CORN

Corn futures were rather quiet overnight with 5 to 6 cent trading ranges registered in the nearbys, and a 4 cent range in new crop December corn 4.57 to 4.53.  The dollar is up 33 basis points, reversing yesterday’s drop to a 3-week low.  On Friday, USDA will have their annual Outlook Forum. They will provide a glimpse at U.S. 2021/22 corn Supply and Demand using their baseline acres, trend yield and trend demand numbers. The trade is building in 92.9 million U.S. 2021 corn acres, a U.S. 2021 crop near 15.243 bil bu and 2021/22 carryout near 1.725 bil bu.  Dec corn is sitting just above 4.50 at 4.53-1/2.  May corn is trading both sides of 5.50.  For now, the trade will monitor the current situation surrounding a reduction in ethanol production in the last week caused by the spike in cold weather and natural gas prices.  Ethanol margins in the Corn Belt have dropped sharply due to the frigid weather, falling to negative-$3.92 a gallon, the lowest since at least 2010, Refinitiv Eikon data showed.  Natural gas prices have soared because of power needs, hitting their highest levels in years due to the cold snap.  Overnight tenders showed South Korea buying 69,000 tons of option-origin corn.

SOYBEANS

Soybean futures traded mixed overnight with a firm tone led by more new highs in soyoil and a friendly NOPA Crush for the month of January.  On Friday, USDA will have their annual Outlook Forum where they will release their first U.S. 2021/22 soybean Supply and Demand estimates using their baseline acres, trend yield and trend demand numbers. The trade is looking for 89.9 soybean acres versus 83.1 last year.  Meanwhile, old crop futures contracts are settling into a month-long sideways trading range just above near-term moving average support while keeping a bullish tilt, overall.  Nov beans, at 11-88-1/2, are looking more healthy from a constructive point of view and are testing contract high resistance near 12.00.  The latest South American weather models suggest conditions in much of Brazil will continue to be favorable.  In Argentina, net drying is expected across a majority of Argentina through next Tuesday.  Rain that occurs will be erratic and there will be localized areas of meaningful moisture; however, there will also be pockets that get very little.  Crop stress is unlikely to become very serious in the first week of the outlook; however, greater rain will be needed in the second week.  Rain in the second week is likely to be erratic as well.

WHEAT

Wheat futures retreated overnight from Tuesday’s rally.  May Chicago wheat shed 8-1/4 cents to 6.53-1/4.  KC wheat was down 7-1/2 to 6.35-3/4 (May); and spring wheat futures dropped a nickel to 6.36-1/4.  Follow-through buying looks to have faded overnight amid a rebound in the dollar, setting up a classic “turnaround Tuesday” reversal, only it is Wednesday today, the second trading day of this trade holiday-shortened week.  The entire complex is again gravitating toward their 10 and 20-day moving averages ahead of some market-sensitive USDA estimates at the end of the week.  Using baseline data, USDA’s Outlook Forum is expected to come out with the following U.S. Supply and Demand estimates:  45.3 million all wheat acres with a U.S. 2021 all Wheat crop near 1.874 bil bu and carryout near 769.  Overnight tenders included Philippines seeking 145,000 tons of optional-origin wheat, and Algeria buying small amounts of optional wheat.

CATTLE

Cattle futures are called steady to higher within a supportive technical picture as money flow favors managed money building a long position.  Positive cash trade will likely be needed to maintain the upside with the premium of the market to cash.  Cash was undeveloped on Tuesday, with no bids reported and asking prices at $116.  Carcass values finished higher with Choice carcasses gaining 2.33 to 234.77 on moderate demand.  Strong retail values lead to cash optimism.  The widespread winter storm and cold temperature should impact growth and carcass weights, helping fuel cash optimism.  Looking ahead to Friday, the February Cattle on Feed report is scheduled for after the close that afternoon.

HOGS

Lean hog futures are called steady to higher.  The Lean hog index traded strongly higher gaining 2.18 to 74.54, reflecting the cash market.  In addition, retail values, trading near $90 is nearly $25 over last year, and product movement has been strong, reflecting the demand in the pork product market.   However, the futures market is overbought and support from a strong winter storm may begin to wane and allow prices to ease.  Pork carcasses closed lower on Tuesday, dropping 1.55 to 89.71 on 318 loads, which may also offer resistance to market strength.  April hogs, at 86.17 face support down near 84.30 should a break to the downside occur from here.

Author

Matthew Strelow