TFM Midday Update 2-28-20


Corn futures are choppy to slightly lower into the midday, with Mar unchanged at 3.64-1/2, Jul down 1-1/2 to 3.71, and Dec down 1-1/2 to 3.76. The U.S. dollar is correcting from recent highs which is supportive, but outside markets are very negative. Crude oil is down nearly 3.00 which will tighten ethanol margins. The Brazilian real is pushing to new lows yet again. In addition, Farm Futures released a U.S. corn acreage yesterday of 96.6 million acres, which could grow ending stocks even larger than what the USDA Outlook Forum was projecting. May corn is down 1 cent, and though it traded at new lows early in the morning, it has rebounded to more moderate losses. May and Jul corn both tested resistance at the lower Bollinger Band level this morning but couldn’t break through. Stochastics are sharply oversold. Speculative funds were thought to have sold about 24,000 contracts of corn yesterday.


Soybean futures are slightly soft this morning, with Mar down 1 cent to 8.85-1/4, Jul down 4-3/4 to 9.00, and Nov beans down 6-1/4 to 9.07-1/4. The Brazilian real is at new all-time lows yet again today, but coronavirus fears are still scaring traders. The spread of the virus in China may be slowing down as crushing activities have picked up over the past couple of days. Farm Futures released their U.S. soybean acreage estimate yesterday at 80.6 million acres which could tighten U.S. supplies extremely quickly. Jul beans traded at new lows for the move overnight, but have rallied and are trading within the upper third of the day’s range. Momentum indicators are pointing sideways despite the recent volatility. Speculative funds were thought to have bought about 7,000 contracts of soybeans yesterday.


Wheat markets are down hard this morning, with Mar Chi wheat down 12-1/4 to 5.17, Mar KC wheat down 10-1/4 to 4.33, and Mar spring wheat down 3-1/4 to 5.04-1/2. The pullback lately in the dollar is a big supportive force of the wheat markets, especially since export demand has stayed relatively strong given the spread of coronavirus. Warmer conditions in the Plains over the next 10 days could create good plant growth but it does leave the wheat crop vulnerable to a cold snap in March. Overall though, weather looks non-threatening, hence the selling pressure this morning. May Chi wheat is down 13 cents to its lowest price since November. May KC wheat is trading at its lowest levels today since December 12, and May spring wheat is testing lows from late November. All three markets are sharply oversold according to Stochastics. Speculative funds were thought to have sold about 6,000 contracts of Chi wheat yesterday.


Cattle markets are sharply lower this morning, with Apr lives down 2.92 to 107.55, Jun down 2.42 to 101.50, and Aug lives down 1.67 to 102.80. Mar feeders are down 2.42 to 130.12 and Apr feeders are down 2.32 to 131.70. With the spread of coronavirus across China during the month of January, beef supply pipelines are thought to have been clogged up. This will likely decrease Chinese beef demand in the near future and will pressure beef markets elsewhere in the world. Economic instability in the U.S. is a negative for domestic beef demand, especially after enormous drops in the stock market this week. Dressed steer weights have increased for two weeks in a row, contrary to the normal seasonal trend which will likely add to beef supply and pressure prices. Apr live cattle are pushing to new contract lows this morning after gapping lower on the open. Prices are sharply oversold according to Stochastics and Bollinger Bands. Apr feeders are at their lowest levels today since mid-September but have come off of the session’s lows in a negative yet choppy session.


Hog markets are moderately lower this morning, but not nearly as much as some of the other ag markets. Apr hogs are down 70 cents to 61.85, Jun is down 1.10 to 76.95, and Jul is down 1.00 to 78.40. The index has turned lower today and instability in pork prices is not a positive fundamental development either, but prospects for large Chinese purchases soon are still keeping selling interest somewhat limited. It also helps that pork demand is not nearly as sensitive to economic conditions as beef, especially in China. The best traded Apr contract is trading just off the lows of the day but is still holding lows from early February. Momentum indicators are pointing lower, though the hog markets appear to be extremely sensitive to large Chinese purchases moving forward.


Carol Tillmann

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