TFM Midday Update 5-20-20


Corn futures are falling back below key moving average resistance levels this morning, with July down 0.0275 to 3.185, September is down 0.0275 to 3.2275 and December is down 0.0225 to 3.32. Today’s ethanol report is expected to show a slight bounce in ethanol production, but demand for ethanol is still well below pre-virus levels. There are some concerns about sold weather for the Brazilian safrinha corn crop, as well as planting delays due to excess rains in parts of the Midwest. Still, balance sheet projections for new crop corn can get heavier quite easily. July corn closed above its 10 and 20-day moving average levels yesterday, but was well off the session highs, souring the day’s action. Sellers have stepped back in this morning, and prices are once again testing the 10 and 20-day moving averages as support. Dec corn has fallen well below those support levels. Funds were thought to have bought about 4,000 contracts of corn yesterday.


Soybean futures are a bit higher this morning, with July up 0.0325 to 8.4575, August beans are up 0.0325 to 8.485 and Nov beans are up 0.0375 to 8.54. Higher energy prices, and a more positive economic outlook are positive outside factors for soybeans, and given current new crop estimates from the USDA, the market does not seem to be pricing in much weather uncertainty. Many traders are still calling for higher acres than the USDA’s current estimate, and some planting delays seen over the past week could encourage more soybean planting. July soybeans were barely able to hold their 10 and 20-day moving average support levels at yesterday’s close, but have found moderate buying interest on the successful test. Beans are certainly not rocketing higher today, but if prices can break through the 50-day moving average resistance levels soon, there should be some upside. Funds were thought to have sold about 2,000 contracts of soybeans yesterday.


Wheat markets are still consolidating near long term support levels, and may be trying to draw up the strength for a bounce. July CHI wheat is up 0.0925 to 5.08, July KC wheat is trading 0.015 higher to 4.43 and July MPLS wheat is trading 0.065 higher to 5.1475. The continued pullback in the US dollar has lifted some selling pressure, and the Russian ruble is sharply higher today which is also positive. The Wheat Quality Council’s crop tour estimated winter wheat yield in northwest Kansas yesterday at 51.7 and 41.1 in north central Kansas. The USDA pegged the statewide Kansas yield last year at 52.0. Colorado’s wheat yield was seen at 32.5 vs 49 last year and NE yields were seen at 50.8 vs 57 last year. CHI and MPLS wheat are trading at their highest levels in a week, with CHI testing the 10-day moving average resistance level. KC futures made new lows for the move but have bounced higher. Funds were thought to have bought about 1,000 contracts of CHI wheat yesterday.


Cattle markets are trading slightly lower this morning, with June lives down 0.27 to 98.45, August lives are down 0.82 to 98.25 and Oct lives are down 0.70 to 100.42. August feeders are down 0.80 to 131.12 and September feeders are down 0.85 to 133.37. Cash cattle trade this week has been very quiet, but with slaughter running nearly 11% higher than last week, we should at least see cash values steady, if not higher. Beef prices are still pulling back hard due to slower consumer demand and increasing production. June live cattle are still overbought, and with price action so far today, look vulnerable to making a bearish key reversal today. The 100-day moving average level will likely provide stiff resistance and could limit gains before we move into delivery month. August lives are holding their 20-day moving average support level for the fifth session in a row.


Hog futures are moderately lower this morning, with June down 0.30 to 56.30, July down 0.67 to 55.60 and August down 1.12 to 54.35. The cash index is lower again today despite higher slaughter so far this week. Pork values are still trending lower though China spot prig prices are up over 2% for the week. This could be hinting at even stronger China pork buying in the weeks ahead. Technical momentum is still pushing the hog futures lower into oversold territory. This could make hog futures extra susceptible to a recovery bounce, it is unclear what could provide fuel for a bounce if recovering slaughter can’t. June hogs are still at a sharp discount to the cash index.


Bryan Doherty

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