TFM Midday Update 2-27-20


Corn futures are pushing to new lows this morning under further coronavirus pressure, with Mar down 6-1/2 to 3.64, May down 6 cents to 3.68-1/2, and Jul down 5-1/4 to 3.73-1/2. Outside markets are decidedly negative this morning, with the stock market down over 600 points and crude down nearly 3.00. The weaker energy markets could impact ethanol demand. Still, the market is not devoid of positive fundamentals. Argentina’s Ministry of Agriculture recently suspended exports until further notice. This is typically done before a change in tax structure, and many are expecting the new government to increase export taxes on ag goods. The U.S. sold about 865,000 tons of corn for the week ending February 20, down 31% from last week and down 26% from the previous 4-week average. Mar corn traded as low this morning as 3.61-3/4, a new low for the life of the contract. Corn futures have fallen below their Bollinger Band range and are oversold according to Stochastics. Speculative funds were thought to have sold about 9,000 contracts of corn yesterday.


Soybean futures are lower this morning after recovering from sharp early morning losses. Mar corn is down 1-1/2 to 8.79-1/2, May is down 3-3/4 to 8.88-1/4, and Jul beans are down 3-3/4 to 8.99. Argentina suspended agricultural exports recently, and this usually leads to a sharp increase in export taxes. This would be a major supportive factor for soybean export prospects moving forward. The dollar is lower this morning which is supportive though the real has moved to new lows yet again. For the week ending February 20, the U.S. sold about 339,000 tons of soybeans, down 31% from the previous week and 38% from the previous 4-week average. This missed expectations by about 260,000 tons. Mar soybeans made lows this morning at 8.66-3/4 but have since rallied back and are trading just off of the day’s highs. Impressive price action is not necessarily a bottoming signal but is a sign that traders want to own beans around these price levels. This is the second test of the lower Bollinger Band support level in four sessions. Speculative funds were thought to have bought about 5,000 contracts of beans yesterday.


Wheat markets are moderately lower in sympathy with the rest of the grain complex, with Mar Chi wheat down 8-1/4 to 5.32, Mar KC wheat down 6-3/4 to 4.45-1/2, and Mar spring wheat is down 4-3/4 to 5.10-1/2. The U.S. dollar is sharply lower today which is helping to provide some support, though fears of trade slowdown are keeping the pressure on. News that Argentina will suspend ag exports is supportive as well. Mar Chi wheat has fallen back below its 100-day moving average support level this morning after two consecutive closes above it. This is a negative technical development and could open up a retest of the 200-day moving average support level at 5.25. Mar KC wheat is trading at its lowest levels today since December 13 and Mar spring wheat traded at its lowest values today since December 3. All three wheat markets are oversold according to Stochastics. The U.S. sold 382,000 tons of wheat for the week ending February 20, up 10% from last week but down 23% from the previous 4-week average. Speculative funds were thought to have sold about 3,000 contracts of Chi wheat yesterday.


Cattle markets are sharply lower this morning but have come off of limit down prices. Feb lives are down 2.87 to 111.20, Apr lives are down 2.67 to 109.67, and Jun lives are down 2.50 to 102.52.  Mar feeders are down 3.42 to 130.65 and Apr feeders are down 3.92 to 132.05. The continued spread of coronavirus across the world, and expectations that it will spread through the U.S. at some point, is a big negative for travel, restaurant business, and beef demand in general. Cash cattle have already lost $4-$5 this week. The stock market is down over 500 points at the time of this reading and is now down over 2,600 points for the week so far. Apr live cattle gapped lower this morning and were locked at limit lower for most of the morning but have come off a bit. Apr lives are sharply below their Bollinger Band range and Stochastics are giving oversold readings as well. Mar feeders have also come off of sharp earlier losses and are trading about halfway up the day’s range so far. Momentum indicators are still pointing lower though a quick bounce could come on some stock market stability.


Hog markets are trading with triple-digit losses so far today, with Apr down 2.60 to 62.55, Jun down 2.57 to 77.80, and Jul down 2.70 to 78.90. Coronavirus uncertainty is the main pressure point on hogs today, similar to the rest of the ag markets. However, with some stability in the cash index, stability in cutout values, as well as expectations for big China purchases soon, the market may not stay under pressure for long. Keep in mind that China will begin to issue tariff waivers on Monday and China could make moves to replenish state reserves relatively quickly. The best traded Apr contract is at its lowest levels today since April 6 after an unsuccessful test of resistance at the 20-day moving average level. Momentum indicators have shifted lower despite recent stability.


Carol Tillmann

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