CORN

Corn futures were down more than a dime overnight, following the steep drop off in beans.  March corn traded to an overnight low of 5.12-3/6 on losses of 13-1/4 cents as the front three contracts successfully closed their respective gaps left on the daily charts from the post-January crop report reaction.  Corn is playing the ‘follower’ role to movement in soybeans as the market faces volatility amid near-term topping action and increased farmer selling.  Prices had arguably become technically overbought on this rally and without fresh bullish news on a daily basis, have become vulnerable to profit-taking pressure.  Front month corn futures reached a 138% retracement (526 March) of the 2019 to 2020 selloff, and that is often a point where rallies lose steam.  Chinese Ag futures (May) settled down 91 yuan in soybeans, down 27 in Corn, down 106 in Soymeal, down 96 in Soyoil, and down 96 in Palm Oil due to shrinking Jan palm oil exports.

SOYBEANS

Soybean futures traded sharply lower overnight with nearby March beans down as much as 35-1/4 cents at one point to 13.52.  Nov beans reached a low of 11.66-1/4, down 22-1/2 cents.  Meal and oil were weaker overnight, too.  This is the first time bean prices have traded through 10-day moving average support in three weeks, not entirely surprising given the fact that the market served the trade a topping signal in the form of a bearish key reversal on January 13.  March beans’ 20-day moving average support lies near 13.36-1/4.  The record high net long positioning held in many speculative categories for row crops leaves the door open for plenty of downside price opportunity while still maintaining an uptrend.  The weather outlook in most production regions of South America is unchanged.

WHEAT

Winter wheat futures were down as much as 15-1/2 cents in Chicago and 8 cents in KC overnight.  Mpls wheat was down 8-3/4 cents.  Sharply lower trade in row crops has created a bearish atmosphere for the grain and oilseed complex overnight, carrying wheat with it.  Meanwhile, underlying support from a weak trend in the dollar and overseas wheat price strength keeps prices trending higher and into overbought territory on the charts.  In tender activity, Philippines passed on 100,000 tons of optional-origin feed wheat.

CATTLE

Cattle futures are called steady to higher amid optimism of more reopening of the economy.  Carcass values finished higher to begin the week, holding last week’s trend.  Choice carcasses were up 2.45 to 217.49 and Select gained .60 to 206.44.  Cash trade undeveloped on Tuesday.  Today’s Fed Cattle exchange will give a starting point for the week.  Strong retail values should support cash.   Meanwhile, we view positioning for Friday’s Cattle on Feed report on Friday keep prices choppy.   Preliminary trade estimates show an average guess of Jan 1 On-Feed at 99.3%; Placed in Dec at 97; And, Marketed in Dec at 100.7.

HOGS

Lean hog futures are called steady to lower as front month contracts struggle with large supplies and heavy production.  A softer cash market tone and a Reuter’s Article talking about China’s pork output recovering sharply in 2020, thus creating concerns about China demand is also noted.  Deferred futures contracts experienced profit taking on concerns for the recovery in the Chinese hog herd and its impacts on U.S. demand.  Pork carcasses finished the day 1.10 lower to 77.42 with a load count of 404, softening from midday strength.  This will act as a drag on futures for today.   The Lean hog index closed .31 lower to 65.56, halting the uptrend.

Author

Matthew Strelow