TFM Sunrise Update 10-13-2021


Corn futures traded two-sided overnight from 5.25-1/4  to 5.20-1/2 in the December contract and are on the weaker side this morning, down 1 to 2 cents. 200-day Moving Average support at 5.18-1/2 is holding the market together for the moment as traders continue to digest Tuesday’s bearishly construed USDA report numbers.  The agency raised corn yield to 176.5 bushels per acre from 176.3 in September, upping the production forecast to 15.019 bil bu versus 14.996 a month ago.  Bigger-than-expected corn supplies point to reduced use for feed, meaning a bigger buffer on supplies than thought just a month ago.  U.S. Ending Stocks were 1.4 bil bu vs 1.408 bil.  Weekly Crop Ratings were also improved 1% to 60% Good-to-Excellent.  Corn harvest was pegged at 41% complete versus 29% last week and a 5-year average of 31%.


Soybean futures were up overnight.  Nov beans rose as much as 13 cents to 12.11-1/4 before trimming gains to 12.07-1/2 this morning.  Soyoil recaptured Tuesday’s losses overnight, and meal is down $2 per ton to a new low.  The Dec meal contract is now on pace to finish lower eight out of the last nine sessions while becoming technically oversold.  Tuesday’s sharp losses in beans reflected a yield increase for this year to 51.5 bushels per acre, compared to 50.6 BPA only a week ago.  The market had been expecting a number closer to 51.1 BPA.  The increase raises U.S. bean production to 4.448 bil bu and ending stocks from 320 mil bu from 185 mil despite severely dry conditions in the northwestern U.S. Corn Belt as more resilient hybrid seeds have crops performing well even when conditions aren’t ideal.  Weekly Crop Ratings were improved 1% to 59% Good-to-Excellent.  Bean harvest was pegged at 49% complete versus 34% last week and a 5-year average of 40%.  With yesterday’s new multi-month low(s) holding overnight, consolidation is a strong possibility as traders wait to see if China steps up purchasing commitments at arguably more globally competitive price levels.  Overnight, Chinese Jan beans were down 40 yuan ; Soymeal down 39; Soyoil down 82; Palm oil down 58; Corn up 17;  Malaysian palm oil prices were up 161 ringgit (+3.32%) at 5016 in a sudden surge of buying in late afternoon trading.


Wheat futures were mostly unchanged overnight, similar to post-USDA report closing ranges.  The October report held few surprise, so after posting and ‘outside’ trading day in many contracts, traders seem to have accepted a friendly report as being priced into the higher price levels.  Fewer-than-expected global wheat supplies were one of the few bullish surprises in the report and prices for the grain have moved higher.  USDA pegged world wheat stocks at 277.18 MMT, versus 282.22 mil a month ago.  U.S. Ending Stocks were trimmed to 580 mil bu from 615 mil a month ago.  Dec Chicago and KC wheat contracts are trading flat to 3 cents lower this morning at 7.34 and 7.37, respectively.  Dec MPLS spring wheat is fractionally higher to 9.55-1/2.


Cattle futures calls are mixed to lower.  For the fourth day in a row, Live cattle prices failed to push through overhead resistance, and faded during the session on Tuesday.  The Live cattle market is still a bear spread market, which keeps the selling pressure on the deferred contract, as market looks to remove the premium from the deferred contracts.  The weak price action on Tuesday will open the door technically for some additional downside pressure.  Cash trade has stayed quiet, but asking prices are $125-126.  Most likely, trade will hold of until the end of the week.  Midday retail values were lower, and stayed soft into the close, with Choice losing 0.05 to 281.07,  and Select fell 2.29 to 261.35.  The load count was light/moderate at 177 loads.  The Choice/Select spread widened to 19.72.  Daily slaughter was estimated at 120,000 head, 2,000 under last week, as cattle supplies still seem ample to keep the cash market in check.  Feeder cattle saw mostly higher trade, with the exception of October Feeders.  The Feeder Cash Index traded at 154.15, up .53, and a $4.425 discount to the front-month Oct futures.  Strong selling in the grain markets did help support the remainder of the feeder market overall on Tuesday.  Failure to push through resistance may have helped trigger selling pressure.  The soft price action will lead to some additional selling pressure unless the cash market moves higher to support the market.


Hogs are called steady to weaker.  Technically, the hog market uptrend is still intact, but prices are filling gaps and firming up the charts.  Key support levels gave way on Tuesday with Dec hogs failing to hold the $80 support level.  Traders may be eyeing the gap on the charts established from the bullish response to the Hogs and Pigs report.  The top of that gap is at 77.200 on the Dec contract.  The talk of the possibility of moving the processing lines back to a faster pace as negotiations between the USDA and plant workers groups are developing.  This could push extra supplies into the market place in the months ahead, if an agreement is reached.  The Lean Hog Index traded 0.35 lower to 91.60.  Holding a premium to Oct and Dec hogs should help support the front of the market, but the overall selling pressure was too strong on Tuesday.  Pork carcasses at midday traded lower, giving up the gains from Monday, and that pace accelerated into the close.  Carcasses lost 5.63 to 102.38, trading $10.00 off yesterday’s midday values.  The load count was moderate/strong at 434 loads, as buyers may look at the value in the pork product at these levels.


Matthew Strelow

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