TFM Midday Update 5-14-20


Corn prices are slightly lower this morning after falling back below support levels yesterday. July corn is down 0.0075 to 3.175, September corn is down 0.005 to 3.22 and Dec corn is down 0.0075 to 3.3175. Traders seem a bit hesitant to believe the USDA’s demand numbers from Tuesday’s report, and in particular, the ethanol grind estimate seems a bit rich. However, higher energies and ethanol prices lend themselves to more driving. Feed usage also seems aggressive, up 6.1% from last year despite a massive pullback in meat production for the year so far. The US sold 1.07mmt of corn for the week ending May 7, up 37% from the previous week and up 14% from the previous 4-week average. July corn is testing its 10-day moving average resistance level that had been support until yesterday’s disappointing session. Momentum indicators are pointing mostly sideways, but without much indication of weather issues thus far, price direction could turn lower. Funds were thought to have sold about 13,000 contracts of corn yesterday.


Soybean prices are just a bit higher this morning, showing a small bounce after early pressure. July beans are up 0.0175 to 8.4125, August beans are up 0.0125 to 8.425 and Nov beans are up 0.015 to 8.47. News overnight about China increasing purchases of US ag good has helped to keep beans from selling off, but still, charts look relatively weak. Traders seem to think that the USDA’s demand estimates on the WASDE report are too high, and the 83.5m planted acreage number is also contested. The US sold 655,500mt of soybeans for the week ending May 7, unchanged from last week but up 13% from the previous 4-week average. July beans traded at their lowest levels in a week this morning as prices drift toward support areas from mid-March. Momentum indicators are pointing lower, so holding support levels in the next 0.10 or so will be key to avoid a washout. Funds were thought to have sold about 10,000 contracts of soybeans yesterday.


Wheat markets are choppy so far today, find a bit of stabilization after sharp pressure this week. July CHI wheat is up 0.0025 to 5.02, July KC wheat is down 0.025 to 4.5175 and July MPLS wheat is up 0.0375 to 5.1225. Weather forecasts in the US, Europe and Black Sea are improving, and Australia rains should replenish soils after three years of poor harvests due to a lack of moisture. Kazakhstan will reportedly lift grain export quotas as virus restrictions are relaxed which makes more wheat supplies available on export markets. The US sold 203,500 tonnes of wheat for the week ending May 7, down 17% from the previous week and down 28% from the previous 4-week average. Oversold technicals appear to be the main reason that winter wheat markets are trying to stabilize this morning. CHI wheat prices traded at their lowest levels this morning since March 18 and have since bounced higher off Bollinger Band support. A break below the March lows could open up significant downside, but traders may not want to take prices that low quite so quickly. KC futures are still deeply oversold and spring wheat prices have been unable to punch through nearby resistance. Funds were thought to have sold about 10,000 contracts of CHI wheat yesterday.


Cattle markets are mixed to lower this morning, still under technical selling pressure after surging into overbought territory. June lives are up 0.30 to 94.17, August lives are down 1.12 to 97.30 and Oct lives are down 1.50 to 100.00. May feeders are down 0.72 to 124.57 and Aug feeders are down 1.37 to 131.70. With slaughter improving, cash markets have continued to track higher, though beef prices may have put in a near term top after making their first lower close yesterday since April 8. June live cattle are still overbought and have not fallen out of their recent range. There is still a gap on the charts, so a pullback may target the low end of the gap at 89.47.  August lives and May feeders are both testing and holding nearby support at the 10-day moving average level.


Hog prices are mixed so far this morning, with June up 1.02 to 58.90, July is down 0.20 to 58.97 and August up 0.05 to 58.20. Average weights jumped to a new record for the second week in a row as animals back up in the country due to slow chain speeds. Carcass values continue to increase after a quick 1-session correction lower, and demand for cash hogs should improve as long as packers can stay open. June futures have posted some impressive price action today, testing the 20-day moving average support level and bouncing higher. June is currently testing the 20-day moving average resistance level. Momentum indicators are still pointing lower, but the fact that buyers are still interested in hog markets despite technicals pointing lower is a positive sign. Deferred futures are also trying to grind out a near term bottom, but price action is a bit more quiet.


Bryan Doherty

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