TFM Sunrise Update 8-18-2020


Corn futures stabilized overnight from a major rebound off of contract lows.  Dec corn is down 1-1/2 cents to 3.43-1/4 after achieving a 25 cent rally to 3.45 on Monday.  The National Weather Service 6-10 day forecast is still calling for dry conditions, but some moisture re-entered the 8-14 day forecast.  There are many conflicting appraisals of the storm damage done last week, and traders will continue to price in uncertainty regarding losses. Iowa’s corn crop ratings fell to 59% good-to-excellent by Aug. 16, the USDA said, from 69% a week earlier, while Iowa soybean ratings dropped to 62% good-to-excellent, from 70% previously.  USDA rated 69% of the U.S. corn crop in good-to-excellent condition in its weekly crop progress report, down 2 percentage points from a week ago but just above an average of trade expectations.  These are key talking points for the market after seeing prices break out of a down trend following a bearish to neutral August USDA report.  Yesterday, funds bought about 7,000 contracts during Monday’s session, and though the gap on the charts from mid-July were filled, new gaps were also left with Monday’s opening trades which catch the eye of technical traders.


Soybean futures eased overnight to the tune of 3 to 5 cents.  Like corn, beans left a gap on the daily chart when prices shot higher Sunday night leaving a downside target for technical traders to conquer at some point.  Weather forecasts are viewed as supportive with August the critical month for bean production.   New lows in the dollar overnight is also supportive, especially with such strong demand from China.  South American supplies are relatively tight, and though there is talk of possible planting issues later this year due to La Nina conditions, many are also expecting a large increase in South American soybean acres this year.  November beans, trading at 9.11-3/4, made their first close above the 200-day moving average resistance level since January 23, and the trend looks higher.  Soybean ratings declined to 72% good-to-excellent, down 2 points from the previous week and in line with trade expectations.


Wheat prices were down 4 to 5 cents overnight in a correction a push strongly above nearby moving average resistance levels and out of oversold territory yesterday.  New lows in the dollar offer underlying support, however, Black Sea wheat continues to out-compete US supplies on the export front.  Turkey and Algeria are both tendering for wheat this week, and it would be surprising to see Ukraine or Russian wheat left off the list of suppliers.  IKAR again raised its Russian production outlook due to higher yield guesses. The USDA said the U.S. winter wheat harvest was 93% complete, behind the five-year average of 96% and the average analyst estimate of 95%. The harvest was 90% complete a week earlier.  For spring wheat, the government said the harvest was 30% complete, matching the average analyst estimate but behind the five-year average of 43%.  The USDA rated 70% of the spring wheat crop in good-to-excellent condition, up from 69% a week earlier, bucking analyst expectations for a 1-point decline.


Cattle markets are called steady to lower for this morning.  Live cattle markets, despite a bullish cash and beef trend, made bearish key reversals yesterday and. overbought stochastics could add to the technical selling pressure and keep prices on the defensive.  Feeder cattle closed below some important moving average support levels Monday afternoon which could pull the trend lower.


Hog prices are called mixed to higher.  Cash hogs and pork values have made decent rallies lately, and the futures prices are starting to take notice.  October hogs are beginning to pull out of the months-long trading ranges, and a break above the highs from last week would be a positive technical sign.  Traders could use the recent pop in prices as another selling opportunity, however.  October hogs are currently trading at a much tighter discount to cash than is typical for this time of year.


Matthew Strelow

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