CORN
Corn futures were firm overnight ahead of today’s 11 AM release of the February USDA Supply/Demand report. March corn rose a nickel to 6.37-1/4 and Dec was fractionally higher to 5.82-1/2. Trade estimates point toward a lowering of U.S. carryout to only 1.512 bil versus the Jan Crop report figure of 1.540. Most private estimates are closer to 1.20 which could, perhaps make March corn undervalued if U.S. demand increases and U.S. 2021/22 carryout drops below that 1.20 bil bu figure. A large March corn CALL option is the 6.50 strike price. More normal weather in South America could help Brazil’s larger 2nd crop. Yesterday’s noon weather maps for South America showed increased chances for rain across the dry areas of S Brazil, Argentina and Paraguay. The maps may even be too wet. Outside markets overnight had the dollar down 20 points, offering support to commodities, and the crude maintaining a softer stance this week after making new highs last Friday. Stock index futures are up 180 points this morning.
SOYBEANS
Soybean futures stayed strong overnight with nearby March up a dime to 15.79 versus the contract high from Monday at 15.89-1/2. Some backfilling was noted yesterday to close the gap left on the chart from Monday’s higher open. Nov beans rallied 12 cents overnight to 14.25. Trade estimates for U.S. 2021/22 soybean carryout is 310 mil bu vs USDA 350. China is the largest buyer of World soybeans and was planning to take more soybeans this marketing year from Brazil than U.S. However, lower South American supplies could shift some Chinese buying to the U.S. StoneX dropped their estimate of South America’s soybean crop 30 mmt, Argentina down 6.5 mmt; And, Paraguay down 4 mmt. This could increase demand for U.S. soybean and drop US 2021/22 soybean carryout below 300 mil bu. One group sees final carryout closer to 215 due to a 135 mil bu increase in demand versus USDA. Overnight, Chinese May bean futures were up 13 yuan; Soymeal up 18; Soyoil down 204; Palm oil down 262; Corn down 3; Malaysian palm oil prices overnight were up 145 ringgit (+2.66%) at 5594.
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WHEAT
Wheat futures were down overnight. March Chicago futures fell 5-3/4 cents to 7.73. The nearby KC contract gave up a nickel to 7.96-1/4. And, MPLS wheat was down 6-1/2 cents to 9.34. Technically, all three contracts continue to stay rangebound above their respective 200-day moving average support areas. Trade estimates for U.S. 2021/22 wheat carryout is 629 mil bu vs USDA 628. Some private estimates are closer to 700 due to lower exports. Bulls hope USDA lowers World supplies and raise export trade which would lower World stocks. The most popular CALL option strike price in March Chicago wheat is the 9.00 strike. Traders are not rolling the position forward, afraid of the uncertainty over whether, or not Russia invade Ukraine until after the China winter Olympics or if West agrees not to let Ukraine in NATO. Meanwhile, U.S. South Plains and North Africa weather remains dry.
CATTLE
Cattle futures are called steady to higher. Live cattle futures saw mixed trading action on Tuesday as the market stayed relatively range bound, and fought off early session lows. The front-month Feb contract is now in delivery, but saw no deliveries against futures position. Feb will likely be tied to the cash market and its trend until expiration at the end of the month. Cash trade was still quiet and undeveloped to start the week with bids unavailable, but asking prices at $142-143, trying to build off last week’s strength. Yesterday, Apr cattle dropped to test support levels at the 10-day moving average. Prices rejected this level, and traded nearly a $1.00 off the low for the day, but the chart has turned more negative with two consecutive lower closes. At closing, carcass values were softer – (Choice -1.50 and Select -1.20) with light movement of 180 loads. The Choice/Select spread has moved extremely tight at a difference of 4.42 between the two, reflecting a firmer demand tone and overall tight supply for the Choice product. Feeder cattle saw good buying support after the weak day in the grain markets. The Cash Feeder Index was slightly lower, down .03 to 160.14. Feeder cattle posted a strong outside trading range day on the front end contracts, and could be poised for additional follow through, especially if the grain market weakness continues.
HOGS
Hog futures are called mixed to higher as the market seeks a top. Though heavily over-bought, technically, fundamentals and carcass values still point to a higher trend. April hog futures traded to their highest point since 2014 amid the PEDV rally, trading past last year’s post-COVID rally high. Midday direct cash trade was firmer on Tuesday, gaining 4.75 to 76.58 average with a high base price at $91.00. The Lean Hog Index traded 1.57 higher to 85.87. Pork carcass values were firmer at midday, but trended softer into the close, with carcasses trading .90 lower to 97.29. Within the primal cuts, the high priced pork loin cuts is trading $101.00, over $20 higher than last year, and well above 5-year averages. The stronger demand tone helps support the market overall and provides the value needed to support the higher trending cash market.
Author
Matthew Strelow