ending stocks for 2017-18 ended at 470 million bushels. This was up 25 million bushels from the December numbers, but slightly below market expectations. In addition, quarterly grain stocks were at a record of 3.157 billion bushels, the first time in history this number pushed past the 3 billion mark, but was 30 million bushels below market expectations. While the news was burdensome and heavy in terms of overall supplies, with the market extremely oversold off of highs, today's lower-than-expected numbers were the support under bean futures this afternoon. Globally, world ending stocks saw minor changes to the upside at 98.6 million metric tons, which was also below market expectations.

WHEAT HIGHLIGHTS: Wheat markets were the biggest loser in today's trade, as Chi contracts posted 9 to 12 cent losses. Front month Mar was down 12-3/4 cents to 4.20-1/2, while May was down 12-1/2 cents to 4.34-1/4. In hard red winter wheat markets, front month Mar was down 14 cents to 4.26-1/4, while hard red spring Mar contract was down 16-1/4 cents to 6.12-3/4. Today's session dampened the prospects of a good week in the Chi wheat market as Mar futures finished down 10-1/4 cents for the week. Despite a U.S. dollar index softening to multi-month and maybe yearly lows, the weight of wheat futures off of today's grain stocks and winter wheat seedings numbers are the driving force in today's push lower. Quarterly grain stocks as of December 1 for all wheat, was at 1.873 billion bushels, this was nearly 34 million bushels above expectations, but was still lower than last year's totals of slightly over 2 billion bushels. Globally, wheat supplies stayed heavy at 268 million metric tons, slightly above expectations, but slightly lower than December numbers. The biggest disappointment in the wheat news this afternoon was the winter wheat seedings report, which was expected to see a drop to levels that haven't been expected since 1909 at 31.4 million acres, and the USDA pegged this year's winter wheat acreage at 32.6 million acres. These additional acres could bring additional supplies to an already burdensome market overall, while the U.S. struggles in competition globally. This combination of heavy supplies, as well as burdensome corn markets, made it very difficult for traders to hold any bullish advantage. As prices have been on a steady uptrend since mid-December, long liquidation of positions and adding of shorts to the marketplace quickly put prices to the lowest closing point for 2018. Bearish price action will likely continue into next week as the technical picture posted outside reversal, or bearish hook reversal in today's trade.

CATTLE HIGHLIGHTS: Cattle futures closed very moderately higher on today's session on some end-of-week short covering out of oversold territory. The nearby Feb contract closed 30 cents higher to 117.37, Apr closed 57 cents higher to 119.45, and Jun closed 62 cents higher to 111.62. The U.S. dollar slipped to its lowest point since September 8 today, likely providing some support to beef markets. There were no reports of friendly cash trade. The highest reported cash trade this week was on Wednesday at 120, 1.00 to 2.00 below last week, which is bearish for prices. Boxed beef values were negative today, with choice cuts closing 99 cents lower yesterday afternoon to 209.07, and select cuts down 28 cents to 202.95. By mid-session today, choice cuts were down another 40 cents to 208.67, and select cuts were down 67 cents to 202.28. Without much fundamental support today, it is likely that the positive closes were due to short covering from the recent dump in prices. Stochastics are still showing cattle prices oversold, and many traders were likely apprehensive to hold a short position going into the weekend, especially when beef demand prospects remain friendly. The nearby Feb contract was unable to break above its 200-day moving average resistance level, a negative factor moving into next week.

LEAN HOG HIGHLIGHTS: Hog futures took back a small portion of yesterday's losses, finding support from pork demand and end-of-week short covering. The nearby Feb contract closed 60 cents higher to 71.57, Apr closed 50 cents higher to 74.32, and May closed 30 cents higher to 79.00. To along with the technical breakdown this week, NAFTA concerns have been at the front of traders' minds. However, by today's session, most believe that the price reaction from said concerns were likely overdone. Canadian officials still believe Trump will put out of NAFTA at the end of January, but at this point, such information is just not known. Carcass cutouts were up 1.16 at mid-session today to 80.20. Butts, ribs, hams, and bellies led the way higher, up 3.75, 1.37, 1.60, and 1.39 respectively. The closes for the best traded Feb contract today were still under the 10-day moving average resistance level. The stabilization in prices is positive, but the outlook moving forward is still negative after Wednesday's bearish reversal and Thursday's follow-through.

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