TFM Midday Update 5-18-20


Corn futures are choppy to lower this morning, with July unchanged at 3.1925, September is unchanged at 3.23 and December is down 0.0025 to 3.3175.  Crude oil prices made impressive closes above resistance on Friday and are up sharply again this morning. Ethanol prices are up today, but have set back over the past week or so, likely due to the fact that many plants across the country have begun to re open or are ramping up production. Ethanol is still cheaper than RBOB gas, but the spread is trending towards more profitable margins. Many areas of the country received beneficial rains over the weekend and plentiful acres are keeping new buyers somewhat hesitant. July corn futures were able to break back above the 10 and 20-day moving average resistance levels at Friday’s close, but the new crop contracts could not show the same strength. Ranges so far today have been quiet and prices have generally held support and resistance levels from Friday. Funds were net short about 214,000 contracts as of last Tuesday.


Soybean prices are moderately higher this morning, with July up 0.075 to 8.46, August is up 0.0775 to 8.485 and November beans are up 0.0775 to 8.535. Indonesia has announced an ambitious biodiesel program which helped to boost palm oil and soybean oil prices overnight. China has been an active buyer of US beans over the past few weeks, and there were rumors circulating over the weekend that these purchases will continue, or even increase. July beans pushed through their 10 and 20-day moving average this morning and are currently pushing to new highs for the session. Nov beans are showing similar strength, and a close for both contracts through nearby resistance would be the first since May 12. Momentum indicators are pointing higher, so solid closes today could turn the trend higher. Funds were long about 32,000 contracts as of last Tuesday.


Wheat markets look soft this morning, with July CHI down 0.045 to 4.9575, July KC wheat is down 0.06 to 4.4625 and July MPLS wheat is down 0.015 to 5.0475. Record global supplies and a record global stocks to usage ratio are making it difficult for wheat markets to find any strength lately from eastern European countries hitting export quotas. Russia has filled their Q2 quota, and Ukraine is close to doing the same. Drier soil in the Black Sea has failed to provide much in the way of new buyers as well. July CHI wheat is trading at its lowest levels since last September, July KC wheat is trading at its lowest levels since mid March and spring wheat prices are trending lower toward contracts lows made on May 4. Funds were long only about 3,000 contracts as of last Tuesday’s close.


Cattle futures are showing triple digit gains today, with June lives up 2.40 to 99.40, August lives are up 1.55 to 99.37 and Oct lives are 1.12 to 101.47. May feeders are up 2.12 to 126.85 and August lives are up 2.25 to 133.32. Cash cattle traded up to 120.00 last Friday vs 115.00 the previous week. This was a sizeable jump and leaves live cattle futures at a sharp discount to the cash market, a supportive force. Beef values have begun to pullback hard, as more supplies become available through improving slaughter. Slaughter last week was up 10.4% from the previous week as plants continue to reopen and increase chain speed. June lives gapped higher this morning, and have been stopped at the upper Bollinger Band resistance level and stochastics are sharply overbought. August feeders are testing their 10-day moving average resistance level after two consecutive closes below late last week. Funds were long about 12,000 contracts as of last Tuesday.


Hog markets are slightly higher this morning, with June up 0.45 to 58.32, July is up 0.07 to 57.80 and August lives are up 0.42 to 56.87. The cash index is a bit lower, and pork values may have put in a top. Higher slaughter lately has helped to rebuild pork supplies and kill last week was up 18.5% from the previous week. China purchases have been strong lately, and if pork prices continue to pull back, rumors about increasing China ag purchases could come true. Hog prices have stayed within tight ranges so far today, and are at a technical crossroads. June lives are stuck between support at the 20-day moving average level and resistance at the 50-day moving average resistance level. Lows on the recent pullback also held the 62% retracement of the April rally, so technical action will be watched closely as prices draw closer to a breakout. Funds were long about 12,000 contracts as of last Tuesday.


Bryan Doherty

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