TFM Sunrise Update 12-02-2021


Corn futures were up overnight with March corn gaining 7 cents to 5.78-1/4.  The marketplace, in general seems to fading the news of the first Omicron virus case in the U.S. that made news yesterday.  Trade estimates for this morning’s USDA Weekly Export Sales are 600,000 to 1.25 mil tons.  Spot basis bids for corn shipped by barge to the U.S. Gulf Coast firmed on Wednesday, supported by exporter demand as the shipping season ended on upper stretches of the Mississippi River and on rising costs for barge freight, traders said.  The large net long position held by the funds still leaves the market open to long liquidation should Covid fears and South American weather warrant a change of bullish sentiment.  For now, traders’ sights are honing in one next Thursday’s WASDE report.  Funds had added to net longs on hopes of higher demand lowering US 2021/22 carryout.  Price action should remain uneven as news and South American plays out, and participants factor in high input costs for 2022.  StoneX, in a report raised Brazil’s 2021-22 total corn crop estimate to 120.1 mil tons from 119.8 mil tons in a previous report even after irregular rains curbed summer corn yields.


The soy complex is firm this morning with Jan beans up a nickel to 12.33-1/4, meal up $1 to $2 per ton and soyoil up 55 cents after first making a fresh 9-week low last night.  Trade estimates for this morning’s USDA Weekly bean Export Sales are 800,000 to 1.80 mil tons.  Chinese importers bought a small number of bulk soybean cargoes on Wednesday for shipment in December and January from the U.S. Gulf Coast and Brazilian ports, analysts and an export trader said.  The purchases of around 3 to 4 cargoes, or up to about 240,000 tons, came after a sharp drop in prices on Tuesday as benchmark Chicago Board of Trade soybean futures fell nearly 2%.  With little to no weather premium tied to South America’s crop potential in place, soybean and meal futures have a buoyant feel to them heading into the end of the week.  There are reports of drier weather for South Brazil and Argentina surfacing that could help solidify the recent lows.  On the other hand, StoneX sees Brazil’s soybean crop estimate slightly higher at 145.1 mil tons from 144.7 mil last last month.  Production may reach a new record, rising from 135.5 mil tons in 2020-21.  Chinese Ag futures last night had Jan beans up 29 yuan; Soymeal up 1; Soyoil down 32; Palm oil up 4; Corn up 2; And, Malaysian Palm down 34.


Wheat futures were higher overnight.  March CBOT wheat peaked at 8.08-3/4 on gains of 18-1/4 cents.  March KC wheat was up 16-1/4 cents to an overnight high of 8.35-1/2.  March MPLS is up a dime to 10.29-3/4.  Trade estimates for this morning’s USDA Weekly Export Sales are 250,000 to 600,000.  Some of the recent price fallout was sparked by the risk-off attitude that struck the market place on Covid news, and may have also been linked to forecasts for a record wheat crop in Australia despite recent concerns of too much rain.  Given the parabolic nature of the trade action lately, bouts of long liquidation will keep prices volatile.


Cattle futures are called mixed to lower.  Technically, prices have broken, and are poised to test lower levels in the near-term, especially if retail values slip further and cash trade loses its firming trend.  Futures posted a mild recovery yesterday on what may be more of a technical bounce, than fundamentally driven.  A late afternoon headline of the first case of the “Omicron” variant of COVID found in California may need to be something to watch for the session today, but so far, outside markets are holding firm.  The cash market is still undeveloped to start the week.  Bids were reissued at $138 across the cattle regions, and trade is still not developed.  Boxed beef values have been trending lower this week.  Yesterday, Boxed beef values stayed weak with Choice carcasses slipping 1.46 to 270.22 and Select was 2.32 lower to 257.97.  The  load count was light at 227 loads.  Retail values may be under pressure going into the end of the year as retailers will look to hold off on building inventory given the calendar turning to 2022.  USDA will release the weekly export sales numbers, which has been supportive cattle markets overall, as U.S. beef exports are running well above historical levels.  Feeder cattle saw moderate gains at the cash feeder market has been trending higher.   January feeders are running a premium to the cash index, which helped limit gains.  The Cash feeder index was .86 lower to 161.60, but has been trending higher.


Hogs are called weaker as the market environment, overall is looking defensive, and that makes us cautious.  A low for this most recent move is still likely in front of the market.  Talk of improved cash markets offers support to the front month futures, as well as this week’s Weekly Export Sales, but but the premium of the futures to cash weighs on deferred contracts.  The market will be looking for a strong sales total, new activity for 2022, and if China is staying active in the U.S. export market. National Direct morning hogs posted mild gains yesterday, rising  0.26, posting a third consecutive day of trading higher.  Despite the more positive cash news, the Lean Hog Cash Index was softer, losing .56 to 70.04, keeping its downward trend.  The cash market may be starting to look like a value and see some firming bids.  Dec hogs are still holding a premium of 3.580 over the index, which could limit gains in the front month.  Carcass values have been trying to trend higher this week, but at closing values were lower, as retail pork carcasses lost 4.33 to 82.37. Load count was moderate at 357 loads.  The USDA will release the weekly export sales report on Thursday morning.  Outside markets and news headlines regarding the new strain of COVID virus will be watched closely, and may influence the hog markets as well.


Matthew Strelow

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