TFM Sunrise Update 04-26-2021


Corn futures made new highs overnight on follow-through after managing to shrug off lower trade on Friday and close mixed.  May corn was up as much as 18 cents to 6.73-1/2.  July was up 16 cents to 6.48-1/2.  Dec corn reached a new high of 5.61-1/4 on gains of 10-1/2 cents.  The dollar made a fresh multi-week low overnight.  The export tender sheet showed South Korean feed groups bought 335,000 tons of optional-origin corn.   Weekly export inspections will be out later this morning, crop progress/conditions after the close.  The daily price limits for CBOT grain and soy futures will expand in May following a routine half-yearly review, CME Group Inc, parent of the exchange, said late last week.  The new limits go into effect on May 2, for trades dated May 3, CME Group said, potentially increasing volatility.  The wider daily limits follow the exchange operator’s move on March 15 to expand speculative position limits, raising the number of CBOT futures contracts that non-commercial traders can hold.  For corn futures, the daily limit will move to 40 cents per bushel, from the current 25 cents. Limits for CBOT SRW wheat futures and K.C. HRW wheat futures will rise to 45 cents, from 40 cents.  For soybeans, the daily limit will widen to $1 per bushel, from 70 cents currently.  The limit for soymeal futures will expand to $30 per short ton, from $25, and the soyoil  limit will rise to 3.5 cents per pound, from 2.5 cents.


Soybean and soyoil futures made new highs overnight.  Nearby May beans surged 24-1/2 cents to 15.64-1/4 before giving up much of the rally by 5 AM.  July peaked at 15.39-1/2, and is up 4-1/2  this morning at 15.20-1/2.  Nov beans reached a new high at 13.56 on gains of 14-3/4 cents.  Strategic Biofuels LLC, a project development company, announced on Friday it plans to develop a renewable diesel plant in Louisiana that will produce up to 32 million gallons per year of renewable fuel using wood waste.  The development is one of many over the last year, as companies, including oil refiners, scramble to capture incentives for the production of renewable diesel.

Planting progress will hit its stride next week after an unseasonably cooler spell.  We now move towards First Notice Day for the May futures contract on May 30.  The latest commitments report continued to show managed money maintaining generally healthy net long positions across the board.


Wheat futures rose double digits overnight across the grain complex.  July Chicago wheat hit a new high at 7.31-1/2 on gains of 19-1/4 cents.  July KC got to 6.97-3/4, up 15-1/2 cents.  July MPLS was up 16-3/4 cents to 7.42-1/4.  For those utilizing wheat futures, maintenance margins will increase after the close today by 10.5% to $2,100 per contract from $1,900 for May 2021.  The U.S. remains one of concern for the southwestern U.S. Plains with West Texas and the southwestern HRW wheat production areas getting very little rain over the next couple of weeks.  New lows for the move in the dollar add support from an export perspective.  Tender Activity shows Egypt in the market for optional-origin wheat.  Bangladesh seeks 50,000 tons of optional-origin wheat.  Statistics Canada is scheduled to release its estimates of Canadian crop planting intentions tomorrow morning at 7:30 a.m.  A wire story reports Brazil meatpackers are looking at wheat as an alternative feed to corn as prices rise. Argentina is now looking at a grains export tax hike.  Overseas, Russian wheat export prices rose for a third week in a row last week, buoyed by higher prices in Chicago and Paris on supply concerns.  Russian wheat with 12.5% protein loading from Black Sea ports for supply in May was up $17 from the previous week, IKAR agriculture consultancy said.  Sovecon, another consultancy, said that both wheat and barley prices rose by $6 a ton respectively.  Ukrainian wheat export prices have risen $15 a ton over the past week amid an increase in demand and spring grain sowing delays in Russia, the APK-Inform agriculture consultancy said.


Cattle futures are called steady to firmer.  Friday’s April USDA cattle on Feed report was mostly below expectations as Total cattle on Feed as of April 1 was 105% of last year, Placements were below expectations at 128%, and Marketings inline at 101%.  The numbers are skewed if you compare to last year and the cattle industry dealing with the COVID issues, going back to 2019, the total cattle on feed is slightly below those levels at 11.897 million head versus 11.953 million head in 2019.  The total is the second highest cattle total on record after 2019.  The numbers overall look relatively friendly and the cattle market is undervalued, especially in the deferred contracts.  Retail demand stays supportive as carcasses were mixed at midday.  Choice carcasses were 1.46 higher to 283.77, but Select was 1.56 softer to 272.13 on moderate demand of 92 midday loads.  Choice carcasses at this level are trading at the 2nd highest price level in history, with only last years COVID pandemic prices higher.  The cash market was disappointing last week, given the retail strength, that will still be a key in the market this week.


Hog calls are mixed to higher.  Buyers returned to close out the week, supported by a USDA cold storage report reflecting tight pork supplies and strong on-going demand.  Carcass values are trending close to all-time highs, were strong at midday, but softened to end the week.  Pork carcasses were 2.76 lower to 111.94.  Demand was moderate at 222 loads.  This demand-driven market has fueled the cash market as the lean hog index has trended higher for 12 straight weeks, and gained an additional .87 today to 105.99, pulling the front month contracts higher.  The technical picture looks improved, as prices rebounded off of last week’s lows, and have consolidated, positioning for a move higher, led by the fundamentals.


Matthew Strelow

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