TFM Midday Update 3-2-20


Corn futures are firming nicely this morning in early trade, with May corn up 3-1/2 cents to 3.71-34. Jul is up 2-3/4 to 3.75-1/4, and Dec corn is up 3/4 to 3.77-3/4. Though China has not made inquiries yet about U.S. corn or DDG export prices, there are signs that Chinese industry is ramping up operations, which is supportive. In addition, China is now ready to issue tariff waivers for major importers. The U.S. dollar index traded at its lowest level today since January 17 and is also supportive. Weak price action in the wheat markets and coronavirus fears are likely limiting upside today. Jul corn futures have moved back within their Bollinger band range, though are still oversold according to Stochastics. The bull spread nature of today’s moves may indicate cash market strength. Speculative funds were thought to have been short over 95,000 contracts as of last Tuesday’s close.


Soybean futures are showing a nice recovery bounce so far this morning, with May up 9-1/2 to 9.02-1/4. Jul beans are up 9-1/2 to 9.11, and Nov beans are up 8-1/2 to 9.16-3/4. Soybeans are finding strong buying interest from a sharp jump in meal prices lately. Meal futures made weekly bullish key reversals last week and are trading at their highest levels today since mid January. China is now ready to issue tariff waivers for U.S. beans, and there are reports that Chinese buyers have made inquiries with U.S. exporters. Dry weather in Brazil will help speed up soybean harvest and likely limit bounces in the near term. Jul soybeans traded as high this morning as 9.13, pushing through their 10 and 20-day moving average resistance levels. A close above would be the first since January 2. However, Jul beans have not pushed through the lower trend line created from the bear flag formation. A close above moving average resistance levels may not be quite as important if beans cannot break through that trend line. As of last Tuesday’s close, speculative funds were thought to have been net short over 75,000 contracts.


Wheat markets are moderately lower this morning, with May Chi wheat down 7-1/4 to 5.17-3/4. May KC is down 6-3/4 to 4.46-1/2, and May Mpls is down 4-3/4 to 5.22-3/4. Selling pressure in the wheat markets is disappointing this morning, considering the sharp pullback in the U.S. dollar. Favorable weather in the Plains is likely a limiting factor. Ukraine production is expected to pull back by 8.5% this year, though global trade slowdown may be overwhelming production reductions. May Chi wheat tested resistance this morning at the 200-day moving average level and backed off to trade near the lows of the day so far. May KC wheat is trading just off the lows of the day as well, though making an inside session so far. May spring wheat is continuing its recent downtrend and is oversold according to Stochastics. On Tuesday afternoon, speculators were long nearly 42,000 contracts, a reduction of nearly 23,000 contracts from the previous Tuesday.


Cattle markets are trading with impressive triple-digit gains so far today. Apr lives are up 2.42 to 110.00, Jun lives are up 2.47 to 103.67, and Aug lives are up 2.15 to 104.42. Mar feeders are up 3.10 to 134.37, and Apr feeders are up 2.82 to 135.52. Cattle markets are finding some solid buyer interest today, primarily on a sharp bounce in the stock market. At the time of this writing, Mar mini-Dow futures are up over 520 points for the day. A stabilization in the stock market should increase consumer confidence and increase consumer spending on products like beef. Still, beef fundamentals do not look overly friendly, with production running 5-6% ahead of last year, dressed weights increasing contra-seasonally and a sharp drop in the cash markets last week. Apr live cattle are trading just off the highs of the day and are back within their Bollinger band range. Stochastics are still sharply oversold, but prices have taken out Friday’s highs. Apr feeders have backed off the highs of the day so far, though downward momentum may be waning. Speculators were thought to have liquidated nearly 18,000 contracts for the week ending February 25 and were long about 14,000 contracts at the close of business on Tuesday.


Hog markets are mixed this morning, with Apr up 10 cents to 62.37, Jun is down 5 cents to 77.17, and Jul hogs are up 5 cents to 78.35. The lack of strong buying in the hog markets is disappointing today, as China is ready to issue tariff waivers for commercial Chinese buyers to import U.S. ag products. There appears to be a huge need for pork supplies in China, especially given many analysts’ opinions that the spread of coronavirus in China is pulling back. Pork and cash market values have been choppy lately, but pork production is running sharply ahead of last year, which means that hog prices are even more dependent on exports. Apr hogs are trading near the lows of the day in a quiet, two-way session. Stochastics are giving nearly oversold readings, but the trend is currently sideways.


Lisa Heder

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