TFM Sunrise Update 4-19-21


Corn futures traded higher overnight led by 10 cent gains in the nearby contracts while recovering from a softer close on Friday.  July made it to 5.84-1/2 in a bid to challenge last week’s contract high of 5.86-1/2.  Dec was up 7-3/4 cents to a new high of 5.20.  Concerns over tightening supplies in the U.S. and China remain a source of bullish price momentum.  Now, a steep drop in the dollar to a fresh 6-week low overnight is giving commodities an additional boost to begin the week.  Meanwhile, concerns about dryness to some degree in part of northern and central Iowa to southwestern Wisconsin and southern Minnesota is noted.  Most of the dryness concerns will not be serious while temperatures are cool, but as soon as warming comes around at the end of April the situation will be of greater interest.  Overall, the U.S. remains mostly good for spring planting, although there will be some precipitation this week to disrupt field progress.  Managed Money is showing little interest in selling and is still heavily long an estimated 414,000 corn contracts, and with equity markets and other investment vehicles in good shape, there is plenty of financial backing to still pour into commodities despite historically high positions.


Beans made double-digit gains overnight underpinned by April 1 bean stocks at a 5-year low at 130 mil bu and a friendly bean oil market.  July beans rallied 14 cents to 14.36-1/2.  Nearby May was up 14-1/4 cents to 14.47-1/2.  Nov advanced a dime to 12.84 while coming within a penny of the contract high.  Chinese Ag futures (September) settled down 50 yuan in soybeans, up 22 in Corn, up 41 in Soymeal, up 36 in Soyoil, and up 46 in Palm Oil.  Malaysian palm oil prices were down 40 ringgit at 3,676 (basis July) at midsession were higher overnight and are sitting atop their respective ranges.   Managed Money is net long an estimated 165,000 soybeans; long 48,000t soymeal, and; net long 97,000 soyoil.   We’ll get Weekly Export Inspections today followed by Weekly Crop Progress after the markets close.


Wheat futures were firm overnight after rallying to a new 7-week high last week.  Spring wheat took out Friday’s highs to establish a new contract high in MPLS.  July Chicago was up 8 cents to 6.63 before trimming gains.  KC wheat got to 6.25-3/4.  July MPLS peaked at 6.77-1/2. on gains of 6-1/2. cents.  The dollar is down hard this morning which is bullish for grains.  Cold weather may damage some of the winter wheat in the southwestern Plains, northern Delta and North Carolina and Virginia, but losses should be quite low and mostly held to areas that are not key to U.S. production.


Cattle calls are for steady to firmer.  Prices stayed under pressure on Friday with additional long liquidation and profit-taking.   We view the cattle market as a value opportunity given the strength in retail carcasses.  Retail beef carcasses trended higher last week, and Choice gained 6.12.  Select was 4.60 higher for the week.  The strong carcass prices should help support the cash market going into this week.  The disappointment last week stemmed from the cash market as packers held back on bids.  Some light trade occurred with $120-121 in the South and $123-124 in the North, both were steady to slightly higher than last week.  The market will likely anticipate more cash strength this week with retail carcasses strong and estimated packer margins pushing the $600/head levels.  Feeder cattle may struggle under strong grain markets.


Hogs are called steady to weaker on follow-through from strong selling pressure as more long liquidation and profit-taking pushed the market sharply lower to end the week.  Charts look technically-challenged, posting reversals on weekly charts, which could open the door for additional weakness to start the week.  The cash hog market is still extremely strong with the lean hog Index finishing .33 higher Friday to 103.03, completing the 12th consecutive week higher for the index.  Since the start of the year, the index is trading up 70% and at its highest levels since 2014.  Pork demand stays strong. Carcasses were softer at end of the week, losing 1.28 to 112.09.  Movement was light to moderate at 265 loads.  Pork carcasses have stayed steady to higher, as demand stays aggressive overall.  Total hog slaughter for the year is trending 3.4% under last year, reflecting the tighter supply of hogs.  That tighter supply, in combination with demand strength has led the performance in the hog market overall.  The market is searching for a bottom off this push lower, and that may be near given the fundamental strength.



Matthew Strelow

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