Top Farmer Closing Commentary 12-28-18

CORN HIGHLIGHTS: Corn futures finished with mild gains, as front month Mar closed 1 cent higher to 3.75-1/2, followed by May up 1 cent to 3.83-1/4. For the week, Mar corn futures lost 3 cents, while the new crop Dec contract was down 1-3/4. Corn futures had another quiet trading session, as the Mar contract traded an intraday range of 3 cents. Overall, it was a relatively quiet week with holiday trade, and the market failed to find any overall direction. Sideways trading has been the key, especially over the past handful of months, as the corn market may be building some base and consolidating for a strong move into 2019. Prices have been underpinned by strong demand, but ample supplies and producer movement have kept the topside on rallies in check. Moving into next year, focus will be on weather conditions in South America and the development of their crop. Dry conditions and hot temperatures remain a concern in southern Brazil, and heavy rains are expected in Argentina. Overall, crop conditions are mostly favorable. The market will closely look at the January 11 USDA report, as well as the meeting between U.S. and Chinese officials scheduled for the week of January 7.

SOYBEAN HIGHLIGHTS: Soybean futures were the strength of the grain market today, as contracts finished with double digit gains, up 10 to 13 cents. Front month Jan beans gained 13-3/4 to 8.82-3/4, while Mar beans were up 13 to 8.95-1/2. For the week, Mar soybean contracts, despite today's strength, still finished down 2-1/4 cents, while new crop Nov 19 beans were down 3/4 cent. The strength in the bean market came from weather forecasts for Brazil, which continue to show hot and dry conditions, which are concerning for crops in that region. Some beans being harvested in Mato Grosso are showing reduced yields, and the prospects of continuing difficult weather conditions may result in Brazilian bean crop yield reductions. Short positions in the market are cautious, as the South American crop is entering its key 3-4 week window for development, and weather forecasts will be directly in front of most traders. Fundamentals continue to weigh heavily on the market overall, and upcoming potential trade talks with China during the week of January 7 could bring a high amount of uncertainty into soybean futures.

WHEAT HIGHLIGHTS: Wheat futures, like corn, were more of a follower in today's trade, as the Chi contract saw 2-sided trade before finishing 1 cent higher in the Mar to 5.11-1/2, while May Chi wheat was up 1 cent to 5.18-3/4. Buying strength was noted in the KC wheat contract, as Mar gained 1 cent to 4.96, but Mar HRS wheat lost 1-3/4 cents to 5.50-1/2. For the week, Mar Chi wheat was down 16 cents. Selling pressure continues to weigh heavy on the wheat market, as the U.S. is still looking to be more competitive in a global marketplace. Wet weather has hampered some of the Argentine grain harvest, but the Buenos Aires grain exchange stated that 82% of wheat was harvested and is expecting the crop to reach 19 million metric tons. This continues to keep fresh supplies of wheat on the market and deters any potential growth for U.S. exports. Wheat prices technically held key support levels yesterday and may be trying to etch out a base, but as global competition continues to weigh on U.S. wheat bushels, a potential test lower is a possibility.

CATTLE HIGHLIGHTS: Cattle futures saw additional buying strength this afternoon, as contracts finished with marginal gains. Dec cattle futures led the way higher with gains of 1.15 to close at 124.07-1/2. Feb cattle gained 22-1/2 cents to 124.17-1/2. Monday will be the last trading day for Dec cattle, which had an explosive week up 3.20. Feb cattle gained 1.47-1/2 in this week's trade. Buying interest remains in the Apr contract, which posted a new contract high again today and gained 40 cents to 126.40. Speculator money moved into the cattle market yesterday, as a strong winter storm moved across the Midwest, which could be limiting weight gains as well as movement of cattle. Optimism for higher cash prices this week also helped add fuel to the buying in front month contracts. As of late this afternoon, cash trade was still relatively undeveloped as bids moved firmer to 118 and asking prices to 123. There were some rumors that cash trade posted near 120 or slightly higher, which would be 1.00 to 2.00 over last week's dollar level. Retail values were mixed at midday. While select carcasses dropped 8 cents, choice carcasses continue their late season strength, picking up 13 cents.

LEAN HOG HIGHLIGHTS: Lean hog futures traded mostly lower with the exception of small gains in the Feb contract. Feb hogs were up 7-1/2 cents to 60.65, while Apr hogs were down 17 cents to 66.50. Closes were relatively quiet, as all deferred contracts had losses between 7-1/2 cents to 25 cents today. For the week, Feb hogs lost 47-1/2 cents, while Apr hogs dropped 72-1/2 cents. Talk of oversold markets may have helped provide a little support on a Friday afternoon trade, as positions were squaring before the weekend. Both Feb and Apr hogs held trend line support or key technical support levels, which may bring some rebound next week on the technical side of the equation going into the last trading day of the year. At midday, carcass values were firmer by 94 cents to 71.38, and overall cash prices trended higher as the morning direct cash hog report posted weight averages up 20 cents. Overall, the complex is seeing lack of direction the past couple of trading sessions, as prices have corrected off of recent highs. Moving into January, the market is looking for direction.

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