Top Farmer Closing Commentary 3-8-18

CORN HIGHLIGHTS: Corn futures received friendly news and acted in a friendly manner, as prices pushed to their highest levels since late summer. Futures gained 3-1/4 to 6-1/2 cents with Mar leading today's gains, closing at 3.85-3/4. New crop Dec closed 4 higher at 4.10-1/4, its highest level since mid-August. Today's Supply and Demand report trimmed US carryout 225 million bushels by increasing exports 175 million and increasing ethanol 50 million bushels. Reductions in the South American crop were viewed as rationale for the USDA changes. Argentina's corn crop is now expected to be 6 million tons, in line with the average pre-report estimate but a confirmation of 3-million ton reduction from last month. The Brazilian corn crop was also lower than February, coming in at 94.5 million metric tons, compared to 95 million in February. The average pre report estimate was 91.8. With US carryout now at 2.127, traders took this as another change in the trend of carryout. Consequently, the trend in price is reacting inversely. That is, as carryout shrinks, price moves higher. It is likely, however, that corn prices have now moved high enough to bring additional farmer selling into the mix, which could presently keep a lid on old crop prices. The next technical objective for new crop price is 4.18, the high from 8/10/17.

SOYBEAN HIGHLIGHTS: Soybean futures closed mixed with nearby Mar and May each losing 1-1/4 cents. May closed at 10.64, while new crop Nov gained 1/2, closing at 10.45. Soymeal finished with little change, and soybean oil was on the defensive with small losses of nearly 25 points. The big picture perspective was sharpened today, as numbers from the USDA indicated a drawdown in South American production. This was viewed as supportive, but with a decline also projected for US exports, US carryout rose above expectations and now sits at 555 million. The average pre report estimate was 529 million, and the Feb estimate was 530 million. The Argentine crop dropped significantly from last month's 54 million metric tons down to 47 million, which was below the average pre report estimate of 48.1 million. Brazil's crop, however, increased from 112 million in February to 113 million this month, albeit this was still 1 million metric tons less than the pre report estimate. World projected carryout dropped from 98.1 million metric tons to 94.4. With bean prices rallying since mid-January, the market seemed to more or less yawn at today's information and was not able to make up its mind whether this news was friendly or negative. Increasing US carryout is generally not positive for price, but with world supplies narrowing, buying interest did develop once futures moved 7-8 cents lower. We view the bean market is top heavy, as downgrades to the South American crop are now factored it. The likelihood of prices continuing to move upward could be slim if forecasters are accurate in increasing rainfall chances for Argentina.

WHEAT HIGHLIGHTS: Wheat futures saw choppy trade activity and eventually climbed to positive territory in Chi, gaining 1-3/4 to 3-1/4 cents, while KC lost 1/2 to 1-1/4 and Mpls 1-5 higher. As expected, today's USDA report confirmed big world inventories with the average pre report estimated of 266.2 million metric tons exceeded with today's figure now at 268.89. The US carryout number also rose from last month's 1.009 billion to 1.034 billion and above the pre report acreage estimate of 1.013. Prices bent but did not break today after the report was released and were impressive as they clawed back late in the session. We now argue that wheat prices, at worst, are in a consolidation mode. Positive news may be lacking. Crop ratings will continue to struggle and will likely do so until adequate moisture is in the forecast, which does not seem to be likely in the near term, as the Plains remain dry.

CATTLE HIGHLIGHTS: Cattle futures closed sharply lower on two sets of bearish data on today's USDA's Supply and Demand report. The nearby Apr live cattle contract closed 1.20 lower to 121.77, Jun closed 1.55 lower to 113.27, and Aug closed 1.20 lower to 111.25. Export sales data released this morning was friendly. US beef export sales for the week ending 3/1 were reported at 19,600 metric tons, vs the previous 4-week average of 15,050 metric tons. Cumulative sales for 2018 are now running 19.1% ahead of last year's pace, currently at 271,700 metric tons. Choice cuts closed 22 cents higher yesterday afternoon to 223.57 but backed off 9 cents this morning to 223.48. The negativity in cattle markets today was two-sided, with sellers active due to a bullish report for corn and also expectations for increased beef production. US corn ending stocks came in below the low end of estimates, pushing corn to a 4-6 cent gain on the day. This makes cattle more expensive to feed. In addition, the USDA increased their estimate for second quarter beef production by 50 million lbs. In February, second quarter production was estimated at 7.175 billion lbs, but production on this month's report was bumped to 7.225 billion lbs. This would be a record production for any quarter going back to at least 1970. Technical selling was also noted, with stops triggered after the initial sell-off on report data. Speculative longs may be getting nervous as well. The deferred Jun and Aug contracts traded down to their 200-day moving averages but were able to bounce to close slightly higher.

LEAN HOG HIGHLIGHTS: Hog futures closed within a few ticks of their opening prices in volatile trade. The nearby Apr contract closed 27 cents higher to 68.07, May closed 25 cents lower to 72.35, and Jun closed 35 cents lower to 78.25. Carcass cutout values took heavy losses for today's session, closing 3.21 lower yesterday afternoon to 74.71 and down another 2.45 this morning to 72.26. Bellies were down a whopping 9.48 today to 96.75. Weekly US pork export sales for the week ending 3/1 were reported this morning at 19,800 tons, vs the previous 4-week average of 24,075 tons. This leaves cumulative sales for 2018 6.8% ahead of last year's pace. Today's USDA Supply and Demand report was on the friendly side for hogs. Both quarter one and quarter two production estimates were lowered by 5 million lbs. However, 2018 is expected to see record production for both quarter one and quarter two. The Apr contract traded inside of yesterday's session. The Jun contract took sharp losses early in the session but was able to rally and closed near its opening price.

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