Top Farmer Closing Commentary 9-28-18

CORN HIGHLIGHTS: Corn futures finished 6-8 cents lower, as the front month Dec contract was down 8-1/2 to 3.56-1/4. Mar was down 8-1/2 to 3.68. For the week, Dec corn futures closed down 1 cent, while the Mar contract posted 1-1/2 lower move. Today's trade was all about the USDA quarterly Grain Stocks report, encompassing the end of the 17/18 marketing year. USDA posted a larger then expected corn supply of 2.14 billion bushels on the 9/1 quarterly Grain Stocks report. This was above the high end of range estimates, and obviously weighed heavily on futures prices today. Despite being above expectations, last year, ending quarterly grain stocks were 2.29 billion bushels, approximately a 7% rise over this year's totals. Despite record production the past few years, the U.S. and global stockpiles are still tighter. Regardless, after a round of nearly 25 cents off the most recent low, the market was set for some profit taking and long liquidation. On the harvest front, weather forecasts are wet, which may bring some harvesting delays into those northern regions. Our concern going forward will be the speed of harvest, as well as quality issues that may arise in this year's corn bushels.

SOYBEAN HIGHLIGHTS: Soybean futures, like corn, saw strong selling pressure down 8 to 9 cents, as the front month Nov beans were down 9-1/2 to 8.45-1/2, while Jan beans dropped 9-1/2 cents to 8.59-1/4. For the week, Nov beans were down 1-3/4, while Jan beans posted a similar 1-3/4 low. Today also ended the trading month, which saw Nov beans finish 2 cents higher for the month. Like the corn market, today's trade in the bean market was focused on the USDA quarterly stocks, with bushels coming above expectations. The USDA pegged 9/1 stocks at 438 million bushels, up nearly 45% over last year's 302 million bushel level. Despite adjustments in final usage, the USDA decided to increase the 2017 crop by 19 million bushels to 4.41 billion bushels with an adjustment of 2/10 bushel per acre on yield. Carrying these numbers into the balance sheet now puts next year's carryout projections close to the 890 million bushel mark, which will still weigh heavily on bean prices in the short term. The demand side of the equation will be key, as 17/18 demand was still a record at 4.27 billion bushels for the year. This, despite the China tariff and trade war battles, and this demand pace will need to continue into next year.

WHEAT HIGHLIGHTS: Wheat futures followed suit on the selling side of the equation as the Chi contracts were 1-4 cents lower. Dec wheat futures were down 4 to 5.09 Chi, and the Mar contract lost 3-1/2 cents. For the week, Dec wheat futures posted a 12-3/4 cent loss in disappointing trade. Weakness continued in other markets, as HRW KC was down 6 cents to 5.11-1/4, and Mpls spring wheat was down 7-1/2 cents to 5.72. Grain stocks showed U.S. wheat inventory at 2.397 billion bushels on 9/1, more than expectations, and was up from last year's 2.26 billion bushels. The USDA expected to see a 14% increase in U.S. wheat exports, but this may be revised down in future reports, as demand for the first quarter of the wheat marketing year was at 733 million bushels, its lowest movements in 7 years. The demand side of the equation may be later with tightening seen in global production as well as competitor's export prices. In the short term, it feels like global and U.S. wheat supplies are currently still ample.

CATTLE HIGHLIGHTS: Cattle futures closed moderately higher for the session and the week. The Oct live cattle contract closed 22 cents higher again today and 37 cents higher on the week to 113.45. Dec closed 27 cents higher today and 40 cents higher on the week to 118.85. Feb closed 25 cents on the session and 55 cents higher on the week to 122.80. Choice beef closed 14 cents lower yesterday afternoon to 204.71 and was down another 33 cents this morning to 204.38. Cash sales were noted today in Kansas, Nebraska and Texas, all at 111. This was slightly higher than trade earlier this week and about steady with last week. Technical price action was solid today with prices testing their 10-day moving average once again and finding buyers on ideas of strong beef demand ahead to close higher. The Dec contract made its highest close today since 2/16. Feeder markets were strong today as well with all three nearby contracts falling below their 10-day moving average support levels but rallying back to close above.

LEAN HOG HIGHLIGHTS: Hog futures closed sharply higher today after a supportive Hogs and Pigs report ignited buying interest, particularly in the deferred contracts. The nearby Oct contract closed 87 cents higher to 62.17, Dec closed 2.45 higher to 57.92 and Feb closed 2.37 higher to 65.85. The CME lean hog index is up 1.59 to 65.34, just below its 200 and 100-day moving average levels. Carcass cutouts closed 36 cents lower yesterday afternoon to 80.51 and were down another 95 cents today to 79.56 as the pork cutouts correct from sharp recent rallies. Though the Hogs and Pigs report was actually more supportive to the nearby contracts, traders still suspect active export activity to China in the longer term due to African swine fever issues; hence the strength in the back months. The Oct contract was unable to push through its 200-day moving average resistance level, similar to the Dec contract. However, both Dec and Feb tested recent highs. With quarter four rebalancing coming next week, more technical buying could be active.

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