TFM Sunrise Update 05-12-2021


Corn futures were firm overnight with prices poised to make new highs pending today’s USDA numbers, due out at 11 AM CT.  Weekly ethanol stats will be out later this morning ahead of the USDA report.  Nearby May corn was up 7-1/2 cents to 7.67, July up 4-1/2 to 7.26-3/4; And, to a lesser extent, Dec up 2 to 6.13-1/4.  Futures rallied from overnight lows yesterday on an announcement of new China new crop U.S. corn.  China has bought 3.06 mil tons of U.S. new crop corn since Friday.  Today, the trade will be watching to see what USDA does for USDA China’s 2020/21 imports and their guess of the Brazilian corn crop with some estimates as low as 85 mmt versus USDA 109.  This could add 400-500 mil bu to U.S. 2021/22 corn export demand.  2020/22 U.S. corn exports are estimated at 70-71 million tons, above USDA’s April projection of 67.95 million tons.  Brazil’s Parana state lowered their corn crop rating to 25% good-to-excellent.  Union workers at Brazil’s Santos port on Tuesday delayed a possible strike until next month, amid demands to know how soon they will be vaccinated against COVID-19, a union official said.  U.S. north Midwest two-week weather turned drier Sunday night.  The most significant changes in last evening’s GFS model run were in the May 19 to 23 timeframe, which showed notably wetter in much of the Corn Belt, Delta, and Oklahoma.  Drier conditions appeared in western and southern TX, GA and South Carolina.


The soybean complex traded sharply higher overnight.  A new high in soyoil was posted including a large gap/jump, helping beans to double-digit gains.  July beans rose as much as 38-1/2 cents to 16.53-1/4.  Traders are reacting to ideas that China could take 40 mmt of U.S. soybeans in 2021/22 versus 35 this year and U.S. crush may need to be near 2.400 to meet potential new soyoil jet fuel demand.  The USDA Outlook yield and March acres could suggest a U.S. 2021/22 soybean carryout of 25 mil bu unless USDA drops demand below most estimates.  The thin carryout helped lift November futures to a new high at 14.49 overnight on gains of 17-1/2 cents.  Meal contracts, though not new contract highs, gapped higher to a fresh multi-month high.  Chinese Ag futures for (September) settled up 87 yuan in soybeans (at U.S. $26.30), up32 in Corn (at $11.27), up 83 in Soymeal (at $528), up 224 in Soyoil (at 63.58 cents), and up 206 in Palm Oil.  Malaysian palm oil prices were up 174 ringgit at 4,524 (basis July) at midsession, a record high.


Wheat futures were choppy overnight and are close to unchanged this morning in Chicago and KC.  MPLS wheat is up 4 to 7 cents.  Prices have rebounded to find a mid-range sentiment ahead of today’s May USDA Supply/Demand report.  We look for the positive trend in row crops to keep wheat supported, overall.  US/World 2020/21 wheat supply and demand tables are not expected to see much change.  USDA’s March wheat acres and Outlook yield could suggest a U.S. 2021/22 wheat carryout of 715 mil bu.  Trade estimates for U.S. 2020/21 wheat carryout are near 850 mil bu, down from 852 last month.


Cattle futures calls are for higher following another day of good buying strength, led by Live cattle.  Additional short covering and technical buying supported by the retail beef market supported that sector with the December and later contracts pushing to new contact high closes on the day.  The wholesale beef market is the driving force under the cattle markets’ recovery from the recent selloff. Choice carcasses gained 3.26 to 312.37, and Select carcasses were 2.58 higher to 296.34. Load count was moderate at 106 loads.  The Choice-Select spread has been starting to move wider as carcass weights have trended lower, possibly reflecting a more current feedlot situation and cattle being pulled forward in the face of high grain prices.  Cash trade is still unestablished, and that is weighing on the June futures.  Expectations are for steady to slightly higher than last week, but the majority of business will hold off until Wednesday or later.  Feeder cattle manage to hold small gains, with the exception of May Feeders.  A return of strength in the grain markets limited the gains in the feeder complex, despite the strong Live cattle move.  USDA WASDE numbers today could be a large factor in cattle price direction.  A strong move higher in grains will likely triggered some profit taking in Feeder markets, as feeders typically have an inverse relationship with the corn market.


Hog calls are mixed.  The market experienced moderate selling pressure again on Tuesday, as prices continue to consolidate off most recent move higher.  Technically, front month charts failed to push over key price levels at the 10-day moving average, leaving the door open for further downside pressure.  The price gap on the June charts at 109.725 and the 20-day moving average are possible near-term downside targets.  A factor weighing on futures has been the weakness in Chinese hog values.  Live Hog futures on the Dalian Exchange in China have lost 7% over the past 2 days, to the lowest level since end-January.  This may be due to restriction of animal transport in China to help curb ASF, causing production build up in regions, pressuring prices.  Cash remains firm and the lean hog index gained .88 to 110.10, running a slight discount to may futures.  Carcass values stay firm overall, and were steady to slightly higher on the close.  Pork carcasses traded .04 higher to 113.20 on moderate movement of 310 loads.  The current price action in the hog market is more consolidative in nature, back-checking support levels.  The fundamentals are still strong, and hogs have the potential for another push higher.


Matthew Strelow

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