CORN

Corn futures were choppy overnight ahead of the release of one of the most important USDA reports of the year.  USDA will release the final 2020 crop production numbers, as well as a plethora of other key supply and demand data at 11:00 AM Central time.  Prices are sitting at levels not seen since 2014 with nearby contracts just below $5.00 resistance.  Dec corn traded both sides of 4.40 overnight while staying above 10-day moving average support.  The average trade estimate for U.S. 2020/21 corn production is 14.470 bil bu versus 14.507 with a yield trimmed to and estimated 175.3 bpa from 175.8.  Carryout is estimated near 1.599 bil bu vs USDA 1.702.  Many believe the number could be lower.  Dec 1 U.S. corn stocks could be near 11.951 bil bu vs 11.327 last year.  The average trade estimate for Brazil and Argentina corn crops are near 155 mmt versus USDA 159.  Some feel final South America corn crop could be 10-15 mmt below USDA’s last guess.  Meanwhile, additional support continues in the form of weather premium.  Argentina is to receive rain this week followed by very dry conditions next week.  Heading into today, Managed Money is net long 320,000 contracts.  Even a friendly January crop report could lead to fund long liquidation in row crops if the recent rally is viewed as being overdone based on the data.

SOYBEANS

Soybean futures were up overnight led by old crop contracts.  Nearby March beans were up 7 cents to 13.79-1/2.  Nov was up 3 to 11.58.  The average trade estimate for U.S. 2020/21 bean production is 4.15 bil bu versus 4.17 (Yield 50.5 bpa vs 50.7).  The average trade estimate for U.S. 2020/21 soybean carryout is near 139 mil bu vs USDA 175.  Managed Money is net long an estimated 193,000 soybeans; 96,000 lots of soymeal, and; 106,000 soyoil.  Price movement is likely to be volatile based on just how supportive today’s USDA data is.  Nearby bean futures have posted new daily highs 17 out of the last 18 sessions. The complex has continued to trend higher, supported by talk of increased Chinese demand for U.S. soybeans and a drier Argentina forecast.  Another notable rain event will impact central and northern Argentina Friday into Saturday due to a frontal boundary.  This rain will be important due to the lengthy period of dryness that is expected to follow it.  Last evenings GFS model removed plenty of rain that was in the midday GFS model run for the Jan. 24 – 26 period for central and northeastern parts of Argentina. Some shower and thunderstorm activity will be possible; though, it may be erratic.

WHEAT

Wheat futures traded higher overnight, posting double digit gains in Chicago and KC.  Nearby March SRW wheat futures gained 14 cents to 6.48-3/4 while staying inside Monday’s wide trading range that went down as an ‘outside day’ on the charts.  March HRW wheat futures were up 12 to 6.60; And, March Mpls Spring wheat was up 7 to 6.13.  Paris wheat has reached a two-year high and Russia is considering raising its wheat export tax from the currently planned 25 euro per ton for the last two weeks of February.  A slew of export tenders were reported overnight, and with the U.S. dollar showing signs of a near-term low being formed as the currency turns higher, futures are anticipating U.S. supplies as a cheap source.  Egypt seeks optional-origin wheat; Japan seeks 116,000 tons of optional wheat; Turkey seeks 400,000 tons of option-origin wheat; S. Korea bought 50,000 tons of U.S. wheat; And, Syria seeks 200,000 tons of optional wheat.  For today’s report, analysts are projecting a 20 mil bu increase in 2020-21 U.S. wheat exports from USDA’s current estimate of 985 mil bu.  The average trade estimate for U.S. 2020-21 wheat ending stocks is near 859 mil bu vs 862 last month.  The average trade estimate for U.S. 2021 winter wheat acres is 31.5 mil vs 30.4 last year.

CATTLE

Cattle market calls are mixed to lower following strong selling in the nearbys to begin the week.  Nearby Feb live cattle are testing the 100–day Moving average, while deferred contracts maintain their overall strength. Feeders mixed.  Cash trade is expected to remain undeveloped until the end of the week.  Slaughter was estimated at 119,000 head, versus 112 last week.  The market seems to have ample supplies available.  Carcass values finished mixed.  Choice was up .89 to 207.69 and Select lost .95 to 195.74., an indication that the Choice/Select spread may be starting to widen.  We view the cattle market still trending higher overall, but Monday’s activity signaling a test of support levels.  Deferred contracts hold good strength, pushing to new contract high closes.  

HOGS

Lean hog calls are steady to higher.  However, front month contracts continue to struggle with October price resistance while deferred contracts show strength, challenging or establishing new highs and building a strong up-trend.  June hogs are the subject of technical traders after posting a somewhat bearish reversal since Friday.  As has been the case, higher grain prices may be long-term supportive on futures, limiting expansion due to higher feed cost.  On the flipside, heavy production and available hogs for slaughter weigh on the market.  Estimated slaughter was at 498,000 for Monday, 8,000 more than last week.  Pork carcasses finished the day 2.38 higher to 83.38, posting a good recovery in from last week and trading nearly $6.00 over last Monday.  Good product movement was seen at 377 loads. This will support prices today.  Lean hog index closed .38 higher to 63.34 while trading 5.13 under February and limiting upside potential.

Author

Matthew Strelow