TFM Midday Update 3-16-20


Corn futures are under selling pressure from the risk-off attitude in most markets this morning. May corn is down 8-1/2 cents to 3.57-1/4, Jul down 8 cents to 3.60-1/2, and Dec down 4-1/4 cents to 3.68-3/4. It is unclear at this point what effect the spread of coronavirus will have on physical corn supply and demand fundamentals. However, with energies lower, we can reasonably expect ethanol margins to tighten and demand to pull back. Normally at this time of year, the market begins to price in uncertainty regarding the 2020 corn crop, but the market is currently pricing in a different kind of uncertainty as we push into new lows. Jul corn futures are trading just off their lows of the day currently and have moved to new session lows yet again. Jul corn has fallen below its Bollinger Band support level and is dipping further into oversold territory. Speculative funds were thought to have sold about 2,000 contracts of corn on Friday.


Soybean futures this morning are trading with mostly double-digit losses. May soybeans are down 12-3/4 to 8.36, Jul beans down 12 to 8.44, and Nov soybeans down 9-3/4 to 8.54-3/4. The Brazilian real retested recent lows this morning from last Thursday but has so far been unable to break through. The weak Brazilian real has made it very difficult for U.S. exporters to make good sales of beans, especially given the recent recovery in the U.S. dollar. Palm oil futures were lower overnight which is a pressure point, but China soybean meal futures jumped 3% overnight as meal demand begins to recover as China industry gradually ramps back online. Weather in South America is still hot and dry and forecasts are showing more of the same. Argentina crop estimates have come down lately due to this weather and could continue. Jul soybeans briefly traded higher overnight, reaching as high as 8.63-1/4. However, keeping with the recent trend, sellers quickly swept in to push bean prices lower on the session. Soybeans have had a hard time holding together any positive gains from the early morning and overnight sessions. Soybean futures are below their Bollinger Band support levels and are creeping further into oversold territory. Speculative funds were thought to have sold about 8,000 contracts of soybeans on Friday.


Wheat markets are sharply lower this morning, following the risk-off trend in most markets. May Chi wheat is down 12 cents to 4.94, May KC wheat down 10-1/2 to 4.21, and May spring wheat down 2-1/4 to 5.05-3/4. Good weather and solid soil moisture in the U.S., as well as a strong U.S. dollar, are keeping the pressure on wheat markets today in spite of some European supply developments. Ukraine production estimates are down 12.5% from last year due to a lack of soil moisture from a snowless winter. France’s soft wheat crop is currently rated 63% good to excellent, down from 64% last week and down from 85% last year. This week’s ratings are the lowest for this time of year in at least nine years. There is also talk that recent heavy rains in India could lower yield by up to 3% in key areas. May Chi wheat is trading at its lowest levels today since mid to late-September. Prices have so far respected their Bollinger Band support levels but are still oversold according to Stochastics. May KC wheat is trading at the lows of the day so far and prices are at their lowest values since mid-September. Spring wheat futures are holding together a bit more impressively, attempting to make a double-bottom with last Thursday’s lows. Still, Mpls wheat is oversold stochastically but some consolidation at these levels looks possible. Speculative funds were thought to have been about net-even in Chi wheat on Friday.


Cattle markets are down very hard this morning, trading with near limit down prices currently. Apr lives are down 3.85 to 91.72, Jun lives are down 4.30 to 85.37, and Aug lives are down 3.70 to 85.47. Apr feeders and May feeders are both down 4.50 to 108.10 and 109.97 respectively. Slaughter last week was up 3.6% from a year ago, and with rising weights, beef production for that week was up 7.6% from last year. Cash cattle trade in the country on Friday was able to stabilize from the sharp drop last week but was still recorded in the $105 to $107 range in most areas. Beef values are beginning to rally as grocery stores and other end users book as much beef as possible, anticipating a decent possibility of packer shutdowns. Apr live cattle opened sharply lower this morning, and briefly tested their 4.50 limit lower. Live cattle prices are currently a bit off of the lows. Apr feeders have been locked at their limit lower all session while May briefly traded off.


Hog futures are trading with sharp double-digit losses today. Apr hogs are down 2.25 to 54.12, Jun down 4.50 to 66.80, and Jul down 4.50 to 68.00. Pork production last week was up 8.6% from a year ago, partly helped by higher slaughter, and probably by higher weights. Carcass cutout values are rallying and made their highest close on Friday since January 31 as end users book as many supplies as they can in case of widespread packer shutdowns. The futures market is finding sharp pressure on ideas that if packers shut down, animals will sit on farms and gain weight, pushing higher production down the road eventually. Apr feeders have traded as high this morning as 55.15, and have not sat at their limit lower. Still, they are sharply oversold and well below their lower Bollinger Band support level. Jun and Jul hogs also traded off their limit earlier this session but have since backed off. Jun reached as high as 69.37 and Jul live reached 70.77.


Carol Tillmann

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