TFM Sunrise Update 12-14-2021


Corn futures were down 2 to 3 cents overnight to 5.83 in the March contract.  Last week’s lackluster WASDE numbers combined with mixed outside markets keeps corn prices from testing $6.00 resistance mid-month before the end of the year and the holiday trading schedule.  As of last week, Managed Money was still net long nearly 330,000 corn contracts, about 80% of their net long position in the April rally; Commercials are net short nearly 337,000 contracts.  Corn used for ethanol has been a strong demand fundamental the past six weeks.  We’ll get another weekly update tomorrow.  Favorable conditions for developing to reproductive corn in Brazil is noted, though soils are expected to dry out in the south later in the week.  Scattered showers are seen benefiting developing to reproductive corn in Argentina, but soils will also see net dry out later in the week.


Soybean futures were down 3-1/2 cents overnight to 12.40-1/2 in the nearby Jan contract and 12.47-1/4 in March beans.  Jan meal is up 1.80/ton to 363.90 after sliding nearly $5 yesterday with double-digit losses in beans.  Jan bean oil is making new lows for the move, down .74 to 52.61.  U.S. soybean processors continued their strong crushing pace in November, aided by ample supplies of beans and good processing margins, according to analysts polled ahead of a monthly NOPA report due tomorrow.  Beans are arguably overpriced coming out of the latest WASDE 7.8% Stocks-to-Use ratio where our parallelogram study suggests an upper price range just under $12.00.  South American weather forecasts are looking less threatening, and exports continue to plug along at a slow pace, so rangebound trade can be expected, barring anything in the outside market world affecting oilseeds.  Weather will remain the focal point for the trade until more is known about 2022 planting programs in the U.S.  Chinese bean futures were down 4 yuan overnight; Soymeal down 38; Soyoil down 70; Palm oil down 104; Corn up 2;  Malaysian palm oil prices overnight were down 93 ringgit (-1.94%) at 4699 as investors fret that the tropical oil’s narrowing spread to rival soybean oil would weaken demand..


Wheat futures are 3 to 4 cents lower this morning.  March Chicago and KC contracts are trading at 7.85 and 8.09, respectively.  March MPLS wheat is down a penny to 10.17-1/4.  The complex is underpinned by inflationary talk and Russia’s high export taxes.  Managed Money managers have also cut almost all of their net long position, even though prices are as high as they are.  Look for choppy trade as the dollar stays strong and prices trade at historically overbought levels, and weather news comes out.  For now, periods of precipitation in the PNW favor soil moisture and drought reduction.  Dryness and winds in the Southwestern Plains continuing to stress winter wheat.  Favorable conditions for winter wheat establishment is being reported in southern Europe with crops going dormant mostly in good conditions across the north and east.  Crops going dormant in Ukraine and western Russia are in poor condition.  Drier conditions favor harvest of winter wheat in Australia.  Winter wheat dormant in China is in favorable condition.  Scattered showers in North Africa favor winter wheat planting and establishment.  Drought in Morocco continues despite showers, however.


Cattle futures are called steady to higher. Seasonality and options expiration may have led to the buying support, as prices fought off early session lows and closed with moderate gains to start the week.  Most importantly, deferred contracts posted a bullish technical reversal on the daily charts, which may lead to additional follow through buying.  Expectation for cash this week is for steady trade.  The short-term demand concerns have also limited the market’s rally potential, as retail beef prices have trended lower.  Boxed beef values were firmer at midday, but Choice carcasses closed lower on the day. losing 1.32 to 263.22, but Select was 1.40 higher to 253.64.  The load count was light at 127 loads.  The Choice/Select spread has tightened to 9.58, reflecting the slower demand for Choice beef.  Feeder cattle added moderate gains.  Jan feeders are running a premium to the cash index, which limits rally potential.  The Feeder Cash Index traded 0.65 higher to 162.16.  A weak day in grain market and the strength in live cattle helped promote feeder prices to start the week.


Hogs are called steady to higher.  Monday was a quiet day in the market as prices consolidated off the strength of last week’s closes.  Traders are looking toward options and futures expiration of the December futures today.  The premium of the Dec futures to the cash index pressured prices for the front month, but some buying support stayed in the deferred contracts despite minor losses.  The cash index traded .63 higher to 71.58, but is still running a small discount to the futures with one day to go.  National Direct midday trade was .99 higher versus Friday’s totals as the cash market is showing some signs of life.  The hog market quickly moved off an oversold condition, recovery triggered some short-covering.  The technical picture looks improved after the push higher last week, and being able to hold those gains to start this week.


Matthew Strelow

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