TFM Sunrise Update 05-23-2022


Corn futures are firm to start the week amid a steep drop in the dollar overnight to a 3-1/2 week low and double-digit gains in wheat. Higher trade in crude and stock index futures is also noted.  July corn is up 6-1/2 cents to 7.85-1/4 while remaining in a 7.70 to 8.20 range.  This week’s U.S. Midwest rains could slow plantings.  Meaningful U.S. weather issues will likely be needed in order to trade over 8.20.  Historically, corn futures tend to top in July or August when factoring in weather-related crop problems.  U.S. 2021/22 corn carryout could slump to 1.375 bil bu versus USDA’s 1.440. Despite the arrival of a severe cold front to Brazil this week, only some of the corn-producing regions in Paraná, Mato Grosso do Sul and Minas Gerais were hit by frosts.  However, according to agents, crops have not been badly damaged.  It appears a lack of Ukrainian corn exports, lower South America exports and an increase in EU corn demand suggests 8.00 in July futures is not yet rationing demand.


The soybean complex was mixed overnight with July beans up as much as 14-3/4 cents to 17.20, Nov up 13 to 15.21, July meal down 1.40 to 428.50, and July bean oil up 1.01 to 81.94.  Talk of higher U.S. demand offers support.  Basis bids for soybeans shipped by barge to the U.S. Gulf Coast and loaded for export were steady to higher on Friday on strong demand for old-crop U.S. supplies, traders said.  U.S. combined April soybean use was a record 305 mil bu and up 38% vs last year.  With July beans north of $17, a next object is $18 with China a big short in the soybean market.  Initial resistance is near 17.34.  U.S. 2021/22 soybean carryout could be closer to 190 mil bu than USDA’s 235.  Year-To-Date nearby futures are up 29% in soybeans, Soymeal up 4% and soy oil up 46%.Overnight, Dalian soybean, soymeal. soy oil and palm oil futures were higher.

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Wheat futures regained some positive footing overnight, advancing from a down week last week with gains of 25 cents to 11.93-3/4 in nearby July Chicago this morning, and 23 cents to 12.75-3/4 in KC.  Confirmation that Russia will not allow Ukraine grain exports by vessel should help KC find support near 13.00.  July MPLS spring wheat futures were up 20 cents to 12.99.  An overnight drop in the dollar and ideas that U.S. south Plains rains this week could be too late to help the U.S. HRW crop is supportive.  Most World wheat users are buying hand-to-mouth waiting out a seasonal harvest low to add to coverage.  Another system will bring more showers into the northern Plains forecast for today followed by another system for the weekend and possibly next week.  The planting process is likely to remain slow, though some areas are likely to see enough drying to get out and plant.  Year-To-Date nearby futures are up 55% in SRW, up 59% in HRW and up 32% in HRS.


Cattle futures are called steady to lower.  Friday’s Cattle on Feed report totaled 12.0 million head on May 1, 2022.  The inventory was 2% above May 1, 2021, and slightly above expectations.  At 12 million head, this is the highest May 1 inventory since the report series began in 1996.  The closely watch placement numbers were at 99% for last year, but above the 96.5% expected by analysts.  Marketings last month was in line with expectations at 98%.  The higher-than-expected total cattle and slightly heavier placement number still shows plenty of cattle available and that could weigh on prices to start this week.  The cattle market is heavily oversold, and a lot of negative news could be priced in, as the market may be close to a seasonal low for the spring.  Beyond the cattle numbers, the weak equity market keeps the pressure on the cattle market.  Economic concerns and its potential impact on the consumer keep the sellers in the market in general.  The trend in those market may have more additional impact on cattle prices next week as the market worries about consumer demand.  Both fat and feeder markets are looking toward a seasonal low and will need some news to change the direction of the money flow.


The hog market is called steady to firmer on follow-through from a stronger cash market tone and short covering push to triple digit gains in futures on Friday.   June hogs posted an outside trading day with strong price action as the contract trade higher for the 5th time in 6 days including the contract’s highest close since April 29.  Prices pushed through key short -term moving averages, may have the hog market looking to recover back to a possible test of the 100-day moving average at $110.00.  The strength was tied to the improved direct cash hog trade last week.  Midday cash was higher again in morning trade, gaining 2.02 to 112.25 and a 5-day average at 108.26.  The CME Lean Hog Index started to reflect the higher trend at the end of the week, gaining .29 on Friday to 100.37, but was still .67 softer overall on the week.  In addition, retail values have trended higher this week on good product movement, helping support prices.  Friday’s midday carcass values pushed 5.18 higher, and held gains, closing 3.65 higher to 107.11.  Movement was light at 215 loads.  Friday’s pork carcass values were $5.00+ higher than Monday’s close, showing good strength through the week.  The CME Pork Cutout Index worked higher and reflecting the recent strength.  On Friday, the index gained .90 to 102.26 and was up .85 on the week.  The hog market is seeing some buying strength, being supported by a firmer retail market this week and and strengthening direct cash tone.  Price strength was reflected across the entire hog complex again on Friday, and the market is looking like it has turned the corner higher.  The question is now, how high can this market climb on this recovery.


Matt Strelow

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