Top Farmer Closing Commentary 12-6-18

CORN HIGHLIGHTS: Corn futures edged lower today. Trade tensions grew as a Chinese technology company's representative was arrested in Canada. While the details of this are clouded, it created an anxious environment in the political world today. At day's end, Dec corn lost 2-1/4, closing at 3.72, while new crop Dec closed down 1 cent at 4.01-1/4. As for new crop, we entered into a strategy where you are purchasing 1 put and selling 2 out of the money calls. The short calls are a marginable position and could turn into a hedge on 10,000. If prices drop, this strategy is designed to finance the put through the short calls, protecting 5,000 at a 4.00 price floor. If prices were to rally, the short calls could be problematic from a margin perspective and work against you. However, in the mix of hedging and cash sales, we believe this is an outstanding position. Unless there is a dramatic change in outlook, we will hold with this position for the year.

SOYBEAN HIGHLIGHTS: Soybean futures lost 3-1/2 to 4 cents. Jan closed down 4 at 9.09-1/2, and new crop Nov was down 2-1/4 at 9.54-1/2. Trade tensions were heightened when Canada arrested a Chinese executive from a technologies company. This executive faces possible extradition. As indicated in the corn report, this may have created a less than warm atmosphere for trade relations with trade relations with China today. Bean prices were off near 14 cents at one point but clawed back to finish not nearly as negative. In fact, some might argue that today's ability to recover continues to suggest the bean market may be poised to move higher. From a technical perspective, Jan beans reached a low today of 8.97, close to filling the gap of 8.96 from November 30 and December 3. With prices finishing in the upper end of today's trading range, the market appears to be doing nothing more than consolidating, or some technicians might suggest building the pennant part of a flag formation, which would suggest an eventual push higher with a 9.50 target. Elsewhere, it doesn't look like weather in the southern Hemisphere is of big concern. While there are some dry pockets that are beginning to develop in regions, we think the general condition of crops so far is considered good. Therefore, expectations for a record crop from Brazil are expected to continue. Our bias is that beans may move lower easier than higher. A lot of negative news is already factored into price, or the market is acting as such.

WHEAT HIGHLIGHTS: Wheat futures finished lower on all three exchanges with Dec Chi leading today's drop, closing 9-1/4 lower at 5.05-1/4. The remaining Chi contracts were 2 to 2-1/2 cents lower. KC was down 2 to 7-3/4 with Dec leading the way down and Mpls 4-3/4 to 6-1/4 lower. There was not much, if any, friendly news in the wheat market today. Without news, prices continue to trend in a sideways pattern. There has been a lot of talk about export business picking up and the generalized assumption that the U.S. will be a big participant in world trade this year. There has yet to be any real strong evidence of this, as Russia remains a competitor. Most analysts, however, feel that Russia's wheat will have quality issues, that they are exporting the bulk of their supplies early on and that the U.S. will capture additional business.

CATTLE HIGHLIGHTS: Cattle futures finished with moderate losses today, failing to build on solid gains the past two days. The nearby Dec live cattle contract closed 35 cents lower to 117.95, Feb closed 7 cents lower to 121.80, and Apr closed 40 cents lower to 123.47. Feeder contracts suffered larger losses with Jan down 1.27 to 144.20 and Mar down 1.10 to 141.95. Choice beef values were down 60 cents yesterday afternoon to 213.26 and were down another 43 cents this morning to 212.83. Light cash trade was noted yesterday in Kansas and Nebraska at 118, essentially steady with last week's trade. The southern Plains look cold and wet for this weekend, but Nebraska and Kansas will be dry. This was a pressure point, along with souring trade relations with China. While today's closes were negative, no major technical support levels were violated, minimizing chart damage. Feb live cattle made their third consecutive close above the 50-day moving average since 11/2. Feeder cattle futures closed above yesterday's lows, and thought the Jan and Apr contracts made their second lowest closes in almost six months, today's price action looked more like consolidation than new breaks lower.

LEAN HOG HIGHLIGHTS: Hog markets closed moderately lower today, but the deferred contract months were able to stage rather impressive late-session recoveries. The nearby Dec contract closed 1.32 lower to 54.52, Feb closed 85 cents lower to 66.90 and Apr closed 85 cents lower to 71.27. The CME lean hog index was up two cents to 56.40. Carcass cutout values were up 82 cents by yesterday's close to 71.70 but were down 11 cents this morning to 71.59. Holiday pork demand remains strong, but questions about trade progress with China have arisen. Recently, a prominent Chinese telecommunications executive was arrested in Canada for extradition to the U.S. and is reportedly facing charges related to Iranian sanctions. Some are worried that this could throw a wrench of current U.S. / China trade talks. Despite the trade negativity, buyers cannot seem to stay away from the hog markets. The best traded Feb contract moved as low as 65.25 this morning, showing losses of 2.50. Prices found support at the 20-day moving average level and rallied to close steady with the day's opening trades. Other deferred contracts had similar price action. Early sell-offs were quickly limited, as traders continue to be reminded of the seriousness of African swine fever outbreaks in China.

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