CORN

Corn futures  gapped higher overnight en route to gains exceeding 20 cents.  Yesterday’s rally to a 25 cent limit-up settlement the nearbys triggered expanded limits of 40 cents for today’s trade.  Old crop led the charge again last night with March reaching 5.39.  Dec corn got to 4.63 on gains of 5-1/2 cents.  Prices had steadily pushed higher right into the the release of the January Crop Report.  The U.S. corn figures were the most surprising data published by USDA, particularly for quarterly stocks and 2020 crop yield.  Both of those numbers fell considerably below the trade range of estimates, which were historically wide for yield.  The violent reaction to the upside following a brief one-week consolidation phase may be the market telling us that USDA’s cuts were too small?  For now, nearby corn contracts have established the $5.00 price level as support moving forward after testing that level as resistance the past week, adding to growing rhetoric of impending inflation risk.  In South America, a notable rain event is still expected to impact central and northern Argentina Friday into Saturday due to a frontal boundary. The rain will be important due to the lengthy period of dryness that is still expected to follow it.  Managed Money was a net buyer of 58,000 corn contracts in yesterday’s trade, pushing their net long position to an estimated 378,000 contracts.  Overnight tender activity showed S. Korea seeking 66,000 tons of optional-origin corn.

SOYBEANS

Soybean futures cautiously rose 15 to 17 cents higher overnight to new highs before trimming gains to just 3 to 5 cents.  Nearby January futures hit 14.38-1/4, March reached 14.36-1/2; And, Nov was up as much as 7-1/2 cents to 11.86 in a bid to reach $12.  USDA dropped the U.S. the 2020 soybean crop to 4.135 bil bu versus 4.170, and estimated the U.S. 2020/21 soybean carryout at 140 mil bu vs 175 last month, in part, by increasing imports 20 mil bu and dropping residual 12 mb.  USDA did leave 2021 China soybean imports at 100 mil bu while raising exports 30 and crush 5.  USDA estimated  Brazil and Argentina’s combined soybean crop was pegged near 181 mmt versus 183 last month.  Yesterday’s player sheet had funds net buyers 33,000 soybeans; 13,000 lots of soymeal, and; 1,000 lots of Soyoil.  Managed Money is net long an estimated 226,000 soybeans; 109,000 lots of soymeal, and; 107,000 soyoil.

WHEAT

Wheat futures were firm overnight.  March CBOT and KC winter wheat forged new highs of 6.75-3/4 and 6.33, respectively, on gains of 7 to 8 cents on follow-through momentum from Tuesday’s push higher into new contract highs.  Managed Money was a net buyer of 25,000 SRW wheat contracts.  They’re now net long an estimated 36,000.  The fact that ‘exportable’ global wheat supplies are tightening is supportive for the market.  However, wheat traders have been highly influenced by the direction and movement in row crops, seemingly waiting for cues before asserting money flow into the market.  Look for more of the same leadership as price discovery unfolds.  Mpls spring wheat tagged along with the complex, adding 8 cents to 6.28-3/4 (Mar) versus yesterday’s new high etched at 6.30.

CATTLE

Cattle market calls are mixed to lower on follow through technical selling pressure in front months that has Feb live cattle testing the 100–day moving average.  The drop back below the 40-day MA suggests the longer-term trend could be turning down.  The next downside objective is now at 11.72 after Feb’s current settlement of 112.47.  Deferred contracts maintain their overall strength though.  The Fed on-line cash cattle market is scheduled for today.  Until now, cash has been quiet. Carcass weights were up 4 lbs to 890 lbs which is 8 lbs over last year, according to Tuesday’s  Comprehensive Fed Cattle Weekly Report.  The extra tonnage is falling as the weight premiums over prior year narrow. 

HOGS

Lean hog futures are called mixed as the nearby Feb contract, at 68.50 settles into a choppy trend near 10 and 20-day moving averages and above longer term moving average support levels.  The nearby contracts have retreated over the past week and is looking to consolidate as traders digest the rally in the grain and oilseed complex.  Higher grain will impact all meat products and are a sign of impeding inflation risk.  In addition, the charts turn more positive the farther we look out.  June hogs and beyond have avoided a pullback and are making new contract highs.

Author

Matthew Strelow