TFM Sunrise Update 7-10-20


Corn futures traded two-sided overnight within Thursday’s trading ranges.  Strong-than-expected old crop corn export sales and the recent hot spell gave strength to the corn market early on Thursday before giving way to profit-taking ahead of today’s USDA Supply/Demand report.   However, enough moisture in the short-term forecast for IA and IL is preventing corn from taking out last week’s new three-month highs.   Weather models are a bit mixed including calls for an unusually cool air mass dropping down through the Northern Plains and into Nebraska and the northwestern Corn Belt Tuesday into Thursday next week; this will merge with a weather disturbance containing some monsoonal moisture leading to a potential significant rain event from Nebraska through Wisconsin within this time-frame.  Today, expectations are for a comfortable supply picture with old crop carry out to move to 2.277 billion bushels and new crop carryout to drop to 2.683 billion bushels reflecting the 92 million acres of corn planted.  Look for choppy trade with a firmer bias until the 11:00 AM (CT) release of the report.  Funds are have now trimmed their short position to an estimated 158,000 contracts after buying back another 15,000 yesterday.


Soybean futures also traded both sides of Thursday’s settlement prices overnight.  Old crop soybean export sales of 955,000 mt and the weather forecast supported the soybean market on Thursday.  USDA is expected to show a slight increase in new crop carry out to a very manageable 416 million bushels.  After the report, the market will shift its focus back to weather.  For the week, beans and meal are about even, soy oil lower.  Weather-wise,  the 11 to 16 day forecast has now turned mixed within the models.  The GFS sees close to average rainfall and temps for the Midwest through the period.  The European model sees ridging producing limited rainfall and above average temps.


Wheat futures were mostly lower overnight, flat to 3 lower.  The markets saw follow-through buying and short covering yesterday as rising European wheat prices spilled over into the U.S. market.  Early European harvest has been disappointing and declining crop estimates are showing up for Argentina, France and Russia.  A weaker trending dollar all week long was also noted, but the currency is rebounding into the weekend. Today’s USDA Supply/demand report will be watched closely for any adjustments made to global wheat supplies.  One wire story traders may want to be on alert earlier than usual is the forecast for a possible La Nina later in the year, because although drought does not accompany every episode, some crop-growing regions that are more likely to be negatively affected by La Nina are already dry; persistent dry conditions associated with La Nina are most likely to occur in Argentina and southern Brazil, along with the southern U.S. Plains, where the country’s hard red winter (HRW) wheat variety is grown.


Live cattle futures are called mixed. Cash trade this week is running steady to slightly higher, with most trade near $95 and possibly near a short-term low.  Despite improved cash trade, cattle futures failed to hold early session gains yesterday which may lead to some early weakness today.  We’ll likely see some clean up cash trade today and a market on demand and technical strength going into the weekend.  The recent surge in reported cases of coronavirus have disrupted the reopening and once again changed the manner in which beef is marketed.  The emphasis returns to stay at home purchases rather than the hotel restaurant trade.  Even though many people are returning to work, they are eating at home.  President Trump has been advocating school reopenings this fall and it now appears most schools will reopen.  School lunch programs will support the purchase of beef.


Lean hog futures are called mixed.  The heavy fundamental supply of market hogs make price rallies difficult, but a strong midday retail hog carcass value and another week of solid export sales of 31,500 mt and shipments of 33,500 mt provide support to prices.  The buying pushed the market up to the highest level since June 25th.  Deferred contracts posted an improved daily technical scenario, which could bring additional short covering ahead of the weekend.  Newswires report China’s dwindling pace of meat imports, thanks to its tough measures against coronavirus contamination, will provide further support for prices already buoyed by a severe shortage of pork, analysts said; purchases of pork and other meats have soared this year after domestic production shrank 30% following an outbreak of African swine fever that devastated China’s hog herd, but the recent anti-contamination measures threaten to reduce imports; Beijing has suspended imports from more than 20 overseas plants processing pork, beef and poultry since mid-June, after workers were infected with the virus.


Matthew Strelow

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