TFM Midday Update 4-23-20


Corn futures are moderately higher this morning, finding solid follow through on reports that China could become a major buyer very soon. May is up 0.0375 to 3.2125, July is up 0.035 to 3.2825 and Dec is up 0.04 to 3.4075. Energy prices are providing some outside support, with June crude oil up over 4.00 but still trading at a measly 17.90 per barrel. Brazil’s safrinha corn crop may be experiencing some dryness, though most of the buyer interest today is linked to China. A Reuters report this morning suggested that China could buy up to 20mmt of corn, though the time frame is unclear. These purchases would count towards Phase One deal requirements, and given the wide spread between US and China corn, would be a bargain. July futures traded above their 10-day moving average level for the first time today since March 30 but have since fallen back below. Stochastics have made a bullish crossover, and the trend may be turning higher. Funds were thought to have bought about 18,000 contracts of corn yesterday.


Soybean futures are up this morning, though have fallen sharply from their early-session highs. May beans are up 0.055 to 8.4025, July beans are up 0.0475 and Nov beans are up 0.035 to 8.50. The Brazilian real is falling to a new all-time low which is a source of pressure, but reports surfaced this morning that China may look to buy up to 10mmt of soybeans soon, most of which is expected to come from the US. Not only are US beans cheap, but China still has Phase One trade deal commitments to meet. Technical buying is also a reason to be friendly today after follow through yesterday from Tuesday’s bullish key reversals. July soybeans have tested their 10-day moving average resistance level today, but have since fallen back below. July beans have already fallen about 0.08 off the day’s highs which is a bit disappointing. Funds were thought to have bought about 4,000 contracts of soybeans yesterday.


Wheat markets are mixed this morning, with May CHI up 0.0125 to 5.4425, May KC wheat is down 0.0325 to 4.8675 and May MPLS wheat is up 0.0325 to 5.07. There is still uncertainty over how wheat crops in Russia, Europe and the US will fare with less than ideal weather in the forecast. US wheat has struggled a bit lately with cold weather, while Russian and European crops are short on moisture. Global export activity has stayed strong lately as governments work to bolster strategic reserves, and there are rumors that eastern European countries could hit export quotas quicker than expected. CHI wheat futures are further consolidating within their recent ranges, while KC wheat has fallen a bit lower but held support. Spring wheat futures tested their 10-day moving average resistance level this morning but have fallen back near the middle of the day’s range. Funds were thought to have sold about 3,000 contracts of CHI wheat yesterday.


Cattle markets are lower this morning, with April lives down 3.00 to 85.95, June lives are down 1.22 to 82.67 and August lives are down 0.60 to 87.75. May feeders are down 0.42 to 116.25 and August feeders are down 1.65 to 125.55. Slaughter this week has been much slower than even last week’s kill which may be why the nearby April live cattle contract is still pricing in a steep drop in the cash market. The slow slaughter has also pushed boxed beef values to new all-time highs. Yesterday’s Cold Storage report was seen as a bit bearish, though the real driver lately has been weaker demand for slaughter supplies. June lives are again trading in a quiet range today, though look more negative than the mixed trade earlier this week. The break below the 10-day moving average, and unsuccessful tests of that level since then, may have turned the trend back lower.


Hog markets are showing impressive gains this morning, with June up 2.57 to 50.47, July is up 2.02 to 53.22 and August is up 1.27 to 56.42. Pork values have continued to rally on lower slaughter. Some estimates indicate that up to 15% of total US slaughter capacity has been idled. This will cause hogs to back up in the country and continue to gain weight. Cash prices will likely set back on this development, but for now, traders seem to be of the opinion that plants will do everything in their power to continue killing animals given very cheap supplies and rallying pork prices. The best traded June contract is testing its 20-day moving average resistance level for the first time today since March 25th. A close above that level would be a very bullish technical development. However, given the amount of slaughter capability currently offline, and the additional weight gains that will likely perpetuate, hog markets still look very vulnerable.


Lisa Heder

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