TFM Midday Update 4-13-20


Corn markets are down this morning after yet another test of overhead resistance last night. May is down 0.025 to 3.2925, July is down 0.0275 to 3.34 and Dec is down 0.03 to 3.4775. Thursday’s USDA report was bearish against expectations, with ethanol demand reductions as the main negative. OPEC agreed to production cuts on Friday, but crude oil futures are up less than 0.50. The US dollar is higher against the Brazilian real which is also bearish. July corn matched Thursday’s highs overnight in a test of the 10-day moving average level and has since tested, and held, contract lows from April 3. Stochastics are still oversold. Funds were thought to have bought about 3,000 contracts of corn on Thursday.


Soybean futures have fallen back below nearby support in a disappointing start to the week.  May beans are down 0.1225 to 8.5125, July beans are down 0.1225 to 8.585 and Nov beans are down 0.0825 to 8.675. Thursday’s Supply & Demand report was considered negative against expectations. China has not made any major purchases from the US lately. Low energy demand may contribute to increasing soybean oil stocks despite lower palm oil production. July soybeans are currently making a bearish key reversal after showing gains of over 0.06 during the night session. Prices have fallen back below the 10 and 20-day moving average levels that have been stiff resistance for the past two weeks. Funds were thought to have bought about 6,000 contracts of soybeans on Thursday.


Wheat markets are finding some overflow pressure from the rest of the grains complex this morning. May CHI wheat is down 0.03 to 5.535, May KC wheat is down 0.01 to 4.91 and May MPLS wheat is down 0.055 to 5.27. Last week’s USDA report was a bit bearish versus expectations, but the normal fundamentals have not been as relevant to wheat futures lately. Though no major balance sheet changes were made, the market is still placing value on owning physical stocks of wheat for food security’s sake. This will not last forever, but it does appear that as long as the Covid crisis continues, food security will be a major priority for world governments. Wheat futures attempted to extend their recent rallies overnight, so the turn lower into the mid-day is disappointing. However, only the spring wheat contracts have fallen through any major support. Funds were thought to have bought about 5,000 contracts of Chi wheat on Thursday.


Cattle markets are locked at limit lower prices this morning as overwhelming beef supplies and supply chain uncertainties persist. April, June and August lives are down 3.00 to 91.00, 81.37 and 87.75 respectively. May and August feeders are down 4.50 to 114.45 and 124.37 respectively. Cash cattle trade was able to hold steady through the end of last week at 105, but the market is apparently pricing in lower trade through the end of the month, possibly due to reduced demand for slaughter supplies related to plant shutdowns. Shutdowns would back up animals in the country and would contribute to heavier production later in Q2 and into Q3. June lives have only briefly traded off limit-down prices so far today.


Most hog markets are trading sharply lower today, though the April contract is higher as it converges with cash before expiration. April is up 1.00 to 43.80, June is down 3.75 to 44.92 and July is down 3.62 to 51.12. Cutouts were able to bounce higher on Friday and weights are declining, but there are serious questions about packing plants’ ability to stay open. A large Smithfield plant in South Dakota closed over the weekend after hundreds of employees tested positive for Covid-19. If plants continue to close, demand for slaughter supplies will vanish quickly, pushing nearby prices lower, and forcing higher production once plants can reopen. June hogs did not open at limit-down prices but have been locked at limit-down for the vast majority of the session.


Kelly Rubisch

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