TFM Midday Update 4-27-20


Corn markets look very weak this morning after a disappointing end to last week’s trade. May corn is down 0.10 to 3.0575, July is down 0.0975 to 3.1325 and Dec is down 0.0725 to 3.295. Meanwhile, corn prices in China are at their highest levels in nearly five years, and the shortage of corn, especially high-quality corn, is expected to continue. The widening spread between corn prices in China and the US should make US supplies very attractive for Chinese buyers, though traders are still waiting on confirmation of large sales related to the rumored incoming purchases of up to 20mmt. Meanwhile, ethanol plants in the US are still shutting down, with about 1/3 of the nations plants idled, and another 1/3 running at reduced capacity. July corn is currently trading below its lower Bollinger band support level though has not yet tested the lows from last week at 3.09. Stochastics have curled lower again after popping up last week with the bounce in futures prices. Funds were thought to have sold about 16,000 contracts of corn on Friday.


Soybean futures are slightly lower this morning after another unsuccessful test of overhead resistance overnight. May beans are down 0.04 to 8.2825, July beans are down 0.0375 to 8.3575 and Nov beans are down 0.0075 to 8.41. Soybean traders are still optimistic about rumors of Chinese purchases at some point of up to 10mmt, though recent purchases have been relatively modest. The Brazilian real continues to make new lows, which has helped to keep a lid on US soybean bounces. Declining demand for vegetable and soybean oil is bearish, and planting in the US should ramp up soon. July soybeans tested their 10-day moving average resistance level for the third session in a row and has since slid back to prices near the opening trades. That kind of technical action is not bullish, and though stochastics are pointing mostly sideways, the trend is still lower. Funds were thought to have sold about 7,000 contracts of soybeans during Friday’s session.


Wheat markets are lower this morning along with the rest of the grains complex. May CHI wheat is down 0.055 to 5.2125, May KC wheat is down 0.0275 to 4.72 and May MPLS wheat is down 0.0375 to 4.9525. Russia has likely hit their Q2 wheat export quota, so new export sales will be on hold until July 1. If countries are still securing wheat supplies in the months ahead, this should benefit the US balance sheet. Meanwhile, dryness concerns in the US, as well as Europe, seem to have been alleviated with rains late last week, and more rain in the forecasts. July CHI wheat broke its 200-day moving average support level today and is trading below its lower Bollinger band support level. A close below the 200-day would be the first since March 18. Spring wheat futures are also extending recent losses though KC futures are holding support. Funds were thought to have sold about 12,000 contracts of CHI wheat on Friday.


Cattle markets are moderately higher this morning, holding recent ranges despite major questions about slaughter capabilities across the US. April lives are 0.97 higher to 85.95, June lives are up 1.02 to 83.65 and August lives are up 1.15 to 90.05. May feeders are up 1.17 to 118.62 and August feeders are up 1.30 to 127.70. Cattle slaughter last week was down about 17% from the previous week due to packing plants idling. Cash trade was also lower last week, and beef values have continued to shoot to record highs. Friday’s Cattle on Feed report was seen as supporting, though the market’s focus is on packers’ ability to keep killing cattle. The fundamental picture is quite negative, though for now at least, traders believe that the market has priced in the lower demand for slaughter supplies. June cattle tested their 10 and 20-day moving average support levels this morning but are trading back below. Moving averages and other technicals are pointing sideways to lower. May feeders are trading just off the highs of the day after a successful test of support earlier in the morning.


Hog markets are sharply higher this morning, finding significant buying on a strong technical finish last week. June hogs are up 3.75 to 55.27, July hogs are up 3.70 to 58.37 and August hogs are up 3.22 to 61.55. Slaughter capacity is the main fundamental story in hog markets lately. US slaughter last week was down 10% from the previous week, though hog traders seem somewhat confident that virus issues can be dealt with in a reasonably quick fashion to keep lines moving. Rallying pork prices are bolstering already large profit margins, so plants should have extra incentives to implement effective measures to stay open. Fundamentals are definitely questionable at this point, but technical strength has been impressive. The June contract made its first close above the 20-day moving average level last week since late Feb, and held that level as support on Friday. Technical traders saw this as reason to push prices sharply higher. Stochastics and other momentum indicators are pointing higher though prices could rally into overbought territory fairly quickly. Low open interest may also contribute to elevated volatility.


Kelly Rubisch

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