TFM Midday Update 1-27-20


Corn futures are showing sharp losses so far today, with Mar down 7-1/2 to 3.79-3/4, May down 7 cents to 3.85-3/4, and Jul down 6-1/2 to 3.91-1/4. Corn is being lowered this morning by softer energy prices, and with it, a concern about slowing ethanol demand. The U.S. dollar is higher this morning and the coronavirus outbreak in China leaves many thinking that U.S. ag purchases will fall on the back burner for now. Mar corn traded at its lowest levels today since January 17, reaching as low as 3.77-1/4. Prices have since bounced back within their Bollinger Band range and there is now a gap between Friday’s lows and today’s highs. Speculative funds were thought to have sold about 10,000 contracts of corn on Friday.


Soybean futures are trading moderately lower today, recovering from sharper losses on the overnight session. Mar beans are down 8-1/2 to 8.93-1/2, May beans are down 8-1/2 to 9.07-1/4, and Jul beans are down 8-1/2 to 9.21. A higher U.S. dollar and lower Brazilian real make U.S. beans comparatively expensive on the export markets, and with a record Brazilian crop coming online soon, this is a pressure point for U.S. prices. Most are not expecting much in the way of Chinese purchases in the near term as their focus has instead shifted to containing coronavirus. Mar beans closed at their lowest levels on Friday since December 5, and increasing open interest suggests funds are selling on this downtrend. Mar traded as low this morning as 8.88-1/4 but has since come back a bit. Today’s session has left a gap between 9.00 and 9.00-3/4. Speculative funds were thought to have sold about 4,000 contracts of soybeans on Friday.


Wheat markets are under pressure as well this morning, with Mar Chi wheat down 8 cents to 5.65-1/2, Mar KC wheat down 5 cents to 4.81, and Mar spring wheat down 3/4 of a cent to 5.46-3/4. Without much in the way of new fundamental developments, it is unclear if today is a continuation of new selling action or just a correction of the months-long uptrend. A stronger U.S. dollar is a pressure point, particularly in wheat given the large global ending stocks picture. Still, wheat sales are running at a good clip as exportable supplies across the globe dwindle. Mar Chi wheat opened below its 10-day moving average this morning and tested its 20-day moving average support level. Prices have since bounced back above that level, though a close below would be the first since December 11. Mar KC wheat closed below its 20-day moving average level on Friday for the first time since December 11 and has remained below that level for all of today’s session after a gap lower open. The Mar spring wheat briefly tested support at the 100-day moving average level but has since returned back to its Bollinger Band range in some impressive midday recovery. Speculative funds were thought to have sold about 4,000 contracts of Chi wheat on Friday.


Cattle markets are showing sharp losses so far today, with Feb lives down 2.05 to 122.80, Apr lives are down 2.75 to 121.55, and Jun lives are down 2.60 to 113.42. Mar feeders are down 4.02 to 135.65 and Apr feeders are down 4.07 to 138.42. The stock market is down hard this morning due to a risk-off attitude caused by the spread of coronavirus. Cattle markets are reactive to the stock market, so this is part of the source of pressure this morning. Friday’s Cattle on Feed report was neutral to very slightly bearish and cash trade last week was light though slightly higher from the previous week. Apr live cattle made their lowest close on Friday since November 22 and prices gapped lower this morning and are trading below their 100-day moving average support level for the first time since September 20. This is a hard technical break and could open the door for speculative long liquidation. Mar feeders are trading at their lowest prices currently since mid-September after falling through support levels not tested since late September.


Hog markets are sharply lower this morning, with Feb down 1.87 to 65.35, Apr down 2.75 to 70.70, and Jun down 2.75 to 83.65. The CME Lean Hog Index set its highest levels today since November 4 though pork prices were softer last week. China is not expected to ramp up U.S. ag purchases in the near term as their focus is instead on containing coronavirus. Pork production in the U.S. last week was up 9.9% from the previous week. Friday’s session was technically disappointing, with unsuccessful tests of nearby resistance and subsequent breaks below nearby support. Hogs gapped lower this morning and are pushing into their lowest prices since August.


Carol Tillmann

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