TFM Sunrise Update 02-22-2021


Corn futures were up a nickel overnight while maintaining a technically charged trade overnight along a prolonged up trend.  Dec corn, at 4.65 is poised to exceed Friday’s contract high of 4.66-1/2 after adding 11 cents in last week’s holiday-shorted week of trading.  Nearby corn contracts are in a more neutral pattern along 10 and 20-day moving averages following 3 weeks of sideways movement.  First Notice Day for March futures in grains is this Friday.  The USDA annual Outlook Forum, late last week gave a glimpse of 2021/22 Supply and Demand projections using an estimated 92 million acres and a 15.2 bil bu crop.  A projected 450 million bushel increase in ethanol and feed demand combined with a 50 mil bu hike in exports would keep stocks-to-use in line with the current 10.3%.  The trade will now look forward to the March monthly USDA report and then the Planting Intentions report at the end of March.  Today, we’ll get USDA Weekly Export Inspections.


Soybean futures traded mixed overnight with a higher bias led by the new crop months.  Nov beans traded a range between 12.07-1/4  and 11.99-1/4 following posted gains of 23 cents last week.  May beans got to 13.91 overnight on the high side and 13.78-3/4.  USDA late last week said soybean crush for the 2021/22 season is estimated at 2.21 bil bu, up from 2.20 bil this year.  Exports are expected to decline only 50 mil bu to 2.2 bil, leaving ending stocks at 145 mil bu as compared with 120 mil this year.  Acres are projected to be 90 mil planted which would be a 6.9 mil acre increase from last year. The outlook relies heavily on continued record strong demand, but leaves the market vulnerable to any production issues.  Traders will hone in on potential exports to China this week following a week-long Lunar New Year holiday that ended late last week.  The market has been sideways in the last few weeks but continues to remain in a weekly uptrend that dates back to August.


Wheat futures were mixed overnight.  Nearby winter wheat futures gained about 15 cents last week as the trend in row crops remain in tact, and the dollar leveled off with a weaker finish last week.  USDA officials projected higher domestic usage for the new crop season, but exports were trimmed to 925 mil bu from 985 mil this year.  Ending stocks, however, offered support coming in at 698 mil bushels as compared with 836 million this year which would be the lowest ending stocks since the 2013/14 season.  On top of the potential production losses in the US, traders see a pickup in demand as food security issues and inflation emerge as positive forces.  Technically, all three exchanges are plotting near-term sideways patterns within a long-term up trend that looks ready to break out to the upside if conditions, including a weak dollar, attract another surge of buying interest.


Cattle calls are steady to lower for today.  Friday’s Cattle on Feed report was released after the close with the results largely within expectations:  Total cattle on feed was 101% vs a year ago and placements 103% vs a year ago.  Export sales last week were decent with Net sales of 22,900 MT.  Top buyers were South Korea with 9,600 MT and Japan with 3,500 MT.  Earlier in the week futures traded well over the cash market and and into overbought territory.  Meanwhile, warmer temperatures will help normalize feedlot operations, however, the impact from the polar vortex may be felt for the foreseeable future.


Lean hog calls are mixed to maybe a little higher today based on cash fundamentals.  After mild topping signals last week including April losing 70 cents to a close below 85.20 at 84.50 while posting a bearish weekly reversal, and June & July advancing around 45 cents, prices may chop around to begin the week.  April, currently at a premium to cash, showed signs of tiring last week, opening the door for potential testing of 10 and 20-day moving average support levels located at 83.10 and 80.21, respectively.  However, cash values continue to offer support with the Lean Hog Index up for the 11th straight day on Friday.  Cutout values continued to grind higher, too at $93.76 compared to the five day average of $90.94.  The worst of the winter weather should be in the rearview, so the slaughter pace should begin to pick up this week.


Matthew Strelow

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