TFM Sunrise Update 02-01-2022


Corn futures are firm this morning with March up 2 cents to 6.28 after reversing lower yesterday from a new high of 6.42-1/2.  The technically overbought state of the market may lead to more choppy trade as participants factor in current events.  Dec corn is fractionally higher to 5.74-1/4.  The dollar is down again this morning, adding some outside market support to that of the strong energy markets.  There has been some reduced concern about Russia invading Ukraine after Russia’s comments that there was no proof of intention to invade.  Other than that, there has been little change to the market news surrounding corn as the calendar turns over.  There is talk that Brazil 2022 corn crop may be a slow as 106 mmt versus USDA first estimate of 118.  Argentina’s corn crop could be 50 mmt versus USDA 54.0.  This would suggest a drop of 16 mmt or 600 mil bu.  The USDA is scheduled to release its Dec. Fats and Oils report along with the Grain Crushings report this afternoon at 3pm.  Corn used in ethanol production is expected to be up 10.9% year-over-year to 478.6 mil bu.


Soybean futures consolidated overnight after posting a third straight day of new contract highs.  March beans traded a 10-1/2 cent range between 14.95-1/2 and 14.85 while positioned to take out yesterday’s new high of 14.96-3/4.  Nov beans are unchanged this morning at 13.67 with yesterday’s new high of 13.69-1/4 a bullish target.  July beans peaked at 14.92-1/4 yesterday while maintaining a wide spread to Nov and testing the May, 2021 high near +126.  Continued talk of Brazil’s shrinking South American soybean crop keeps prices pointed higher.  Brazil’s final estimate could be near 125 mmt and well below the first estimate of 144.  Argentina’s crop could be closer to 40 mmt vs USDA 46.5.  China is on holiday, but USDA still announced new and old crop U.S. soybean sales to China yesterday.    Soybean crush is seen coming in at 197.5 mil bu in Dec., a 2.3% rise from a year ago.  Crude and once-refined soybean-oil reserves at end of December seen at 2.51 bil lbs, up from 2.111 bil.  Spot basis bids for soybeans shipped by barge to the U.S. Gulf Coast weakened on Monday after rising sharply last week, pressured by concerns that prices for U.S. supplies may have become too costly for overseas buyers, dealers said.


Wheat futures were up overnight.  March CBOT futures advanced 8-1/2 cents to 7.69-3/4, but remain in the lower half of yesterday’s trading range.  March KC wheat is up 6-12/4 cents to 7.87-1/2.  The nearby MPLS wheat contract is up 5-1/2 cents to 9.12.  Easing concerns over Russia’s plans to overtake Ukraine have wheat prices at all three exchanges in limbo with a weaker bias on the charts.  Slow U.S. wheat export shipments and the fact U.S. HRW export prices are still a discount to EU and Russia offers resistance.  Egypt’s tender was at prices lower than expected with French wheat even lower than Russia or East Europe.  Russian wheat shipments for the 2021-22 season amounted to 23.6m tons as of Jan. 27, down 21% from a year earlier, the Federal Center of Quality and Safety Assurance for Grain and Grain Products said on its website, citing inspections before exports.


Cattle futures are called steady to higher on follow-through.  Cattle futures saw aggressive buying strength to start the week, as optimism was in front of the market before the USDA Cattle Inventory report and support spilled over from selling pressure in wheat and corn markets.  The  buying strength started right on the open as April cattle posted a small gap higher on the session.  Price now looks poised to challenge the recent contract highs.  October and later contracts made that break, and closed at new contract highs on Monday.  The Cattle inventory report confirms the market expectation of a tighter cattle supply.  Total Cattle and Calves were down 2% from last year at 91.9 million head.  Total Beef cows were also down 2% at 30.1 million head, and the 2021 calf crop was down 1% from last year and the lowest calf crop total since 2015.  Boxed beef values are reflecting the good demand tone.  Retail prices are still historically high, which should help provide some leverage in the cash market next week.  The cattle market overall looks friendly and is still trading in an up-trend.  We like the near-term view of the market, as prices may be starting to target a winter/early spring high.


Hog futures are called mixed as prices consolidate within Friday’s range.  Futures look to be taking a pause.  They rejected the lows from last week relatively quickly, but are struggling with resistance over the top of the market.  We will be watching the fundamentals for a clue about possible direction.  A friendly demand tone stays supportive, but the premium of the futures market to the cash market limit near-term rallies.  The direct cash market was supportive on Monday, adding 2.17 to 66.69 for the weighted average price.  The lean hog index had good strength, reflecting a more active cash market.  On Monday the index gained 0.8 to 80.61.  Deferred contracts have shown strength this week recently on optimism in the potential tighter supplies of available hogs, but prices are looking tired in the near-term.  Summer contracts posted a reversal last week on Thursday, and are holding in place.


Matthew Strelow

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