TFM Sunrise Update 02-23-2021

CORN

December corn traded to a new high of 4.74 overnight on gains of 4-1/4 cents.  Nearby March corn made a fresh 2-week high while trading 6-1/2 cents higher to 5.57-1/2 as strong demand for U.S. supplies and talk of higher domestic use pushes prices higher.  Talk of inflation in commodities is also fueling money flow into the corn market.  USDA estimated near record high U.S. 2021 corn acres and yield last week, but only increased carryout 50 mil bu which would eat into projected carryout, maybe more than expected.   In South America, net drying is expected continue across most of Argentina through next Monday; though, there will be some locally meaningful rain. Last evening’s GFS model run was notably wetter than the midday European Model.  Last evening’s GFS model was drier than the midday GFS model for week 2 of the outlook; though, it continued to showed greater coverage of meaningful moisture compared to week 1.

SOYBEANS

The soy complex was higher overnight led by soyoil and new highs in new crop bean contracts.  Nov beans rallied more than 15 cents to a new high of 12.27.  May futures broke out of their sideways trading range with gains of as much as 27-1/2 cents to 14.15 before trimming gains as the contract takes on the brunt of the open interest ahead of First Notice Day for the nearby March contract on Friday.  Prior to last night’s rally, Managed Money was net long an estimated 160,000 bean contracts, 64,000 lots of soymeal; And, 114,000 soyoil.  The tight supply storyline of U.S. 2020/21 and 2021/22 beans keeps a bid under the market, particularly with China coming out of their public holiday period that helped result in a slowdown in imports.  Relative to domestic demand, U.S. stockpiles are forecast to be record-tight later this year, and according to the USDA, not even a record crop this summer can ease the situation much by mid-2022.  In Brazil, as of February 18 was only 15% completed with harvest, the slowest start for this time of the month in 10 years.  A rainy forecast for the next 10 days is prompting farmers to forge ahead with harvest to prevent potential losses.

WHEAT

Wheat futures were mostly lower overnight, respecting overhead chart resistance.  The USDA rated 40% of the Kansas winter wheat crop in good-to-excellent condition as of Feb. 21, down from 43% a month earlier.  A year ago, 35% of the Kansas crop was rated good-to-excellent.  Winter wheat ratings also declined in Oklahoma, but improved in South Dakota, Colorado and Montana.  May Chicago wheat lost 8-1/2 cents to 6.61-3/4 with a strong level of resistance forming right around 6.70.  May KC was down 10-3/4 to 6.40-3/4; And, May Mpls lost 5-1/2 cents to 6.44-1/4.  Uncertainty over Russia’s new crop export policy and talk of declining EU wheat exports, as well as a weaker dollar and higher row crops offers underlying support.  Lingering help from USDA’s forecast for U.S. 2021/22 wheat carryout near 698 mil bu vs 836 this year is also noted.

CATTLE

Cattle calls are mixed for today.  The back-log of cattle and a heavier a front-end supply picture will keep pressure on prices until the market gets direction from cash trade this week.  Cash is expected steady to higher this week, based on strong retail demand.  April cattle futures, at 123.05, did hold support on Monday, and are still in an uptrend overall.  The nearby February cattle contract goes off the board on Friday, and that may keep the market choppy until then.  The slaughter pace has recovered back to normal levels after the southern winter storms, but the market still has a backlog to work through.  Retail carcasses stay firm; Choice finished .75 higher to 239.98 and Select was 2.08 higher to 229.98 on moderate product movement.  Deferred cattle contracts look to stay technically strong on the feeling that demand will be there while facing a projected tighter cattle supply.

HOGS

Lean hog calls are steady to higher.  The strength in the cash market, reflective of the lean hog index supports the nearby contracts.  The index gained .23 to 77.43 on Monday.  April, at 85.12 still holds a 7.6950 premium to the index, which could limit upside as indicated by yesterday’s consolidation.  Retail values stay supportive with carcasses gaining .62 on Monday to $92.11 on good movement of 267 loads.  The strong demand tone supports the market with pork carcasses trading over the $90 level.  Longer-term futures contracts are showing good strength with July and beyond making new contract highs on Monday amid the prospects of tighter overall hogs supplies due to higher feed costs.

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Matthew Strelow

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