TFM Sunrise Update 8-17-2020


Corn futures gapped higher overnight to their highest price levels since gapping lower on July 13.  Dec corn rose 4 cents to 3.42 and is within 2 cents of closing in on an upside target of 3.43-3/4, the low from July 10.  The market is shrugging off views of a large supply from the USDA report on Wednesday, mainly because of a lower-than-expected FSA acreage estimate and the wind storm in Iowa.  An estimated 8.5 million corn acres were affected to some degree last week Monday.  Many in the trade are looking for a decline in weekly crop ratings for row crops.  The U.S. Midwest 2 week weather forecast is dry and cool.  The technical picture is greatly improved, and is coaxing more short covering from the market.  The commitment of traders report showed Managed Money net short 172,000 corn contracts as of last Tuesday.  Since then, managers have been big buyers of corn and beans and for corn, that number should be closer to 117,000 coming into today.   A close eye will be on the Pro Farmer Crop tour starting today.  Further weakness in the dollar is also giving talk of inflation to commodities some traction.


Soybean futures were up 9 cents overnight despite failing to push through the 200-day moving average and the top of the range near 9.00 on Friday.  Nov got to 9.08 last night, taking out near-term resistance near 9.05 and is targeting the multi-month high of 9.12-1/2 from July 6.  Carryout projections moved to 610 mil bu last week in the USDA WASDE report which may come into play as a form of resistance at some point, but for now, aggressive Chinese demand and a closer survey of last week’s crop damage in Iowa this week as the Pro Farmer crop tour gets under way has prices in an uptrend.  Weekly Export Inspections are on tap today.  Also, U.S. soybean crushings likely rose to a four-month high in July, according to analysts polled ahead of today’s monthly NOPA report.  Heading into today, Managed Money is net long an estimated 45,000 bean contracts’ net short 23,000 lots of soymeal; and, long 55,000 soyoil.  On the political front, The U.S. and China delayed a review of their Phase 1 trade deal initially slated for last Saturday, citing scheduling conflicts and the need to allow time for more Chinese purchases of U.S. exports; no new date for the initial six-month compliance review between U.S. Trade Representative Robert Lighthizer, U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He has been agreed upon.


Wheat futures traded 4 cents higher across the board overnight and back to the upper half of Friday’s higher trading ranges.  Weakness in the dollar combined with spillover support from row crops is giving the market a boost to start the week.  In addition, Canada, Argentina and most of Australia are dry.  We still view heavy global wheat supplies a limiting factor for any major price rallies, though.  Global ending stocks for the world were 316.8 MMT on Wednesday, 3 MMT above expectations and U.S. prices are still too high versus the global market.  The trade is still looking for USDA to increase World wheat production in their next estimate.  In tender activity, Algeria seeks 50,000 tons of option-origin wheat, Turkey seeks 390,000 tons of milling wheat and 110,000 tons of durum wheat.


Live cattle futures are called steady to higher.  October cattle traded higher for the fifth consecutive day and stayed above the $110 price level on Friday.  Cash strength and improved midday retail values are seen as supportive factors this morning.  Choice carcasses are now trading at $214.  Cash stayed firm to $106-107 in some regions, $3-5 over last week.  The market is overbought and could be open to long liquidation if retail values were to soften.


Lean hog futures are called mixed.  Strong gains in the retail market supported the lean hog market this week as the October contract closed above the 100-day moving average for the first time since January.  The improved technical picture may bring additional short covering and money flow.  Supply-side fundamentals for the hog market remain heavy, limiting rallies.


Matthew Strelow

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