TFM Sunrise Update 10-28-20


Corn futures were down overnight on follow-through after row crops reached new highs on Tuesday only to close lower on the day.  This set-up points to an overdue market correction fueled by improving weather conditions in South America.  In addition, the dollar was up sharply overnight, fortifying resistance to U.S. exports, and the equity market futures are more than 400 points lower.  Dec corn shed 6-1/2 cents to breach the contract’s 10-day moving average support at 4.11-1/4 for the first time in a month.  4.22-1/4, yesterday’s high is now the top of the corn market moving forward.  Weekly Ethanol Stats will be out mid-morning, exports tomorrow.  U.S. ethanol production and inventories are expected to drop again this week, says Futures International, which forecasts ethanol production to fall 6,000 barrels per day to 907,000 barrels per day, which would be the lowest they’ve been since mid-September; meanwhile, the firm forecasts ethanol inventories to fall by anywhere from 100,000 barrels to 300,000 barrels–which could potentially put ethanol inventories at their lowest levels since December 2016; an inventory drop combined with higher production would be a hopeful sign for grains traders looking to see US.. ethanol domestic demand rebound.


Soybean futures tumbled overnight with Nov down nearly 12 cents to 10.71-1/2 after a bearish price reversal on Tuesday that saw a new contract high etched at 10.94 and settlement at 10.87-3/4.  There were no new export announcements on the daily watch list yesterday.  Managed Money is still heavily long the bean complex, but some long liquidation and end-of-the-month position-squaring may be occurring ahead of the election.  If demand falters in the coming weeks as winter in the northern hemisphere exacerbates Covid-19, markets will likely continue to rebalance, barring an outright collapse in demand.  Brazil has rain falling in most of the nation at one time or another, but rainfall will be least frequent and least significant in the interior south.  Argentina will receive showers today before dry weather occurs for about a week.


Winter wheat futures saw double digit losses overnight as a ‘risk-off’ attitude forms over the grain and oilseed complex mid-week, the dollar rebounds, and weather premium is being removed from the market.  Dec Chicago wheat lost 12 cents to 6.03-3/4, KC wheat was making new lows for the overnight session this morning, down 13-1/4 to 5.36; Mpls spring wheat was dragged 5 cents lower to 5.56-1/2.  Technically, the wheat complex had been susceptible to a downward correction, and this week’s closes below the 10-day moving averages are leading to a bearish development on the charts.  Significant precipitation is still expected in West TX and the TX Panhandle through OK and south-central KS into Thursday.  This will increase soil moisture and benefit the newly planted winter crops.  Other wheat regions around the globe have some form of moisture in the forecast, so again, weather premium is reduced.


Cattle futures calls are steady to higher, but yesterday’s mid-range close on Dec cattle after a higher opening are concerning.  Demand may be a resistance issue for the front month.  Choice carcasses firmed late on Tuesday, widening the spread to select cuts that may indicate tighter choice meat supply?  Still no real cash market indicators to go off of.  We will watch the Fed Cattle Exchange later this morning for signs.  The expectation is for very light trade around $105/cwt, not enough to develop a trend, though.  Weakness in the grain complex will aid upward price support for feeders.  


Lean hog calls are steady to lower based on Dec failing to hold early session gains yesterday.  This clouds the technical opinion, and the a downturn in the CME Lean Hog Index by .38 to 78.17, though still a premium to Dec, points to possible early session weakness today.  Retails closed 3.03 lower to 88.83 highlighting a softening of the demand outlook.


Matthew Strelow

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