TFM Sunrise Update 1-5-2021


Corn futures traded two-sided overnight after posting a bearish key reversal in March corn yesterday.  A positive close today would, however, market the 16th consecutive day of a higher closes in May corn.  The most-active CBOT corn contract surged 14% in the second half of December, something not seen in more than three decades.  Many commodity markets took their respective cues from a major bearish development in the stock market where new highs were erased on talk of higher taxes.  Stock index futures are firmer this morning and headlines from the USDA pertaining to the continuation of the Farmers to Families Food Box Program amounting to $1.5 bil worth of food to families affected by the COVID-19 pandemic offers support.  Meanwhile grain fundamentals remain bullish.  There are some estimates for the U.S. 2020/21 corn carryout to approach 1.350 bil bu versus USDA last estimate of 1.702.  USDA will release the January Crop Report on the 12th.


Soybean futures rallied more than 20 cents overnight after seeing yesterday’s 30 cent gains all but disappear by the closing bell.  The bearish crossover from a wild swing from a new high to a near steady close in beans, and reversals in meal and oil signal potential topping action in the complex with Managed Money heavily holding a sizable net long position.  A reading over 70 in the 9-day relative strength index indicates the approach of an overbought market, technically.  Rain in Argentina’s forecast and improving conditions in Brazil is threatening to slow the rise in grain prices as traders look ahead to the upcoming January Crop Report, which is noted for spurring the third most volatile reaction from the trade.  In Monday’s Fats and Oils report, USDA stated that 5.73 mil tons (191 mil bu) of U.S. beans were crushed in November.  Trade estimates were 192 mil bu (that compared to 197 mil a month ago, 175 mil a year ago).  Soymeal stocks came in at 415,000t, (342,000t a month ago, 426,000t a year ago); And, Soyoil stocks were 2.118 bil lbs (1.964 bil last month, 1.880 bil a year ago).  U.S. soyoil stocks at the end of November were seen swelling to 2.023 billion lbs.


Wheat futures traded higher overnight with new highs etched in Chicago and almost in Mpls spring wheat.  March Chicago wheat rose 9-3/4 cents to eclipse Monday’s new high of 6.50-1/4 by 2-1/2 cents.  The new high in CBOT wheat was the highest since December 2014. Wheat has been tracking the grains upward in recent sessions, but traders are also keeping an eye on global export demand as well as prices and shipments out of the Black Sea, the top supplier of wheat.  March KC wheat stayed above $6.00 at 6.06-1/2 on gains of 7-1/4 cents.  March Mpls wheat kept pace with gains of 7-3/4 cents, falling short shy of Monday’s contract high of 6.07-1/2.  The dollar is down 25 basis points, mid range of Monday’s trading range that included a new low for the move.

The USDA issued its last national winter wheat ratings of the season on Nov. 30, reporting 46% of the U.S. crop in good-to-excellent condition as of Nov. 29.  Condition ratings for winter wheat improved during December in Kansas, but ratings declined in several other Plains states and in Illinois.  The USDA rated 46% of the Kansas winter wheat crop in good-to-excellent condition as of Jan. 3, up from 33% in late November. A year ago, 40% of the Kansas crop was rated good-to-excellent.  Winter wheat ratings also improved in Nebraska.  But, ratings fell in Montana and declined in South Dakota as well.  Ratings declined sharply in Illinois; the USDA rated 50% of the Illinois wheat crop as good-to-excellent by Jan. 3, down from 79% in late November.


Cattle futures are called steady to higher.  Choppy trade may be expected after Monday’s unexpected down-turn in prices, likely influenced by outside markets.  Technically, the cattle market broke support while approaching early December levels, but the trend remains higher, overall.  No cash trade developed on Monday, but we expect trade to be higher following last week’s rise to $112 and a tone from packers signaling an improvement in the start of 2021.   Carcass values finished mixed on the close and gave up midday strength.  Choice carcasses lost .08 to 209.87 and Select gained .88 to 196.53. 


Lean hog calls are for steady to higher supported by strong gains in front month contracts as strong export demand helped usher in a technical breakout on Monday.  Those front month futures are challenging highs established in Oct. Deferred contracts, meanwhile have pushed to new contract highs.  Pork carcasses were strong at midday, up over $7.00, providing strength in the market and have been trending higher the past few sessions.   The lean hog index closed .21 higher to 60.07 while trading 11.15 under February.  This, and heavy carcass weights that have hit a new record high high last week could limit upside price potential.


Matthew Strelow

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