TFM Sunrise Update 7-6-20


Corn futures were as much as 6-1/2 cents overnight after experiencing profit-taking pressure before the holiday weekend.  Warmer and drier trending weather (see soybeans) keeps the rally alive as well as the likelihood of additional short covering this week.  The Dec corn contract, at 3.57-3/4, has a bullish target at last week’s high of 3.63 after advancing 28-1/4 cents last week alone.  Outside markets offer support as crude builds a modest up-trend and the dollar retreats, losing 43 basis points overnight.  Corn fundamentals stay burdensome, and a decision by the EPA to postpone a biofuel blending mandate is seen as creating headwinds to further upside price potential.  Weekly Export Inspections will be out at 10:00 AM CT today.


The soybean complex was up overnight with beans and meal leading the way on new multi-week highs.  Nov beans were up more than a dime to a fresh 3-month high of 9.09-1/4.  A tighter than expected acreage forecast help to usher in some premium into the market with warmer than normal forecasts into July.  The 6-10 day forecast for the Midwest sees below average rainfall to occur in the region; any rains that do occur look to be light or isolated and favor more of the northern sections of the Midwest.  Temps will run above average for the next 10 days across the Midwest.  The 11-16 day forecast for the Midwest has a bit of a difference in the models with the European seeing ridging to continue while, the GFS has the ridge moving back west bringing some rainfall to the region.  Meanwhile, China stepped back into the U.S. bean export market on Thursday with a 120,000 MT purchase.  In other tender activity, Egypt seeks 30,000 tons of optional-origin soy oil, 10,000 tons of sun oil.


Wheat futures were firm overnight supported by surging row crop markets.  Global wheat supplies seem adequate and heavier-than-anticipated grain stocks last week helped send wheat prices tumbling on Friday.   Food and Ag Commodity Economics group, formally known as Informa estimated the U.S. 2020 wheat crop near 1,856 mil bu versus USDA 1,877 and 1,920 last year.  HRW is 716 versus 833 last year; SRW 291 versus 239 and HRS 562 versus 562 last year.  This forecast, a lower dollar and strength in row crops grains could drag wheat higher, or at least sideways to begin the week.  Tender activity shows Syria seeking 200,000 tons of optional-origin wheat.


Live cattle futures are called steady to higher. Despite concerning fundamental picture, cattle futures were supported by technical buying and money flow.  Technically, August live cattle broke out to the  topside on Thursday to trade to their highest level since May 29.   That contract is now above the 40-day moving average suggesting the longer-term is higher.  Strong 4th of July consumer activity and a friendly U.S. jobs report could spell supportive demand dynamics for the beef sector.


Lean hog futures are called mixed.  The heavy fundamental supply of market hogs weighed on futures Wednesday.  Choppy price action will be likely as the market looks for direction.  The August contract, at 49.20 has pivoted off of key support level the past two weeks, and could see some follow through buying from technical support with the gap from June 25 a bullish target at 50.60.  If that attempt fails, large supplies are a concern and could break August hogs to a multi-year low.


Matthew Strelow

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