TFM Sunrise Update 8-12-2021


Corn futures were unchanged overnight as the trade awaits today’s USDA report to be released at 11 AM Central.  Dec corn is at 5.56 after 14 consecutive days settling between 5.45 and 5.60. Look for prices to break that string of monotony today.  With variability in weather conditions throughout the Corn Belt this year, estimating an average yield is not an easy task.  The average estimate for the report is 177.6 bushels per acre (BPA), down from trendline yield of 179.5 BPA.  The average is made up of estimates ranging only 4.3 BPA with 180 marking the high end.  This is the narrowest range in 20 years.  U.S. corn production is seen at 14.97 bil bu, 194 mil bu lower than July.  Ending Stocks are seen coming in 162 mil bu lower at 1.27 bil bu.  Brazil’s corn production is seen 5 mil tons lower at 88 mil.  One aspect of the Aug balance sheet that doesn’t get much pre-report attention is demand, which has been struggling lately.  The trade is looking for a market-friendly report.  However, even a neutral report could weigh on prices.  Trade estimates for this morning’s USDA Weekly Export Sales are 250,000 to 1.0 mil tons.


Soybean futures mostly softer overnight with the exception of the nearby Aug contract which was up 6 cents to 14.11-1/2.  Nov beans were down a nickel to 13.35.  The average estimate for soybean yield is 50.4 BPA versus trendline yield of 50.8 BPA in today’s USDA balance sheet.  The question still remains over what China’s appetite for soybeans/soybean meal imports will be in the months ahead, and the ending stocks number on the report is expected to remain relatively tight at 148 million bushels for 2020/21 and 159 mb for 2021/22.  Trade estimates for this morning’s USDA Weekly Export Sales are 450,000 to 900,000 tons.  Bean oil futures are firm this morning, underpinned by Malaysian palm oil prices trading at all-time highs this week.  Malaysian palm oil prices overnight were down 32 ringgit (-0.71%) at 4479 after hitting an contract high earlier in the session with weakening demand outweighed supply tightness in the second-biggest grower Malaysia.  Chinese Sept bean futures were up 8 yuan overnight; Soymeal down 34; Soyoil up 128; Palm oil up 230.


Wheat futures were narrowly mixed overnight.  Sept Chicago wheat is unchanged this morning at 7.27.   Sept KC is fractionally higher to 7.11.  Sept MPLS futures are up a nickel to 9.18 while helping support the complex.  The average trade estimates for today’s USDA report include a lowering of the U.S. wheat 2021/22 carryout to near 644 vs USDA 885.  Some are as low as 590.   With the recent issues in Russia many think the USDA’s world wheat number may be too high as well.  The trade estimate for World 2021/22 wheat ending stocks are near 288.1 mmt vs USDA 291.7.  The trade estimate for U.S. all wheat crop is near 1.723 bil bu vs 1.746 in July and 1.826 last year.   Plummeting spring wheat vegetation density and continued depletion of soil moisture in the Northern Plains will likely lower 2021/22 U.S. total wheat production by 2% to 46.9 million tons.  One current median estimate is below the USDA’s latest estimate (from July WASDE) of 47.5 million tons.  Trade estimates for this morning’s USDA Weekly Export Sales are 250,000 to 550,000 tons.


Cattle futures are called mixed to higher.  The USDA WASDE report could be a big factor today for the cattle markets.  A strong grain reaction could either be supportive or negative.  Despite a strong retail market, the cash market is still struggling to get a bid overall.  Some light trade developed on Wednesday with parts of the South at $121, roughly steady with last week’s weighted averages.  A few deals have also taken place in parts of Iowa at $126, but these were set for delivery the week of August 23rd.  Asking prices are around $123 plus in the South, and $202 to $204 in the North.  The retail market remains red hot with a strong demand tone.  Choice carcasses were another 5.48 higher to 310.80, and Select gained 3.38to 287.99.  The load count was light at 110 loads.  A strong signal in demand is the Choice-Select spread, trading at a wide 20.19 at midday, reflecting the bids for the Choice retail market.  The strong retail values are not truly being reflected in the cash market, and that disappointed futures trade on Wednesday.


Hogs are called steady to higher on follow-through from the front end contracts rebounding from the most recent selloff.  Weekly export sales have been supportive, and this morning’s numbers could help the price recovery going into the weekend.  August is continuing to try and pull even with the Lean hog index, which dropped .44 to 110.77.  The gap between the two is now 1.145 premium of the index to futures with two trading days left in the August contract.  The bounce in October was technical, as price held the trendline under the futures, that was tested on Tuesday.  The buying strength in the October contract may represent some value buying, after a strong period of long liquidation.  The gap between the October contract and August is historically wide, and that may be bringing some additional buying support.  On the flipside, the move higher may be limited as overhead resistance in October hogs is near the $88 level for a possible recovery target.


Matthew Strelow

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