TFM Midday Update 3-23-20


Corn futures are a bit soft this morning, with May down 2-1/4 to 3.41-1/2. Jul is down 2 cents to 3.47-1/2, and Dec corn is down 3/4 cent to 3.62-1/2. The market is still struggling with pricing in the evaporation of ethanol demand lately, with the huge dump out in energy prices. Brazilian dock workers will be voting today on whether or not to hold a strike at the Santos port. China bought corn on Friday, which was a major positive signal, especially considering it was the biggest one day sale of corn to China since mid July 2013. Jul corn has traded within a two-way range so far today, reaching as high as 3.51-1/4 but trading as low as 3.44-1/2. Prices are within their Bollinger band range, though a few sessions in a row of weak closes does not indicate much new buying. Stochastics are still oversold. Funds were thought to have sold about 10,000 contracts of corn on Friday.


Soybean futures are punching higher again today, rallying out of recent lows on ideas that China’s soybean stocks are dwindling and they will need to purchase more soon. China meal futures were up their 4% trading limit overnight, at their highest level since October. This is likely due to expanding livestock herds, as large-scale producers recover from the African swine fever outbreak. As of March 10, soybean stocks in China dropped to their lowest level since 2010. Many are expecting the demand for soymeal to continue to increase with the recent drop in ethanol margins. With strong ethanol production, the supply of DDGs will dwindle, which will increase the demand for meal for feed usage. There is also some chatter about shipping disruptions from Argentina and Brazil due to strikes and other hiccups. Jul soybeans opened a bit lower this morning but quickly rallied higher and are currently testing their 20-day moving average resistance level. A close above the 20-day moving average will be the first since March 4 and could quickly open up additional upside, where next resistance would be the 50-day moving average at about 9.07. Stochastics are crossing up into a buy signal from oversold levels. Speculative funds were thought to have bought about 14,000 contracts of soybeans on Friday.


Wheat markets are sharply higher this morning, with May Chi wheat up 14-1/2 to 5.53-3/4, May KC is up 17-1/2 cents to 4.86-1/2, and May spring wheat is up 9-3/4 to 5.30-3/4. Concerns that European supply chains may be disrupted by the coronavirus could lead to increasing European exports in the U.S. and Australia. General global uncertainty, and especially food security uncertainty, has lead to many nations stocking up on milling wheat supplies. Milling wheat has higher protein quality and is used for making goods, such as bread. May Chi wheat is trading at its highest level today since February 21, and today’s close above the 50-day moving average will be the first since February 20. Stochastics are giving nearly overbought readings. May KC wheat is also trading at its highest levels today since February 19, with Stochastics punching into overbought territory. May Mpls wheat is trading at its highest level today since March 3, with nearby resistance at the 50-day moving average at 5.38-1/2. Speculative funds were thought to have bought about 4,000 contracts of Chi wheat on Friday.


Cattle markets are locked at their limit higher prices this morning, with Apr lives at 101.65. Jun lives are at 92.52, and Aug lives are at 93.75. Apr feeders are locked at 123.32, and May feeders are locked at 122.75. Wholesale values rallied 18% last week, as grocers struggle to book enough supplies to handle the run on grocery stores lately. Cash cattle markets have begun to stabilize, especially after feedlots are holding out for higher prices due to record packer margins. In addition, last week’s Cattle on Feed report came in essentially online with trade expectations, which was supportive. Jun live cattle opened limit higher this morning and have not moved off of that price. Stochastics are creeping back into a buy signal from oversold territory, and prices are back within their Bollinger band range. If prices were to close above the 10-day moving average today, it would be the first since February 19 and could open up an additional 5.00 of upside before another resistance level. Apr feeders also opened at their limit higher price today and have not moved off it. If prices were to close here today, it would be the second close in a row above the 10-day moving average. Stochastics have moved to a buy signal from oversold territory.


Hog markets are sharply higher this morning, finding some follow through buying interest from last week’s gains, as well as overall support from the cattle markets. Apr hogs are up 3.00 to 64.57, Jun hogs are up 2.82 to 70.77, and Jul hogs are up 2.75 to 73.12. The USDA is expecting a steady decline in pork production over the next few months, which is a very supportive factor. Given the rapidly increasing packer margins, demand for slaughter supplies should stay high and keep demand high for slaughter supplies. The market may be dealing with a bit of pork oversupply at the moment, with pork production last week up 11.8% from the same week last year. On the technical side, last week’s base building action was impressive. The best traded Jun contract made a contract low on Wednesday but did not break lower. Prices opened sharply higher today, back-tested the middle of the current range and are rallying back toward the upper end of the recent range. Though the 10-day moving average resistance level is not within reach for today’s session, if prices can continue to base build and punch through that level, that would be a major technical development and could cause a wave of short covering and new buyer interest.


Lisa Heder

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