TFM Sunrise Update 8-19-2020


Corn futures were down 2 to 3 cents overnight after posting a minor technical reversal on Tuesday as early results from Pro Farmer Crop Tour report a larger crop than USDA’s forecast.  Indiana corn yields were projected at 179.84 bushels per acre (bpa), the Pro Farmer Midwest Crop Tour said on Tuesday evening, larger than the 2019 crop tour average of 161.46 bpa and more than the three-year crop tour average of 171.67 bpa.  Nebraska corn yields were projected at 175.15 bushels per acre (bpa); that is higher than the 2019 crop tour average of 172.55 bpa and the three-year crop tour average of 172.38 bpa.  The announcements of two export sales on Tuesday morning to China and Unknown destinations supported the market.  China’s demand for corn to feed animals has increased as its pig herd has rebounded more quickly than expected from a deadly swine disease first detected in the country two years ago.  However, the inability for Dec corn to hold above the 3.40 level and Monday’s gap left from the price hike on the daily chart may signal a more negative turn for the market as support from crop damage in Iowa wanes.  Look for more of a consolidation phase until the final results of crop tour are available, and then September option expiration will lead to some volatility in the market.  Heading into today, Managed Money is net short an estimated 110,000 corn contracts after selling 15,000 in Tuesday’s session.  Weekly Ethanol Stats will be out today, Exports tomorrow.


Soybean futures traded two-sided overnight within a 4 to 5 cent trading range.  Traders have hit the pause button after Monday’s strong gains as pod counts from Pro Farmer Tour point to potentially big crop.  Soybean pods in a 3-by-3-foot square in Indiana were pegged at an average of 1,281.12 pods, up from last year’s average of 923.94 pods and up from the three-year average of 1,134.86 pods.  In Nebraska, the number of soybean pods in a 3-by-3-foot square were estimated at an average 1,297.93 pods, up from last year’s average of 1210.83 pods and a three-year average of 1213.64 pods.  The dry weather forecast over the next two weeks offers underlying support for the market within an improved technical picture.  The 6 to 10 day forecast for the Midwest continues with mostly light rainfall for the region as models are mixed with coverage and rainfall amounts; Temperatures run from below to above average over the period.  Demand is also noted with another announced export sale of soybeans on Tuesday morning.  Look for choppy, mid-week trade this morning as politics, weather and market-reaction to crop damage in Iowa plays out.  No new high-level trade talks have been scheduled between the United States and China but the two sides remain in touch about implementing a Phase 1 deal, according to the White House Chief of Staff.


Wheat futures were firm overnight with most contracts trading an ‘inside’ day for potentially the second day in a row.  Chicago contracts gained 5 cents, KC, 3 to 4; And, Mpls was up 2.  The recent upturn in the complex is reflective of the downward trend in the dollar.  Meanwhile, private analysts raised the Russian wheat crop to 82 MMT, keeping the expectation of heavy global supplies intact. Despite the lower dollar, U.S. wheat is struggling to compete against global wheat prices.  In tender activity, Algeria bought 560,000 tons of option-origin wheat; Japan seeks 117,000 tons of option-origin wheat.


Live cattle futures are called steady to lower.  The cattle market was quiet in Tuesday’s session, but weakness toward the close resulted in an ‘outside- trading day for October could bring follow through long liquidation within this uptrend today.  The cattle market is over-bought and position squaring may occur in preparation for Friday’s Cattle on Feed report.  Cash trade is still mostly undeveloped, but early indications are for trade to trend higher than last week. Retail values stay supportive, improving packer margins, lifting cash potential.


Lean hog futures are called steady to lower.  The supply side of the hog market stays heavy, limiting rallies, as hog prices failed at resistance near $54 in October.  The failure for bullish traders to push prices higher spurred some long liquidation on Tuesday.  Prices are testing support and may succumb to additional selling pressure as pork retail values appear to be reaching a seasonal top after closing softer by 49 cents on Tuesday afternoon.


Matthew Strelow

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