TFM Midday Update 4-22-20


Corn futures are showing very impressive strength this morning, find a solid bounce on oversold technicals. May is up 0.0925 to 2.185, July is up 0.0825 to 3.2525 and Dec is up 0.0625 to 3.3825. Energy markets are finding a bit of a bounce today, with the nearby June crude oil contract up 2.30 to 13.90. Ethanol demand is still very poor, with reports that up to 40% of ethanol plants nationwide have idled.Its seems that the country is moving closer to reopening businesses, which should be positive for fuel, and therefore ethanol demand. Planting weather so far has been nonthreatening, and US farmers look poised to plant over 95m acres of corn this year. July futures tested their lower Bollinger band line as support this morning and have rallied through the morning. Stochastics may make a bullish crossover today which could turn momentum higher, though prices will face stiff resistance at the 10-day moving average. Funds were thought to have sold about 16,000 contracts of corn yesterday.


Soybean markets are following through nicely from yesterdays strong close, with May up 0.075 to 8.3825, July up 0.055 to 8.46 and Nov up 0.0325 to 8.51. The USDA is expecting declining ending stocks this year, and without pressure from outside markets today, beans have found buyers. Many traders are expecting China to restart buying activities, and there were rumors circulating that China purchased nearly 1mmt of US beans yesterday. July soybeans are still trading below their 10-day moving average resistance level, but the setup looks promising. Meal futures made sweeping bullish key reversals yesterday, but are trading lower so far today, likely limiting upside for soybeans today. On the contrary, soybean oil futures surged lower yesterday and are pushing higher today. Funds were thought to have bought about 2,000 contracts of soybeans yesterday.


Wheat markets are moderately lower this morning, with May CHI wheat down 0.025 to 5.4425, May KC wheat is down 0.055 to 4.9125 and May MPLS wheat is down 0.015 to 5.035. Dryness concerns in Russia and Europe have been supportive lately, and this week’s Crop Conditions report showed declining conditions for US winter wheat. US wheat stocks are expected to decline this year, especially if a below-trendline yield emerges, though it is much too early to make a judgement about that. The US dollar has rallied lately, and though the Russian ruble is also up a bit today, cheap energy prices will keep the dollar comparatively strong. Winter wheat futures have so far traded inside of yesterday’s ranges in mostly negative territory. Spring wheat futures are pushing to new lows for the move. Funds were thought to have sold about 2,000 contracts of Chi wheat yesterday.


Cattle markets are slightly higher in very quiet trade so far. April lives are up 0.20 to 91.80, June lives are up 0.80 to 84.87 and August lives are up 0.97 to 89.47. May feeders are up 1.45 to 118.20 and August feeders are up 0.70 to 127.60. Beef prices have rallied nearly 38.00 over the past nine sessions due to sharply lower slaughter. As plants idle due to the spread of covid-19, demand for slaughter supplies goes down and processed beef prices rally. One of Canada’s largest processors idled starting this week, and traders will continue to monitor news wires for reports of further closures. Early week cash trade is down from last week. June lives were unable to hold above their 10-day moving average support level yesterday, and are currently testing that resistance area again today. May feeders have traded in an extremely tight range today, though are back above their 10 and 20-day moving average levels.


Hog markets are mixed in very quiet trade today, with June up 0.80 to 48.90, July is up 0.10 to 53.02 and August is down 0.50 to 56.67. The cash index has turned higher today, though it is not “out of the woods” yet. Slaughter plants have had a difficult time staying open, and just this morning, Tyson’s largest slaughter facility in Iowa announced that it was idling indefinitely. While pork production slows down, pork values have surged nearly 18.00 in just four sessions. China Q1 pork production was down from last year which should keep US exports strong. June futures have only traded slightly higher than yesterday’s highs while July is making an inside session. August prices have fallen back below support levels. This kind of price action usually means that spread traders are active, especially when futures are not in a delivery month.


Lisa Heder

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