TFM Sunrise Update 5-3-2021


Corn futures traded higher overnight with nearby May and July contracts making new highs amid a lack of deliveries against the front month contract.  Both contracts gapped higher to establish new highs at 7.58-1/4 and 6.98, respectively.  May rallied 18-1/4 cents, July 14-3/4; and Dec 13-1/4 higher to 5.77.  Funds were strong net buyers on Friday but, the end-of-week commitment of trader reports generally came in with fewer than estimated long positions.  All in all, they are still seen net long across the board.  Traders are already reacting to lower production forecast in Brazil.  Portions of Iowa, southeastern South Dakota, northeastern Nebraska and southern Minnesota reported excessive heat during the weekend in the very same area that has been unusually dry in the past 30 days.  Crops and livestock were stressed by the heat and rapid soil moisture depletion resulted.  Brazil is facing another ten days to two weeks of dry weather in its Safrinha corn.  Weekly Export Inspections and Crop Ratings will be out today.  In outside markets, the dollar is lower after rebounding last week.  Crude is weaker while trending mostly sideways.


Soybeans were higher overnight.  May got to 16.00 on gains of 29 cents before trimming gains.  July reached 15.63-1/2, up 15-1/4 cents.  Nov beans hit 13.63-3/4 on gains of 24 cents.  None of the bean contracts were new highs, but soybean oil gapped higher into new highs to begin the new month.  Bean contract highs are on the horizon for bullish traders.  Chinese Ag futures are closed for holiday until Thursday.  Malaysian palm oil prices were up 155 ringgit at 4,023 (basis July) at midsession supported by strong April exports.  The USDA is scheduled to release its monthly fats and oils report at 2 p.m. CDT.  U.S. soybean crushings in March likely totaled 5.652 mil short tons, or 188.4 mil bu.  If the estimate is realized, the March crush would up from 164.3 mil bu processed in February but below the March 2020 crush of 192.1 mil, which was a record for the third month of the year.  U.S. soyoil stocks as of March 31 were estimated at 2.317 bil lbs compared with 2.306 bil at the end of February and 2.327 bil at the end of March 2020.


Wheat futures gapped higher overnight while breaking out of a brief consolidation phase.  July Chicago futures rose to 7.53-1/2 on gains of 18-3/4 cents.  July KC was up as much as 19 cents to 7.22-1/2 at one point.  July MPLS spring wheat rose as much as 20 cents to a new high of 7.83-3/4 while leading the complex.  For now, wheat futures need to follow corn to make sure no additional US/World wheat is fed.  USDA estimates World wheat feeding a record 156 mmt vs 139 last year and China a record 40 mmt vs 19 last year.  Excessive rain fell across portions of Texas during the weekend resulting in some flooding.  The forecast reads like this:  U.S. northern Plains and a part of the Canada Prairies will receive “some” much needed rain during the coming weekend and early next week.  U.S. Midwest, Delta and southeastern states will experience alternating periods of rain and sunshine during the next ten days.  Elsewhere, French wheat crop conditions are on the decline.  Russia and Ukraine weather looks normal for now but there are reports of replanting in Russia.


Cattle calls are steady to higher after a positive close on Friday after rallying off of session lows.  Front month contracts posted bullish hook reversals on the week, so the improved technical picture could bring some additional support today and throughout the week.  Cash trade was a disappointment last week as moderate trade occurred in the North at $118 to $120 live, and $190 to $191 dressed – $1 to as much as $4 lower for the live market.  Light to moderate volumes traded in the South were at mostly $118 to $119 – steady to $1 softer than last week.  Strong demand for the upcoming spring holidays kept buyers active to push the cutout higher.  Choice boxes advanced $11.45 and Selects increased $6.10 for the week.  Large slaughter numbers keep the leverage in the packers court as the market feels there is ample supply to meet the demand.  Feeder cattle will stay under pressure with the strong grain markets, which could weigh on the complex.


Hog calls are for steady to higher trade.   Futures finished strong to end the week, with a couple front end contracts trading the 3.000 limit higher, which opens the door for additional buying strength to start the week/month.  Expanded limits of $4.500 are in effect for today due to those limit up closes in the June and July contracts.  The cash market stays strong overall, despite the Lean hog index softening again Friday.  The index lost .12 to 106.89.  For the week, the index was still .90 higher, but some of the upward momentum has deteriorated.  Livestock were stressed by weekend heat in portions of IA, southeastern SD, northeastern NE and southern MN.  Demand is still the driver in the hog markets.  Pork carcasses were higher on the close, gaining 2.91 to 110.46. All major hog primal cuts trended higher on Friday, showing the buying for pork product.  Loads were moderate at 290 loads.  Carcass values were choppy last week, and trading mostly within a range around the $110 level.  Estimated hog slaughter on Friday was 470,000 head, just under last week, and for the week with Saturday kill, was estimated at 2,454,000, down 19,000 from last week.  Technically, hog futures are vastly improved from a couple weeks ago.  The strong move in prices has June poised to pushed through the recent contract highs.


Matthew Strelow

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