TFM Sunrise Update 12-1-2021


Corn futures made a technical bounce overnight, trading as much as 6-1/2 cents higher to 5.74 (March).  This puts prices back near 10 and 20-day moving averages after yesterday’s price drop.  Outside markets seem to have stabilized to start the new month.  Crude is recovering $2.00 per barrel, the dollar is mixed and stock index futures are up 280 basis points.  Look for choppy, two-sided trade to develop as the trade digests recent volatility tied to reaction to Covid news, and political headlines.  The Commodity Futures Trading Commission, in their weekly update indicated Managed funds had increased their net long positions (especially in corn) in the last week.  In this trade environment, the combination of speculative trade and momentum trade can quickly drive prices in either direction.  Weekly Ethanol Stats will be out today.  Corn used in ethanol production is seen up 7.8% year-over-year to 468 mil bu.  Trade estimates for production is lower than last week at 1.075 mil barrels per day.  Stockpiles average estimate is 20.265 mil barrels vs 20.164 mil a week ago which would be a second straight week-over-week increase.


The soy complex is mostly firmer this morning with Jan beans up 9 cents to 12. 26-1/4, meal unchanged and soyoil up 55 cents.  The recent sell-off in commodities, including the bean complex was deemed “risk off” trade tied to Covid news triggering sell pressure in outside markets.  Sell stops were initiated along the way, thus accelerating pressure in beans and soyoil.  Today, so far, we’re seeing some stability as the calendar turns over.  However, based on current price levels, January beans could be poised to target the recent low of 11.81-1/4.  Later today, we’ll get the monthly USDA Fats and Oils report.  The U.S. soybean crush in October likely jumped to a nine-month high of 5.868 million short tons, or 195.6 mil bushels, according to the average forecast of nine analysts surveyed by Reuters.   Bloomberg’s survey of six analysts yields an estimate of 195.3 mil bu.  Overnight, Chinese Ag futures had Jan beans down 16 yuan; Soymeal down 32; Soyoil down 172; Palm oil down 140; Corn down 15.  Malaysian palm oil prices overnight were up 12 ringgit (+0.26%) at 4684.


Wheat futures are higher this morning after being hard hit lately.  Last Tuesday, March Chicago wheat, now up 6 cents to 7.93-1/4, posted a bearish reversal following a new contract high in the session, opening the door to long liquidation.  Since then, the contract tumbled from the contract high of 8.74-3/4 to yesterday’s low of 7.82-1/2.  March KC wheat is up a nickel to 8.27; And, March MPLS wheat is up 12 cents to 10.22.  For now, it appears as if the wheat markets have put in a top based on the quick and significant drop off in price on the charts.  Spot basis bids for hard red winter wheat held steady at grain terminals across the southern U.S. Plains on Tuesday, dealers said.  On dealer in Oklahoma noted a sharp decline in the futures market eroding cash prices and shutting off prospects for new sales by farmers.  Wheat news, so far this week includes: Weekly U.S. winter wheat crop ratings staying at 44% Good-to-excellent.  This is the 2nd lowest rating since 2010.  The U.S. southern Plains are expected to remain dry over the next two weeks.  Egypt purchased 600,000 metric tons of what from Russia, Ukraine and Romania.


Cattle futures are called mixed given stability in outside markets overnight.  Cattle had a second day of weakness Tuesday following through on Monday’s reversal lower, pressured by a risk-off tone in the market in general.  The market was in over-bought territory, as was ready for some correction.  In addition, seasonality is a concern in this time window, and  cattle prices have typically peaked around the Thanksgiving day holiday and trend lower into December.   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.  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 trend to work firmer.  Early soft bids were reported at $138 in the South versus firmer asking prices compared to last week.  Bids will likely firm up, but trade will hold off until late in the week.  Boxed beef values stayed weak at the close with Choice carcasses slipping 5.90 to 271.68 and Select was 11.39 lower to 260.29.  The load count was light at 199 loads.


Hogs are called weaker.  Futures were mixed Tuesday with talk of improved cash markets helping support the front month futures, but wide-spread selling pressure across the markets weighed on deferred contracts.  Dec hog futures held support under the market at the 72.00 floor as talk of firming cash trade supported the market.  National Direct morning hogs posted mild gains, rising  0.32 compared to Monday’s trade, for a second consecutive day trading higher.  Countryside markets saw bid strength, which help add to the optimism.  Despite the more positive country side news, the Lean Hog Cash Index was softer, losing 1.03 to 70.60, 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 2.775 over the index, which could limit gains in the front month.  The strong premium of the futures market to the cash market is a limiting factor in the markets in general, especially with the overall negative market tone.  The technical picture may point to a further pull back.  A low for this most recent move is still likely ahead for the market.


Matthew Strelow

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