TFM Midday Update 10-2-19


Corn futures are finding some corrective selling pressure today, with Dec down 4-/34 to 4.87-3/4. Mar is down 4-3/4 to 3.99-3/4, and May corn is down 4 cents to 4.05-1/4. The 6-10 day weather forecasts have shifted from cool and wet to now indicating warm and dry conditions. This is conducive to harvest activities that have been held back by excessive rains lately. Given the amounts of rain, it is unclear how much dry weather it will take before harvest can get up to full speed. Calendar spreads are slightly lower today, but the recent strength shows the end users urgency in securing corn supplies. Dec corn closed its August gap yesterday. Yesterday’s session was the second in a row with Dec corn close overbought according to Stochastics and Bollinger bands. Much of today’s selling is technical in nature, and a test of the 50-day moving average support level at 3.83 is not out of the question. Speculative funds were thought to have bought about 20,000 contracts of corn yesterday.


Soybean futures are slightly lower this morning, with Nov down 4-1/2 to 9.15. Jan beans are down 3-3/4 to 9.28-3/4, and Mar beans are down 2-3/4 to 9.38-3/4. Weather conditions are improving in both North and South America with the United States forecast shifting to warm and dry weather, while Brazil has been receiving beneficial rains for planting season. Dec soybean crush traded as low as 76 cents yesterday, the lowest the spread has traded since December 2016. This indicates low crusher profits and possibly weakening end user demand. Nov beans were stopped yesterday at 9.20, their highest value since July 22. Prices were overbought according to both Stochastics and Bollinger bands Today’s range has been tight, and prices have not made any move toward nearby support at the 200-day moving average level at 9.11-1/4. Speculative funds were thought to have bought about 13,000 contracts of beans yesterday.


Wheat markets are sharply lower this morning, with Dec Chi wheat down 9-3/4 to 4.89. Dec KC wheat is down 7-1/2 cents to 4.04, and Dec Mpls wheat is down 9-1/4 cents to 5.23-3/4. Egypt is tendering for wheat for the second week in a row, which is supportive, especially given the rallying Russian wheat prices. Production estimates continue to come down, especially for the spring wheat crop due to poor harvest weather. However , waning technical momentum in all three of the wheat markets is attracting a wave of sellers today. Dec Chi wheat is retesting its 10-day moving average support level today after a strong close yesterday. Dec KC wheat has fallen below its 20-day moving average support level, and a close below would be the first since September 11. Dec spring wheat closed below its 10-day moving average yesterday for the first time since September 9 and appears to be retesting its 20 and 50-day moving average support levels. Speculative funds were thought to have bought about 3,000 contracts of wheat yesterday.


Cattle markets are slightly higher today, with Oct lives up 82 cents to 105.45. Dec lives are up 40 cents to 110.22, and Feb lives are  up 20 cents to 116.25. Oct feeders are up 32 cents to 141.30, and Nov feeders are up 85 cents to 141.02. Both the live and feeder markets are sharply overbought and posted outside sessions lower yesterday. Today’s higher prices action is impressive after a test of nearby support and a jump in beef value. Inverted head-and-shoulders formations are still pointing to higher prices over a longer term, while a correction in the near future could be warranted given the overbought nature of current prices.


Hog markets are slightly higher today, with Oct up 10 cents to 62.65. Dec hogs are up 27 cents to 70.20, and Feb hogs are up 12 cents to 76.22. Cash fundamentals have turned higher, which is a very supportive sign. Still, the enormous premium of futures prices to the cash index is currently a major limiting factor. Hog futures have traded within very tight ranges today and have tested both nearby support and resistance. With U.S. pork exports beginning to pick up, too much downside is tough to rationalize from here. Too much upside is also unlikely in the short term with the cash index so far below current futures levels.


Lisa Heder

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