TFM Sunrise Update 12-21-21


Corn futures were unchanged overnight. March corn is still sideways. Friday’s close was the highest for the front month contract since early July, but that did not influence any additional push in the new week as the $6.00 mark looms overhead.  U.S. cash corn basis remains firm supported by positive corn processing margins, but spot basis bids for corn fell at processors across the U.S. Midwest on Monday morning.  Managed money traders purchased another 13,479 contracts last week to push to 345,980 contracts net long, a sizable position. Their net long position peaked last spring at 401,993 contracts the week of April 13, for comparison. There does seem to be enough support from South America’s weather to keep prices elevated for now, but prices have been sitting at resistance for the better part of a month now.  USDA will likely make adjustments to carryout on Jan 12.  A potential cut in carryout leaves little room for either continued South American weather concerns or warm and dry U.S. 2022 weather.


Soybean futures are down 4 cents this morning to 12.88-1/4 (March) and 4-1/2 cents lower to 12.44-1/4 (Nov 22′). The January soybean meal contract traded to an intra-day and 6-month high of 387.40 yesterday and is at 385.30 this morning.  The fundamental catalyst remains the dry two-week forecast for large parts of Brazil and Argentina, and increasing optimism for better export demand for U.S. production.  Firm U.S. cash basis also offers support.  Soyoil is struggling in the wake of lower energy prices and concerns over the spread of Omicron virus reducing food and fuel demand.  Otherwise, demand news in the short-term has been mixed overall, but soybean futures are at 3-month highs and are poised to put together their first positive monthly close in eight months.  Overnight, Chinese soybean futures were down 41 yuan; Soymeal up 5; Soyoil down 30; Palm oil down 4; Corn down 10;  Malaysian palm oil prices overnight were up 89 ringgit (+2.07%) at 4384.


The wheat complex was mixed overnight.  March Chicago wheat is down 2 cents to 7.75-3/4.  The 7.75 mark was the November low and is worth watching into month’s end as a close beneath that could promote another leg lower.  The nearby KC contract is up 3-1/4 cents to 8.16-1/2;  And, March MPLS wheat is down a penny to 10.18-3/4.  The market is trying to find some footing after taking a beating for the last few weeks.  Outside of the windstorm last week that caused some damage, some feel uncomfortable with the dry conditions in the western plains heading deeper into winter.  Persistent dryness across the Southern U.S. Plains is threatening winter wheat crops that are desperately needing a rain, one Oklahoma grain dealer said.  U.S. spot prices for millfeeds were steady with a firm tone on Monday as supplies were expected to tighten as flour mills scale back milling operations at the end of the year, dealers said.  Flour mills are expected to be down for at least a day over the next two weeks for the Christmas and New Year’s holidays.  Russia is considering raising their wheat export tax again if their domestic price continues higher, which would likely add some optimism to domestic prices.


Cattle futures are called steady to lower. Selling pressure stays in the live cattle market as near-term fundamentals and weak outside markets have a more negative tone.  Cattle futures started the Christmas week with weak price action as Feb cattle closed below support at the 100 day moving average for the first time since October, which leaves the charts open to a test of the 200-day moving average at 134.000, or even trend line support at the 130 level.  Packer interest will be quiet with the holiday week, and expectations is for cash trade to be steady to softer following a difficult week last week.  Retail values were mixed at the close and still reflect a lack of demand for Choice beef.  Choice carcasses lost .63 to 262.38, but Select traded 2.39 higher to 250.67.  Movement was light at 94 loads.  The overall lack of strength in the cattle market going into the holiday is concerning as prices are being challenged both technically and fundamentally.  The USDA is scheduled to release its cattle on feed report at 3pm on Dec. 23.  November placements onto feedlots are seen rising year over year to 1.97 mil head.  That would be the second straight increase after rising by 2.4% in October.  Marketings are seen up by 4.4% year over year, following four straight months of declines.  The feedlot herd as of Dec. 1 is seen mostly unchanged from a year ago at 12.04 mil head.


Hog opening calls are mixed. A lot of triple digit losses were posted Monday as weak outside markets and selling pressure in the cattle markets triggered some long liquidation.  Feb hogs fell back to challenges support as prices bounced between moving averages to start the week.  Overall, prices are still building a consolidation pattern, resembling a bullish flag, with a series of lower lows and highs. The 100-day moving average held prices in check on Friday, and support was the 10-day moving average yesterday for Feb Hogs.  This pattern could break out to challenge resistance over the Feb hogs at the 84.00 level.  The premium of the futures over cash is a large limiting actor, and with markets week in general today, some of that premium was taken out. The cash index traded 0.08 lower to 72.33.  The index is still running at a discount to the Feb futures of 7.14.  Cash hogs have been showing some positive activity, but National Direct midday trade was 1.34 lower versus Friday’s midday values.  This may be more of a reflection of light overall trade for the holiday week.


Matthew Strelow

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