TFM Sunrise Update 10-07-2020


Corn futures were up 2 cents overnight after breaking through short term resistance of 3.85-1/2 (Dec) yesterday.  The grain complex remains in control of the bulls as a higher bid across the complex led by trend followers continues to enter the market on this rally. Recent dryness in Argentina, Brazil, and Eastern Europe helps support the markets as well.  Some places in Eastern Europe have the potential to remain dry for all of October.  Dec corn, at 3.87 is trading inside yesterday’s higher range that peaked at a 7-1/2 month high of 3.89-1/4.  We’ll get Weekly Ethanol Stats today, Exports tomorrow followed by the October monthly USDA report on Friday.  Heading into today, Managed Money is net long an estimated 190,000 corn contracts.  In tender activity, S. Korea bought a large quantity of corn from South America.


Soybean futures were narrowly mixed overnight, consolidating yesterday’s rally to new highs.  Nov beans, at 10.44, broke the next psychological resistance barrier at 10.50 yesterday where trend-trading computer algorithms calculate values of a market where the supply may be shrinking versus bigger demand.  Meal and soyoil were also mixed overnight.  Managed Money is now net long an estimated 277,000 soybeans; 97,000 lots of soymeal, and; 97,000 soyoil after yesterday’s buying spree.  In tender activity, S. Korea bought 59,000 tons of soymeal from South America.  Egypt bought 60,000 tons of optional-origin soyoil, 26,000 tons of sunoil.


Chicago wheat futures were unchanged overnight; KC and Mpls were up a penny.  Prices are likely to trade an inside day today after surging to new highs the past two days, thus adding to an overbought technical condition for the market(s).  Heading into today, Managed Money is net long an estimated 52,000 SRW wheat contracts.  Recent dryness in Argentina and Eastern Europe, as well as the potential for a dry month of October that could stunt their wheat crops, underpins the market.  Friday’s USDA report is expected to show a U.S. wheat carryout of 887 mil bu vs the USDA’s previous estimate of 925 mil. Tender Activity has Japan seeking 118,428 tons of optional-origin wheat; Tunisia bought 92,000 tons of optional-origin wheat.


Cattle calls are steady to lower as the strength in grains weigh on the complex.  Boxed beef values are also trending softer since the start of the week.  Choice and select carcasses were down more than .80 and cash is undeveloped so far this week.  We’ll get a glimpse of cash market indicators in the form of the weekly Cash Cattle Exchange trade mid-morning today.


Lean hog futures are called steady to higher, underpinned by a strong cash market that continues to trend higher.  The index reached 77.26 on Tuesday, regaining momentum after slowing the previous two days.  This will help float the nearby October contract that settled near the session’s high and a new high for the year at 76.32 on yesterday.  The contract is overbought, which could lead to a sharp retreat if fundamentals dictate a reversal.  Tuesday carcass cutouts softened 2.45 to 92.55.  Meanwhile, Dec hogs, at 63.87 remain at a deep discount to the index.


Matthew Strelow

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