TFM Sunrise Update 12-13-2021


Corn futures were down 2 to 3 cents overnight to 5.87 in the March contract.  $6.00 remains an upside target for the bulls, as well as a resistance area.  For now, a 33 point jump in the dollar to begin the week is weighing on commodities.  On Thursday last week, USDA pegged U.S. 2021/22 corn ending stocks at 1.493 bil bu, unchanged from November, but above the average estimate of 1.487 bil, setting the stage for an adjustment in the big January 12th report.  Weekly Export Inspections will be out this morning.  Much of the support in corn is on the front end.  Demand remains strong with yet another good week of corn usage for ethanol production last week.  Dryness over southern Brazil is causing some stress, and dryness in Argentina remains a concern for corn planting.  Although new estimates indicate high production in Brazil and in the world, corn prices continue in an upward trend in both domestic and international markets.  Brazilian price increases in phosphates and nitrogen are looking less likely in the week ahead as market participants seek stability.  The uptrend in fertilizer prices that began a few months ago continues to strain farmers’ production costs.  To cope with high prices, many farmers have reduced their use of fertilizer on soil this season by about 10-15%.  A gridlock market persists, with buying below regular levels and few deals made, a trend that could force suppliers to rethink prices.  Spot basis bids for corn eased at elevators, processors and river terminals across the U.S. Midwest on Friday, grain dealers said.


Soybean futures were down 6-1/2 cents overnight to 12.61-1/4 in the nearby Jan contract.  March beans are down 6 to 12.68-1/4.  March Meal is off $3/ton to 362.90; And, soyoil is firm after tumbling to an almost 6 month low on Friday.  USDA left carryout unchanged last week and tightened the global carryout forecast, underpinning beans going into the end of the year.  The Agency left their South American production tables unchanged from November.  The trade will be keenly aware of changes in South American weather where 30% of the 2022 crop is seeing drier than normal weather.  The volume of rainfall has been irregular and below expectations in South Brazil, and forecasts indicate that this scenario may continue in December.  For beans, momentum is trending higher from mid-range action which would support a test of 200-day Moving Average resistance at 12.94-1/2.  Near-term, the contract’s 100-day MA lies at 12.86-1/4.  Chinese Ag futures overnight had May beans up 27 yuan; Soymeal up 23; Soyoil down 62; Palm oil down 82; Corn up 34.  Malaysian palm oil prices were down 8 ringgit (-0.17%) at 4792.  Basis bids for soybeans shipped by barge to the U.S. Gulf Coast firmed on Friday, reflecting stepped-up exporter demand and rising costs for barge freight, traders said.


Wheat futures were down overnight after finishing off a second consecutive week of losses on Friday.  March CBOT wheat is down 7 cents to 7.78-1/4 this morning.  March KC wheat is at 7.99, down 6-1/2 cents.  March MPLS wheat is down 11 cents to 10.10-3/4.  Futures had been on the defensive on concern that USDA would increase World supplies and that some World importers were slowing new buying and buying hand to mouth.  USDA raised World wheat crop 2 mmt due to higher crops in Russia, Australia and Canada. They also raised domestic feed use 2 mmt and exports 1.0 mmt.  Ending stocks were increased 3.0 mmt.  Weather has taken some of the starch out of the wheat market strength as the U.S. Plains see better conditions and a drier forecast shapes up for Australia.  In addition, softer EU wheat and and a jump in the dollar to start the week are sources of pressure.  Spot basis bids for HRW wheat delivered to grain terminals around the southern U.S. Plains were mostly steady on Friday, according to grain dealers.


Cattle futures are called steady to lower.  The cash market was disappointing last week, and Friday’s trade was very quiet with most of the trade ranging from $138-140 in the south, steady to $2 lower than the previous week.  The Choice cutout moved $6 to $7 lower while Select decreased $7 to $8.  Declining ribeye and tenderloin values have been the largest contributors to the decline, which is atypical for this time of year.  Feeder cattle added moderate gains.  Jan feeders are running a premium to the cash index, which limits rally potential.  The Feeder Cash Index traded 0.12 lower to 161.51.  The seasonality makes the market cautious and searching for a nearby low.  The weak retail values are concerning and may limit cash trade.  Cattle prices may be poised for a push lower, especially if the cash market continues to fade.


Hogs are called steady to higher, though a higher dollar this morning may limit price strength.  The hog market quickly moved off an oversold condition that triggered some short-covering.  The technical close was strong for the deferred contracts as prices are potentially breaking out to the top side.  Strong short covering and technical buying moved into the deferred contracts of the market as prices moved aggressively off the week’s lows.  Pork cutout values have been moving higher, helping support prices.  At midday Friday, pork values were 4.86 higher but softened into the close, losing .77 to 86.19.  The load count was moderate at 210 loads.  Deferred contracts are in a typical seasonal strength pattern, and building good value into the summer months, supported by tighter overall hog supplies.  The cash market has been showing some signs of life, but Friday, midday national direct cash prices were 2.33 lower than Thursday’s values.  The cash index was 0.12 to 70.83 and trading at a discount to futures, which could be a limiting factor.  For the week, the Cash Index traded .09 higher for the index’s first positive week since September.  The strong retail values help lift the market off its lows, but the cash market will need to follow through to the upside to get a sustained rally.


Matthew Strelow

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