TFM Sunrise Update 12-1-2020


Corn futures experienced a modest technical bounce of 2 to 3 cents overnight after closing lower following a new round of contract highs to begin the week and end the month of November yesterday.  The bearish key reversals in row crops suggest a near-term top is at hand and a place for farmer selling to increase.  Not many changes are expected in the next USDA monthly Supply and Demand balance sheet on December 10 unless rumors materialize that China may soon approve additional 5 mmt of corn import licenses and choose to buy from the U.S.  If true, this could drop U.S. carryout below 1.50 bil bu.  South American weather will continue to be closely watched to see if that has an additional impact on Demand.  Outside markets show the dollar stabilizing from new lows, crude steady and stock index futures up 340 basis points.


Soybean futures traded two-sided overnight, first with follow-through weakness from steep losses posted across the board yesterday where prices settled at session lows, then working higher.  Jan beans are up a nickel this morning to 11.73-1/2, more than 25 cents from a price ceiling formed near 12.00 per bushel.  A ‘dead cat’ bounce is common after such a sharp drop in one day, but technical traders, including Managed Money funds may view the technical reversal as a reason to further liquidate long positions, particularly as long as parts of South America has rains advertised.   A potential shift in trade relations between China and the new administration is viewed as a concern for soybean traders and may add to additional long liquidation.  We view the topping action as a reason for producers to step-up sales.


Wheat futures were up 3 cents overnight following a breakout to the downside on Monday, influenced by outside markets and despite a lower dollar.  Equity futures are making a comeback this morning from yesterday’s losses.  This may offer some support to commodities.  Technically, though, winter wheat contracts have plunged beneath their 10 and 20-day moving averages that have been binding the sideways trend together for weeks, and are now at or below their respective 50-day moving average support for the first time since mid-to late August.


Cattle futures are called mixed, looking for direction.  Cash bids and asking prices were undefined on Monday amid hope for higher trade this week, being led by the strength in retail. Choice closed .83 higher 243.68 in keeping with the trend, and Select gained 1.75 to 222.43 while holding onto midday strength.  The Choice/Select spread is at 21.25. Showing a current feedlot.  Feeder cattle are supported by weakness in cash market and strength in Feeder cattle index.  Equity futures are rebounding this morning and could have a positive impact on cattle.


Lean hog calls are mixed after shrugging off Friday’s down day yesterday led to a break-out to the upside fueled by Midday retail strength.  However, though $8.00 higher at midday, retails failed to hold those gains, finishing up .13 the close to 80.09.  Estimated slaughter was at 497,000 on Monday, keeping pressure on cash prices.  Talk that Chinese domestic pork prices are climbing should support the demand side of the hog market.  However, we view the heavy pork production and a large slaughter run as limiting factors for more significant upside potential.  The CME Lean Hog Index is still trending lower, down .23 to 7.15.  


Matthew Strelow

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