TFM Midday Update 3-17-20


Corn futures are soft yet again today, with May down 5-1/2 to 3.49-1/4, July down 4-3/4 to 3.53-3/4, and Dec down 2-3/4 to 3.64-1/4. Crude oil is slightly higher today, but there is growing concern for corn demand from the livestock sector. With the quickly collapsing livestock prices, one cannot help but wonder if the livestock profitability will be squeezed very quickly. This can lower replacements and therefore impact feed demand in a noticeable way. Apart from the normal fundamental topics, corn is still suffering from an overall risk-off tone as most other markets are choppy to lower today. Jul corn futures have broken to new lows once again, trading as low this morning as 3.52-1/2. Prices are well below their Bollinger Band ranges and are falling further into oversold territory. Speculative funds were thought to have sold about 32,000 contracts of corn yesterday.


Soybean futures are finding a bit of a bounce this morning, with May up 4-3/4 to 8.26-1/2, July beans up 4-1/4 to 8.34-3/4, and Nov up 2-3/4 to 8.47-1/2. There may be a bit of a better feeling in markets today that the U.S. government is doing more to slow the spread of coronavirus. However, export activity around the world is slowing considerably, and this could quickly impact the soybean complex if it continues. There are reports that the U.S. has only one cargo of soybeans left to ship to China for the current exporting season, practically unheard of for this time of year. This is even more concerning given the fact that China is still committed to huge U.S. farm-good purchases under the Phase One trade agreement. The 6-10 day forecast in Brazil and Argentina looks mostly dry at this point. Jul soybeans have been unable to break below yesterday’s lows. Jul beans traded as high this morning as 8.40-3/4 and have reached as low as 8.30-3/4. The relatively quiet 10 cent range is somewhat impressive though it is not a bottoming signal. Prices are still well-below their Bollinger Band range and are still oversold according to Stochastics. Speculative funds were thought to have sold about 7,000 contracts of soybeans yesterday.


Wheat markets are finding some short-covering action today, possibly stabilizing their recent lows. May Chi wheat is up 3 cents to 5.01, May KC wheat is up 6-3/4 to 4.30-1/2, and May spring wheat is up 8 cents to 5.17-3/4. The market is still a bit concerned about heavy rains in India that could possibly lower production. There is also talk of lower production in Ukraine and other Eastern European countries though overall, the global supply picture is still not tight enough to initiate an extended rally. There are also concerns that coronavirus will continue to weigh on wheat demand, particularly wheat export activity. The U.S. dollar is sharply higher today, trading at its highest level since February 21. That, coupled with the lower Russian ruble is very bearish. The fact that wheat is finding some stabilization action in light of the currency exchange rates is interesting. May Chi wheat has traded within a relatively tight range today, with lows of 4.94-1/2 and highs at 5.02-3/4. This is still an inside session and does not represent any reversal action. KC wheat futures are showing similar price action and spring wheat futures are pushing through nearby resistance at the 10-day moving average in some impressive buying action. Stochastics are turning out of oversold levels and will produce a buy signal if prices can close at these levels today.


Cattle markets are sharply higher this morning, with Apr, Jun, and Aug lives all up their limit higher gains. Apr lives are up 4.50 to 96.35, Jun is up 4.50 to 89.75, and Aug is up 4.50 to 89.57. Apr feeders are up 5.87 to 113.97 and May feeders are up 5.05 to 115.02. The market appears to be settled a bit over increasing measures to control the spread of coronavirus. Beef values also made a record jump yesterday. Grocery stores are likely buying as much beef as they can get their hands on in case packers get shut down. In the meantime, there is no guarantee that any packers will be shut down, and as long as they stay open, they will make solid profits. Still, today’s session is an inside day. Jun live cattle opened sharply higher and have never traded with losses this session. Apr feeder cattle have shown similar price action though are not locked at their limit higher. Today’s bounce in both the live and feeder markets is impressive but will not constitute reversal action.


Hog markets are sharply higher today, following the jump in the cattle markets. Apr hogs are up 4.50 to 58.47, Jun is up 2.90 to 69.70, and Jul is up 3.52 to 71.55. While weights have been increasing contra-seasonal lately, there is no evidence yet that producers are backing hogs up in the country or that packers are shutting down. Currently, the opposite is happening. With the sharp jump in pork values yesterday, packers will want to kill as many hogs as possible and produce as much pork as possible as long as they can. China’s hog prices are down over 2% for the month so far. It is unclear to what degree this is due to increasing hog supply in China, or decreasing demand for pork with the recent shutdowns due to the spread of coronavirus. Apr hog futures opened sharply higher today and have returned within their Bollinger Band range. Stochastics are giving a buy signal and we could see a run up to nearby resistance at near 61.75 if the trend were to continue. Jun and Jul hogs opened only a bit higher but have also rallied back within their Bollinger Band range. Jun and Jul contracts are still oversold according to Stochastics we do not have a buy signal yet.


Carol Tillmann

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