TFM Sunrise Update 10-30-20


Corn futures were mixed overnight with nearby Dec down 2 cents to 3.96-1/2 and the rest of the contracts flat/firm.  For the week Dec is down 23 cents as the trade eases into the end of the month and ahead of the key election.

A wire story indicated, “if Joe Biden prevails come Election Day next week, then grains traders may become concerned that a Biden Administration could affect domestic corn demand; the spring shutdown of the economy slashed ethanol demand by 50% at the time, and we are still paying the price for that; Trump has stated that he will not do that again, while Biden has hinted that he might, and that has the corn and ethanol industry very nervous”.

In addition, crude and equity markets have fallen to multi-month lows, and the dollar has been on the rise all week, offsetting better-than-expected export sales and big corn sales to Mexico.  Managed Money is net long an estimated 192,000 corn contracts after liquidating more than 53,000 contracts mid-week in a ‘risk-off’ move rather than any kind of shift in the fundamental state of the market.  The 6 to 10 day time frame for the Midwest hold mostly dry weather for the region with temps below average for the first couple days, then warming to above average next week.  In tender activity, S. Korean feed groups bought 264,000t optional-origin corn, Iran passed on 200,000t optional-origin corn.


Soybean futures slumped to a new low for the week overnight before regaining composure and moving higher.  Nov beans as of this morning are up 4-1/2 cents to 10.54-3/4 with good volume creating an overnight range between 10.62-1/4 and 10.47.   The nearby Nov contract enters First Notice Day today, opening the door for deliveries against the contract, and transitioning long position holders into deferred contracts.  Most of the high open interest is now in the January contract which resides at 10.56-1/2.  For the week, Jan is down 25 cents.  Resistance is still at 11.00 and another 1-1/2 to 2 months of Chinese buying could spell record U.S. exports to China and push prices higher.  Managed Money is net long an estimated 222,000 soybeans; 88,000 lots of soymeal, and; 81,000 soyoil.

Weather-wise: The Brazilian growing regions have hit and miss rainfall for mostly the northern growing regions over the next 5 days. The 6 to 10 day forecast continues with moderate rainfall in the northern areas with little rainfall elsewhere.  The Argentine growing regions have mainly dry weather over the next 5 days. The 6 to 10 day forecast sees limited rainfall for most of the growing areas with only some activity for eastern sections.


Wheat futures were narrowly mixed overnight after trading lower this week as recent rains across portions of the dry areas, a surge in the U.S dollar plus weakness in the energy complex helped to drag futures back to key levels of support.  The International Grain Council also raised its forecast for wheat production by 1 million tons to 764 mil.  Dec Chicago wheat is back above 6.00 to 6.04-1/2, but below the contract’s 10 and 20-day moving average for the first time in a month, on a weekly basis.  Dec KC is at 5.44-1/4, up 2-1/2 cents and also below its 10 and 20 day MA, as is the Dec Mpls contract, currently up 2-1/2 cents to 5.54-1/2.  For the week, the winter wheat contracts are off about 25 cents.  In tender activity, Ethiopia seeks 400,000t optional-origin wheat; S. Korea bought 22,800t U.S. wheat, 4,000t Canadian.


Cattle futures calls are steady to higher after seeing additional short covering and value buying flare up on Wednesday with follow-through yesterday finishing with a strong technical close.  No cash trade developed yesterday except for light $103/cwt trade in NE.  Bids firmed to $106, asks up to $108-110.  Strength in market is helping the resolve of the feedlot.  Choice Carcasses firmed at midday yesterday, up 1.50 to 207.29, and held that until the close, Choice was up 1.53 to 207.32.  More overall choice product movement featuring nearly 100 choice box loads the past 3 days is a sign of improving demand with retailers locking in cheaper holiday supplies.  Export sales at 18,900MT were down 13% from last week, with China the top buyer at 4,500MT, which is encouraging for the market.  


Lean hog calls are called steady to lower based on a difficult technical picture and a slip in the CME Lean Hog Index of 1.20 to 76.27.  The index is still holding a premium to the Dec contract that settled at 65.62, but the trend has turned lower.  Retail values had a strong outing, up 5.04 to 89.56 at mid-day and finishing 3.05 higher to 87.57.  Export sales on Thursday morning came in at 29,000 MT, up 8% from last week, but China was a buyer of only 2,500 MT for 2020.  Again, futures are technically weaker, leading to additional long liquidation.  Deferred contracts are testing key support levels and are starting to look like a value. 


Matthew Strelow

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