CORN

Nearby corn futures broke the $5 mark overnight on gains of 10 cents with beans showing no signs of slowing their ascent and the dollar making new lows.  March corn made a new high of 5.02-3/4.  May was up 9-1/2 cents to a new high of 5.02-1/2; And, Dec futures rose 5-1/2 cents to set a new high at 4.44.  Open interest continues to climb as new long positions are established with little resistance slowing the rally in row crops.  The bull market perception continues to grow, supported by fundamentals and news headlines.  Goldman Sachs cites COVID-19 kick-starting a new commodities “supercycle”.  While last year’s strong rebound in many commodity prices might be viewed as a “V-shaped vaccine recovery”, the bank contends it is just “the beginning of a much longer structural bull market for commodities”.

Meanwhile, looking ahead to next week’s January Crop Report, the trade is still concerned that lower South America 2021 corn supplies could increase demand for U.S. exports  and lower carryout, thus pushing prices even higher.  Some estimate South America’s corn crop near 147 mmt versus USDA 159.  Informa dropped Argentina’s corn crop 1.6 mmt to 47.  Trade estimates U.S. 2020/21 corn carryout is near 1.380 bil bu vs USDA 1.702.  And now, crude oil prices rose overnight to their highest since February 2020 after Saudi Arabia agreed to reduce output more than expected in a meeting with allied producers, while industry figures showed U.S. crude stockpiles were down last week.  U.S. corn used for ethanol during November was 432 mil bu (vs 457 mil bu last year).  The Sep thru Nov corn grind for ethanol totals were 1267 mil bu vs 1301 mil bu last year, down 34.1 mil bu.  Tender activity showed Turkey seeking 155,000 tons of option-origin corn.

SOYBEANS

Soybean futures rallied more than 20 cents again overnight pushing nearby Jan to 13.75-3/4 on gains of 25-3/4 cents.  Nov beans reached 11.63-1/4 on gains of 28-1/4 cents.  Nearby meal and soyoil futures hit new highs, as well.  Conditions in Brazil will still be mostly favorable for crop development. There will be some dryness in pockets of the far south; though, rain will occur enough to prevent serious crop stress. The far northeast will also still have some dryness.  In Argentina, erratic shower and thunderstorm activity will continue to benefit some of the region and leave pockets of the region with increasing crop stress.  Meaningful rain will increase in coverage for Sunday through next Tuesday due to a frontal boundary.  Last evening’s model run showed a notable increase of rainfall in central Argentina Jan. 15 – 17.  The markets continue to rally, though, on technical momentum and ideas that Tuesday’s Jan Crop report will validate the upward price breakout that began nearly 6 months ago.  Stochastic readings near 90 on the RSI scale indicate an extremely overbought market that would reinforce a violent pullback in price should technical traders opt to reorganize positions on signs of the rally stalling.  Jan beans are bumping up against resistance at 13.77 with next resistance seen up at 14.02-1/4.

WHEAT

Wheat futures were up a nickel while being dragged higher by row crops and the influence of a lower dollar.  Prices stayed inside Tuesday’s higher trading ranges last night after settling well off of session lows yesterday due, in part to an overbought condition.  This week’s new contract highs create a layer of new technical resistance to be tested from outside market support and sketchy U.S. winter wheat crop ratings.  Overnight tender Activity had Japan seeking 120,000 tons of optional-origin wheat;   Ethiopia cancelled 600,000 tons worth of wheat deals made in November.

CATTLE

Cattle futures are called steady to higher as technical buying ushers in money flow to the markets.  Feb cattle posted an outside day reversal finishing at the top of the range yesterday, closing back above the 100–day moving average and opening the door for follow through buying today.  Very light cash trade has begun, but not enough to establish a trend at $112 in IA.  Market talk of $114-116 in some local livestock auctions have surfaced, solidifying expectations for higher trade this week.  The Fed Cattle exchange today may help with clarity.  The packer tone into the cash market should improve in the start of 2021.   Carcass values finished lower, steady with midday.  Choice carcasses lost 3.97 to 205.90 and Select lost .04 to 196.49.  Good movement was seen with 204 loads. 

HOGS

Lean hog calls are mixed.  Yesterday’s market was mostly higher, except for weakness in Feb.  Front month futures are challenging the high established in Oct.   Deferred contracts pushed to new contract highs while exhibiting strength.  Higher grain prices may be long-term supportive on futures, limiting expansion due to higher feed cost.  Pork carcasses were slightly lower at the close, finishing .14 lower to 77.63, but carcasses have been trending higher the past few sessions.  Strong product movement hit 458 loads.   The lean hog index closed .55 higher to 60.62 while trading 10.30 under February, and hog carcass weights pushed to a new record high last week at an average of 221.2 lbs, keeping production heavy. 

Author

Matthew Strelow