TFM Sunrise Update 05-06-2022


Corn futures were down overnight overnight with July losing a dime to 7.87 and Dec 13 cents to 7.25-1/2.  World Weather Inc reports a huge opportunity for significant fieldwork will be opening up next week across the U.S. Midwest and a part of the mid-south region as drier and warmer weather evolves.  The window for planting may not be tremendous even though recent forecast model runs have suggested it could last a while.  Producers have the ability to plant huge amounts of land in a relatively short period of time and after a period of drying this weekend and early next week the Midwest is likely see some impressive field progress.  U.S. stocks are lower following yesterdays steep losses.  Crude is higher and near $110. U.S. Dollar is lower.  Copper, silver, coffee, cocoa, sugar and cotton are lower.  Next Thursday the USDA will release its May WASDE report, and the market is looking for lower South American production and higher US 21/22 demand.  Many are also looking for the USDA to lower the 22/23 US carryout.  Brazil and EU are dry.  Argentina’s corn Good-to-Excellent rating dropped 3% to 16%.


The soybean complex was mostly lower overnight, in part due to ideas of late corn planting leading to the potential for more bean acres.   July beans are down 14 cents to 16.33 this morning.  Nov beans fell as much as 17-3/4 cents to 14.74.  July meal is down 1.0 to 418.90.  Key support in soybean meal has failed and a decline in open interest suggests the market is still liquidating long positions, which may be adding pressure to soybeans.  July soy oil is down 1.47 to 80.38.  Headlines suggest the selloff in the stock markets and China’s Covid-led lockdowns that will slow their economy, combined with seasonal U.S. planting progress is acting as a drag on the bean complex heading into the weekend.  The lockdown could slow China’s veg oil demand and soybean imports.  Dalian palm oil and soy oil futures are lower. U.S. inflation will also be an influencer for feed and cooking oil demand.

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Winter wheat futures were down a dime overnight to 10.97-1/4 in July Chicago and 11.67 in the KC contract.  July MPLS was down 4-3/4 cents to 12.05.  Prices are still up for the week, though.  The recent heat wave that affected India also affected Pakistan and Bangladesh, raising concerns that they may become net wheat importers.  India may consider restricting wheat exports, as some estimate their crop may be down as much as 6 mmt due to a recent heat wave. They were expected to export as much as 10 mmt to help offset lower supplies from Ukraine.  There are questions whether the USDA will lower export demand and raise the carryout for 21/22 in next Thursday’s report.  The May WASDE report will also show the USDA’s first estimate of the US 22/23 wheat crop with the lowest winter wheat ratings since 1996 and delays in spring wheat planting.


Cattle futures are called steady to lower following some profit taking pressure on Thursday as grain prices traded higher, led by a wheat price surge.  In addition, strong selling in the equity markets is noted.  Grains are lower this morning.  Jun live cattle futures failed to push through the 200-day moving average, so the path of least resistance seemed to work lower.   Light cash trade began building on Thursday with $140 cash trade in the South, steady with last week, and North ranging around $146.  Northern dressed trade was at $232, again steady with last week.  Trade was quiet on Thursday, and there may be a few wrap up deals to end the week.   Beef retail values saw carcass values trade lower (Choice: -4.56 to 255.18, Select: -1.87 to 245.81) on movement of 159 loads.  The Choice/Select spread narrowed to 9.37 could be reflecting a more current cattle supply.   Feeder price action was weak, and charts turned technically lower, leaving the door open for additional long liquidation into the weekend.  Cattle markets have had a good start to this week, but prices are pressured, giving back those gains.  The market seems poised to retest recent lows.


The hog market is called steady to higher on follow-through from strong triple-digit gains for the second consecutive day allowing  June hogs to post its first higher high of the week.  The strong price action on the day leaves more upside room for prices to challenge back to the 100-day moving average and the 10-day moving average at the $109-110 levels.   The cash market still looks to be an issue, limiting the front end of the market.  The Lean Hog Cash Index lost 0.11 to 101.04, and back trading at a discount of 1.760 to the May and 6.035 to Jun contracts, limiting upside.  In afternoon direct cash trade, prices were 2.66 lower to 101.58 and 5-day average of 101.31.  Retail carcasses were firmer at midday, gaining 4.28 and held those gains closing 2.44 to 106.27 on light demand of 265 loads. The firm afternoon close will help support prices on the Friday open.  We view hogs as putting in a season-low with the firming price action on Wednesday and the follow through higher on Thursday may help confirm the move.  The technical picture on deferred contracts looks more friendly, as the nearby months are still dealing with demand issues and a choppy cash market


Matt Strelow

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