TFM Midday Update 5-7-20


Corn futures are making a nice bounce today, trading at their highest levels for the week so far. May corn is up 0.0525 to 3.17, July is up 0.05 to 3.1925 and Dec corn is up 0.0425 to 3.355. Ethanol production is beginning to ramp up again, and ethanol prices are rallying with most of the energy complex.  The US sold nearly 775,000 tonnes of corn for the week ending April 30, down 48% form last week and 15% from the previous 4-week average. Despite renewed tensions between the US and China,  there are likely shorts beginning to exit ahead of next week’s WASDE report. July futures are trading above their 10-day moving average resistance level, and a close above would be the first since March 26. While it would be a positive development, it may not be a trend changer. Momentum lower appears to be waning and the trend looks sideways. Funds were thought to have sold about 9,000 contracts of corn yesterday.


Soybean futures are putting together a strong start to the day, with May up 0.1075 to 8.4125, July is up 0.115 to 8.4425 and Nov is up 0.105 to 8.50.  Fears that exports to China could be harmed by souring relations with China are likely limiting gains today, and that will be something the soybean market will have to contend with for the near future. The Brazilian real is near all time lows again and the US dollar is higher, which could make Brazilian beans a more attractive target for large purchases. Still, beans, meal and oil all all higher this morning. Planting activities are moving along quickly which should keep acreage shifts to beans somewhat limited. The US sold 653,100 tonnes of beans for the week ending April 30, down 39% from last week buy up 19% from the previous 4-week average. July soybeans held support from March lows for the past few sessions, and since they have not collapsed through support, buyers have emerged. July beans are trading above their 10-day moving average resistance level and are testing their 20-day moving average. A close above would be the first since April 30. Funds were though to have sold about 4,000 contracts of soybeans yesterday.


Wheat futures are higher this morning, finding overflow buying from the rest of the grains complex. July CHI wheat is up 0.075 to 5.25, July KC wheat is up 0.0525 to 4.8275 and July MPLS wheat is up 0.055 to 5.1325. Today’s bounce in spite of a higher US dollar is likely helped by a move higher in the Russian ruble. If energies can continue to rally, the strength in the Russian currency should continue to provide support. Currently there are not many concerns about dryness in the US, Russia or the Black Sea, but talk of frost possibilities over the weekend are keeping some weather premium in the market. The US sold 244,800 tonnes of wheat for the week ending April 30, down 48% from last week and down 15% from the previous 4-week average. July CHI wheat futures have punched through their 10-day moving average resistance level this morning, and a close above would be the first since April 20. Spring wheat futures are also moving through 10-day moving average resistance, and KC futures are still consolidating within their recent ranges. Funds were thought to have sold about 2,000 contracts of CHI wheat yesterday.


Cattle markets are sharply higher again this morning, as traders’ optimism regarding slaughter pace continues to improve. June lives are locked at their expanded 4.50 limit higher to 93.97, August lives are up 3.80 and Oct lives are up 3.07 to 102.60. May feeders are up 3.22 to 127.32 and August feeders are up 3.50 to 136.25. Meat shortages at the retail level are still pushing beef prices to unheard of levels, but beef production has begun to perk up this week. News that President Trump is asking the Justice Department to investigate the meatpacking industry is also seen as supportive, though details are light. June live cattle gapped higher this morning and are at their highest price since March 26. Prices are well above their Bollinger band range and stochastics are overbought which could accelerate a correction on bearish news. May feeders are also at their highest levels since March 26.


Hog markets are moderately lower this morning, with June down 2.37 to 63.20, July hogs are down 1.52 to 62.27 and August hogs are down 1.50 to 61.70. The cash index is moving higher, and slow pork production is keeping meat values rallying. Slaughter this week has been higher than last week, but is still lagging very far behind last year. Smithfield is reopening their large South Dakota plant today which should further increase production capacity. June hogs are currently making a bearish key reversal, but are still holding nearby support at the 50-day moving average level. Stochastics are sharply overbought, and very low open interest could make a correction lower come harder and faster than initially expected, if strength were to evaporate.


Lisa Heder

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