TFI Sunrise Update 12-18-2020


Corn futures gained 2 cents overnight on spillover support from higher trade in the bean complex.  March corn achieved a new high for the month at 4.34-3/4 and is up 11 cents for the week.  Managed Money is already long a substantial number of corn contracts on this rally, now pegged at an estimated 314,000, as good weekly U.S. corn sales and talk of lower 2021 South America corn crops boost March corn above 4.30 with the next objective being 4.50.  The contract high from November 30 is 4.39-1/2.


Soybean futures made new highs overnight on follow-through from Thursday’s rally through $12.  Jan beans gained another 15 cents to 12.16-1/4.  March made it to 12.21.  Weekend rains for Argentina have been downgraded in the past 24 hours keeping a dry weather pattern in place, thus ushering in price premium to the marketplace.  Argentine soy planting has been slowed by dryness, the Buenos Aires Grains Exchange said in its weekly crop report; reaching 67.8% of the 17.2 million hectares expected to be sown with the oilseed in the 2020/21 season.  This year’s planting tempo lags last year’s by 2.5 percentage points, the exchange said in a statement.  The next price target for March bean futures is up at $13.00, supported by a bullish stocks-to-use ratio.   Nearby soybean meal futures broke above $400/ton, and Jan bean oil breached the $40 barrier.  As of Thursday’s close, Managed Money was estimated net long 228,000 soybeans; 81,000 lots of soymeal, and; 118,000 soyoil.


Winter wheat futures were up 4 to 5 cents overnight, influenced by higher row crops and this week’s new lows in the dollar.  Prices remain generally rangebound, but are ending the week on a positive note as Chicago contracts get back above $6.00.  The NOAA 90 day U.S. weather forecast calls for above normal temps and below normal rains in the south and above normal rains in the Ohio river valley. Informa estimated the U.S. 2021 wheat acreage near 45.4 mil this week versus 44.4 last year.  The 2021 U.S. all wheat crop is estimated near 1.909 bil versus 1.828 last year.  Meanwhile, Russia is attempting to stabilize food prices with a grain export quota and a wheat export tax from mid-February to the end of June.  Extra customs checks could be aimed at ensuring that grain exports do not accelerate in the run up to Feb. 15, when the wheat export tax is due to be introduced, according to newswires.


Cattle calls are for mixed to higher after another dose of technical buying pushed Fed cattle to its highest level in 2 weeks and June-Dec contracts expanded their rally to new contract highs.  Optimism about tighter overall cattle supplies and about tight placements in this afternoon’s Cattle on Feed number is a driving force behind the buying interest.  Trade estimates are for Cattle on Feed for December to come in at 100%; Placed (Nov) at 91.8; and, Marketed (Nov) at 97.9, yet, we may see some profit-taking pressure ahead of the report.  Yesterday, cash trade improved with late afternoon trade at $108-$109/cwt, up from $105 earlier in the week and steady with last week.  This added to the afternoon bid in futures.  Choice carcass finished 2.29 higher to 209.51 and Select was up 1.61 to 193.70.  Prices gained off midday strength into the close.  Product movement has been good, a signal of good carcass value.  Feeders are finding support from talk of strong cash markets and technical buying supporting futures, allowing for nearby contracts to hold above the $140 level, which is favorable.  Feeders are also showing strength on a forecast for tighter numbers.


Lean hog calls are steady to lower after the market failed to push through overhead resistance during this lower technical trend.  Weekly export sales were strong.  For 2020, 39,900 MT, for 2021: 44,300 MT, with Mexico and China top buyers.  Export shipments showed 42,000 MT, yet the strong movement failed to move the market.  Heavy pork production and large slaughter limits upside potential.  Wednesday’s slaughter was 480,000 head, but under last week.  We view the strong slaughter pace may be slowing into the end of the year.  The CME Lean Hog Index was off by .01 to 65.05 and Feb is trading over the index, which may limit upside.  In addition, the pork Product index is trending sideways to lower, losing .46 on Thursday to 76.81.  Overall,  hogs look technically weak after retesting resistance, and the fundamental picture needs to improve to bring buying interest back into the market.


Matthew Strelow

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