TFM Sunrise Update 5-4-20


Corn futures are lower to start the week as a ‘risk off’ mood in global markets serves as a source of pressure for corn.  Strong planting progress is also noted.  Crude is unable to hold last week’s strength and is down more than $1.00/bbl, stock index futures are down 275 points; And, the dollar is rebounding from Friday’s two-week lows.  Seasonally, early May is a difficult time for grain markets and USDA, in their weekly Crop Progress report later this afternoon should show an above average start to this year’s planting pace though, some freezing temps are forecast for the coming week which, along with Weekly Export Inspections later this morning should help prices stay above contract low support at 3.25-1/2 for the new crop Dec contract, at least for today.  Long-term, with a Stocks-to-Use ratio possibly in the low 20’s probable, look for more downside.  USDA will release the latest balance sheets in the May 12th WASDE report.   Friday’s Commitment of Traders report showed funds short 160,975 corn contracts.


Soybean futures tumbled lower overnight with meal and oil prices.  Nov beans were down as much as 12-1/2 cents to 8.42-1/2, keeping the down-trend well intact.  The contract low target for Nov is at 8.31.  Confirmation of Chinese export interest with the purchase of 264,000 mt of U.S. soybeans for August and September failed to move needle higher for very long on Friday and now economic hostilities with China are flaring up.  President Trump, on Sunday stated that tariffs are “the ultimate punishment” for its response to the pandemic and is threatening to withdraw from the trade deal if Beijing’s purchase pledges come up short.   Markets will be looking for direction this week as this story plays out.  Meanwhile, good planting progress acts as resistance for prices.  Friday’s Commitment of Traders report showed funds long 4,392 bean contracts, short 7,964 meal; And, short 11,906 oil.


Wheat futures gapped lower overnight en-route to new six-week lows for the Chicago contracts on losses of a dime.  KC wheat was down 7-1/2 cents while testing their range lows.  Mpls wheat was down 2 as North Dakota farmers eye planting spring wheat instead cheap corn.  A sharp rebound in the dollar combined with wide-spread weakness across a basket of commodities is pressuring the wheat varieties to start the week.  Weather will be a source of choppy to lower market direction, too.  Nearby May winter wheat contracts are fairing better while in their respective delivery periods.  Friday’s Commitment of Traders report showed funds long 15,975 contracts of Chicago wheat, as of last Tuesday and long 5,474 KC wheat.


Live cattle futures are called steady to lower in keeping with the weak start in global markets.  Strong retail values and June futures’ discount to cash market brought money flow into cattle markets last week and prices pushed higher.  On Friday one processing firm priced a couple thousand cattle in the south at $105/cwt. This had an immediate reaction in futures prices that rose the permissible limit before fading back for the close.  It also added a new record trading range to weekly prices from $90 to $105.  The prospect of restarting packing plants will help curb fears of an excessive cattle supply which will still take time to work through.


Lean hog futures are called mixed as a ‘risk off’ mood in the markets battles a strong retail market and hefty export sales last week.  Extremely high packer profit margins are fueling incentive to fix the slaughter capability.  Friday’s limit higher closes leave room for additional short covering to start the week and expand today’s trading limits to 550 points.  Market participants will be watching news about the possible opening of processing plants and the ability to get the supply chain moving again.


Kelly Rubisch

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