TFM Sunrise Update 7-12-21


Corn futures traded 7 cents higher overnight while recapturing Friday’s losses.  Sept corn peaked at 5.36-3/4 near Friday’s intra-day high of 5.38 and a dime below the contract’s 100-day moving average that failed last week.  Dec rose to 5.24-1/2 versus that contract’s 100-day etched near 5.28.  On daily charts, last week’s sell-off pushed prices to oversold territory.  Midwest weather forecasts continue to call for scattered rains across most of the area over this week.  The market is also positioning ahead of today’s USDA supply and demand report.  The average of trade estimates sees a higher U.S. production estimate than on the June report by about 125 million bushels.  Despite the USDA having raised planted acres on the June 30th report, the pre-report estimate is that the agency will lower yield from the current 179.5 bushels per acre.  None of the analysts surveyed for the Reuters survey expect the yield to be raised on this report.  On one hand, the market could still be surprised with an unchanged or lower 2021-2022 ending stocks number if the USDA lowers yield below 178.  On the other, they could lower demand for next season as the agency’s Foreign Agricultural Service at the beginning of this month estimated China to increase their corn planting area and subsequently their demand for U.S. corn.  Weekly Export Inspections and Crop Ratings will also be out today.


Soybean futures are up this morning after initially trading both sides of Friday’s settlement prices.  Aug beans are up 8 to 13.87-1/4 and Nov is up a nickel to 13.34-1/4 while holding above the 100-day moving average drawn at 13.11-3/4.  Weekly Crop Ratings this afternoon may show an increase for the Eastern Corn belt that would offset low ratings in NW Midwest.   Even though there were no announcements of soybean sales to China last week, Mexico bought US soybeans and products at the end of the week.  With the stocks-to-use on soybeans historically tight, any sales news is supportive.  China already has more than 150 million bushels of new crop soybeans on the books.  The average of trade estimates for today’s Supply and Demand report is for a slight decrease to US 2021/2022 production of about 10 million bushels to 4.394 billion bushels versus 4.405 in June and 4.135 in 2020/2021.  The USDA left planted acres unchanged from their June report and the March intentions, but traders expect the agency to trim yield from the current estimate of 50.8 bushels per acre.  Overnight, Chinese Soybean futures were up 21 yuan ; Soymeal unchanged; Soyoil up 144;  Malaysian palm oil prices overnight were down 24 ringgit (-0.62%) at 3868.


Winter wheat futures were mostly unchanged overnight, Spring wheat, up a dime.  Sept Chicago is up a fraction to 6.15-1/4 this morning.  KC wheat is down a penny to 5.93, and Sept MPLS is up 11 to 8.25-1/4.  The average trade estimates for today’s USDA Supply and demand report is for 2021-22 U.S. Ending Stocks to shrink from the June report estimate of 700 mil bu with the guesses ranging from 575 mil to 809 mil.  The low end of the estimates are likely factoring in a much larger feed use.  U.S. Spring Wheat condition ratings are well below year-ago levels.  However, improved 2021/22 winter wheat yields may offset the losses.  Chicago wheat futures are trending below trendline support on the continuous chart as harvest pressure and reports of strong yields promote selling.  Weekly Export Inspections are due out later this morning, and there are a slew of pending global wheat tenders lighting up the wires this morning.


Cattle futures are called steady to lower ahead of today’s USDA Supply/Demand report.  Activity in the grain markets will likely have an impact on the cattle markets, especially feeders if the price of grain moves aggressively.  Even with the small gains on Friday, charts look technically challenged for Live cattle and hold more potential downside and long liquidation on the radar.  Cash trade last week was light to moderate trade occurred in the North at mostly $123 to $125 live and $197 to $200 dressed, which is steady to $1 softer than last week.  Moderate volumes traded in the South at $118 to $120 – steady to $2 lower than last week.  A lack of support was seen in the box beef trade last week, even with the short production week.  Choice boxes declined $5.68 and Selects moved $6.87 lower on light demand for the week.  Feeders saw some price recovery on Friday supported by the weak corn market.  Technically, feeder charts look supported and a weak grain market could be a key.


Hog calls are mixed.  Futures finished higher to end the week amid buying from a strong weekly export sales report on Friday morning.  Weekly export sales were nearly double the previous week at 43,800MT.  China was back in the export market buying 16,300 MT as the top buyer for the week.  China has been soft in buying the past few weeks, but uncertainty regarding ASF in the country still keeps support in the market.  Newswires reported some farms in the central province of Sichuan are still battling severe outbreaks of African swine fever and have been since March.  This province is responsible for approximately 9% of Chinese pork production.  The lean hog index was pressured for the 3rd consecutive week, losing 2.00 to 109.77, and is now trading at a discount to July futures, which could limit gains with expiration scheduled for Thursday.  Pork carcass values have found some stability around the $114-116 level, and were firmer at midday but lost those gains, closing .46 lower to 116.44 on light to moderate movement of 229 loads.  Technically, Hog futures still trying to build a bottom but ending last week firmer could be the start of some upward momentum.  Follow through this week will be a key.


Matthew Strelow

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