TFM Midday Update 2-26-20


Corn futures are trading fractionally higher this morning in more choppy two-way price action. Mar corn is up 1/2 cent to 3.73, Jul is up 1/2 cent to 3.80-1/2, and Dec corn is up 1-1/4 to 3.83-1/2. The spread of coronavirus in China appears to be slowing which could increase the likelihood of large corn and/or DDG purchases beginning next week when China begins to issue tariff waivers. Feed usage has been very strong lately, with January chicken production up 6.3% from last year, January pork production was up 8% from last year, and beef production was up 3% from last January. Still, expectations for heavy supplies this coming year are keeping a damper on prices. Jul corn has traded within yesterday’s range so far but is at the highs of the day currently. Corn futures are nearly oversold according to Stochastics and Bollinger Bands. Speculative funds were thought to have been net even in corn yesterday.


Soybean futures are trading moderately higher in an impressive bounce so far today, with Mar up 8-1/2 cents to 8.87-1/2, Jul is up 9-1/4 to 9.09, and Nov beans are up 8-1/2 to 9.19. While the CDC is already giving warnings about the spread of coronavirus into the U.S., the spread in China may be slowing down. If this is the case, it could increase the likelihood of major soybean purchases that will count towards Phase One commitments. China will begin to issue tariff waivers next Monday, so we could see purchases surface as soon as then. The U.S. dollar is higher today and the Brazilian real is also higher, keeping the spreads relatively neutral. Jul soybeans tested nearby support this morning at their lower Bollinger Band and have since rallied up to test their 10 and 20-day moving average resistance levels. A close above would be the first since January 2 and should open up some more topside. Otherwise, futures may still be under the influence of Monday’s sharp break. Speculative funds were thought to have bought about 6,000 contracts of soybeans.


Wheat markets are moderately higher so far this morning, with Mar Chi wheat up 2-1/2 cents to 5.41-1/2, Mar KC wheat up 3-3/4 to 4.58-3/4, and Mar Mpls wheat up 1-3/4 to 5.17-3/4. Both the U.S. dollar and Russian ruble are higher this morning which is mixed for U.S. wheat markets. Good soil moisture for winter wheat in the Plains is bearish, along with forecasts for above-normal precipitation over the next two weeks. European wheat is posing stiff competition to U.S. exports lately, with the weakness in the euro currency. European soft wheat exports are running 63% ahead of last year’s pace. Mar Chi wheat made a hook reversal yesterday, holding support and possibly putting in a near-term low. Mar KC wheat has tested and held its 100-day moving average support level for the second session in a row so far today and Mar spring wheat had bounced back within its Bollinger Band range though was still oversold according to Stochastics. Speculative funds were thought to have sold about 5,000 contracts of Chi wheat yesterday.


Cattle markets are mixed this morning, with Feb lives down 37 cents to 114.65, Apr lives are down 7 cents to 112.87, and Jun lives are down 15 cents to 105.65. Mar feeders are up 82 cents to 133.80 and Apr feeders are up 1.05 to 135.17. Cash cattle values fell sharply yesterday which is no surprise given the weakness in beef values. It seems likely that beef demand can pull back even further given the CDC warning that coronavirus will probably spread through the U.S. at some point. This would impact the travel and restaurant business significantly. Apr live cattle traded at their lowest levels today since September 10 but have not surged lower like past sessions. Apr feeders are putting in a decent bounce, but are well off the highs for the day and have not traded outside of yesterday’s range.


Hog markets are slightly higher this morning, with Apr up 17 cents to 64.85, Jun is up 37 cents to 80.07, and Jul is up 50 cents to 81.30. If the spread of coronavirus in China is actually slowing down, then it looks likely that China will become an even bigger buyer of U.S. pork in the near term. China will be auctioning 20,000 tons of pork from state reserves tomorrow, further increasing the livelihood of large purchases. However, without these purchases, the domestic supply picture looks very heavy. Production has surged lately though a pullback in restaurant demand will not hurt pork as much as beef. The best traded Apr contract has tested its overhead resistance this morning at the 10 and 20-day moving average levels but has not broken through. A close above would be a positive technical development and open up room to test the highs from last Wednesday. Price action has been mostly choppy and quiet thus far today.


Carol Tillmann

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