Top Farmer Intelligence 9-18-18

CORN HIGHLIGHTS: Corn futures continued their downward slide, losing 4-1/4 to 4-3/4 cents as Dec once again led the futures contracts lower, closing at 3.43-1/4, another new contract low close. Since last week, prices have now fallen near 25 cents on the heels of a negative Supply and Demand report, in which the USDA yield estimate was a surprise to the market, coming in at 181.3 bushels per acre. The market was looking for under 178. Dec corn futures have now closed lower 4 out of the last 5 sessions, as fund money continues to go short, adding to contracts. Weakness in beans also spilled over to corn, as rhetoric was once again ratcheted higher in regard to tariff implementation and additional tariff talk. Harvest pressure is full steam ahead, with most producers likely suggesting their yield is as or better than expected.

SOYBEAN HIGHLIGHTS: Soybean futures softened again, scoring new contract lows as futures lost 8-3/4 to 9-1/2 cents with Nov leading today's drop, closing at 8.14. Upward ratcheting of tariff rhetoric pressured prices, as did expectations for good yield results as harvest picks up steam in the weeks ahead. The technical picture continues to look negative, and this has also likely pressured prices as traders who are long exit the market in addition to funds adding to short positions. Meal and oil were both softer today, also reaching new contract lows.

WHEAT HIGHLIGHTS: Wheat futures finished with small gains of 1 to 4-1/4 cents, as Dec Chi led today's gains, closing at 5.10-1/2. KC gained 3-4 cents, and Mpls 4-1/2 to 5 as Dec led the way higher, closing at 5.80-1/4. Mpls looks encouraging with prices finishing higher for the third consecutive session and a decisive close above the 10-day moving average, something that has not occurred since 8/9. Chi gains for the second time in three sessions after posting their lowest level on 9/13 since mid-July. Ideas of oversold and expectations that weather conditions elsewhere have shortened the world supply of inventory that the recent downturn probably has a downside limit, and that is where prices bottomed in both June and July, April and last January. Our point, there doesn't appear to be much appetite for farmers to sell. The gloomy atmosphere that surrounds commodities, whether it be due to good harvest expectations for corn and beans or tariff talk or poor technicals has weighed on wheat. Yet, we believe the longer term fundamental picture for wheat has taken a step forward this year, and that the market will likely buy dips and not turn bearish at this point. That being said, one of the potential problems the grain market may be facing is that, while wheat price is at a good value, investment dollars are finding better returns in the equity markets, which broke into new highs today.

CATTLE HIGHLIGHTS: Cattle futures closed lower today, consolidating and correcting slightly from Friday's surge higher. The nearby Oct live cattle contract closed 20 cents lower to 113.22, Dec closed 12 cents lower to 117.97 and Feb closed 45 cents lower to 121.85. Feeders were down slightly more aggressively, with Sep down 1.50 to 155.82, Oct down 1.15 to 158.02 and Nov down 1.20 to 157.82. Choice beef values were 1.77 cents higher yesterday afternoon to 206.04. The strength was impressive, but this was still lower than the same point last week. This morning, choice beef fell 7 cents to 205.97. Texas cattle traded at 111 last week, sharply higher than the previous week, but futures are still running premium to cash, and with projections of a contra-seasonal increase in beef production come quarter 4, this could be a pressure point later down the road. Friday's surge in futures prices left both live and feeder markets in overbought territory. Price action yesterday and today is working to help alleviate the overbought condition, but the poor closes in feeder markets and stalling out beef values may bring about hedge pressure, especially heading into Friday's Cattle on Feed report and Monday's Cold Storage report.

LEAN HOG HIGHLIGHTS: Hog futures put in a large bounce today with the Oct contract up 2.72 to 59.17. Dec was up 2.60 to 57.97, and Feb was up 1.27 to 65.80. Nearby contracts were able to rally more today, as traders worry about a disruption of pork supply near term due to Hurricane Florence shutting down packing plants. Carcass cutout values have been rallying as well on those concerns, closing 1.55 higher yesterday to 77.57 and up 27 more cents today to 76.29. This is up almost 6.00 on the week, partly due to cash bellies trading almost 7.00 higher on the week. The CME lean hog index was up 1.63 today to 53.48. Technically, today's strength was impressive, but the nearby Oct contract may have created a setback target due to its gap open higher. Oct futures closed above their 100-day moving average for the first time since 3/1. Dec made its highest close today since 6/19, and Feb made its highest close since 4/20.

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