TFM Midday Update 1-7-20


Corn futures are trading steady to very slightly lower so far today, with Mar unchanged at 3.84-3/4, May is down 1/4 cent to 3.91-1/4, and Jul is down 1/2 cent to 3.97-1/2. Trade has been very choppy today as traders continue to anticipate Friday’s USDA supply and demand data dump. Most are expecting production to come down, and in turn, ending stocks. Reports this morning that China will not increase its annual low tariff import quotas for corn was slightly bearish. This brings many back down to earth that were previously expecting Chinese corn purchases from the U.S. to explode. The best traded Mar contract has traded within a range today of just 2-1/4 cents. Prices are currently below their 20-day moving average level and a close below would be the first since December 11 and would turn the technical momentum lower. Prices have remained within yesterday’s range so far and are likely to stay choppy before Friday’s report. Speculative funds were thought to have sold about 4,000 contracts of corn yesterday.


Soybean futures are moderately lower so far today, with Jan down 2-1/2 cents to 9.30-1/4, Mar beans were down 5-1/2 to 9.39-1/4, and May beans were down 5-3/4 to 9.52-1/2. While prices are lower today, soybeans have been able to stabilize after the sharp selloff on Friday, partially due to news that China is still planning to sign the Phase One trade deal on January 15. Traders are still expecting lower production and ending stocks on Friday’s USDA Supply and Demand report, but with prices nearly 60 cents off of the lows from a month ago, there could be some air below prices if the USDA throws the market a curveball. Mar soybeans are currently making a second inside session in a row. Prices are just off the lows of the day but are still holding the lows from Friday. Mar beans briefly tested their overhead 10-day moving average resistance level earlier in the session. Speculative funds were thought to have bought about 4,000 contracts of beans yesterday.


Wheat markets are soft this morning, with Mar Chi wheat down 2-3/4 to 5.47-1/4, Mar KC wheat is down 6 cents to 4.71-1/4, and Mar Mpls wheat is down 4 cents to 5.44. Extremely dry and hot conditions in Australia, along with wildfires, have created some concerns about global wheat supplies, but the extent of the wheat crop damage remains unknown. Tension in the Middle East, particularly with Iraq voting to expel U.S. Armed Forces is also a bearish development for the wheat markets as Iraq is the region’s number one wheat importer. The U.S. dollar is higher today which makes U.S. wheat more expensive on export markets. The Mar Chi wheat briefly tested overhead resistance at the 10-day moving average this morning but has since fallen below yesterday’s lows. Mar KC wheat is trading at the lows of the day so far and is making a move below the 10-day moving average. A close below would be the first since December 11. Mar spring wheat is making an inside session, trading just off the lows of the day so far. Speculative funds were thought to have sold about 3,000 contracts of Chi wheat yesterday.


Cattle markets are showing moderate losses so far today, correcting from yesterday’s sharp gains. Feb lives are down 1.05 to 126.22, Apr lives are down 97 cents to 127.12, and Jun lives are down 87 cents to 118.57. Jan feeders are down 1.60 to 145.82 and Mar feeders are down 1.45 to 144.90. At the moment, increasing beef supplies seem to be a limiting factor for cattle markets. Still, cash market strength has been noted and the premium structure of futures to cash has reverted more in line with historical norms. Beef values are beginning to rebound higher as well. Feb live cattle are currently testing their 10-day moving average support level but still making a relatively quiet inside session. Jan feeders are also making an inside session after a close yesterday above their Bollinger Band resistance level. Both the live and feeder cattle markets are sustaining their recent sideways trends.


Hog markets are slightly higher so far today, with Feb up 27 cents to 68.90, Apr is up 40 cents to 75.35, and Jun is up 22 cents to 87.15. The cash index may have put in a recent bottom and Chinese pig prices continue to rally. U.S. pork production is expected to pull back soon which should also be supportive, especially as China theoretically steps up purchases of U.S. pork. The Feb lean hog futures prices are trading within a fairly tight range today and currently near the midpoint of the day’s range. While new buyers at these levels appear somewhat hard to come by, so are new sellers, especially given longer-term supply and demand setups.


Carol Tillmann

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