TFM Sunrise Update 8-31-2020


Corn futures traded 5 to 6 cents higher overnight and to their highest level since March 30 on weather stress and exports.  Dry weather over the weekend is noted, and sales to China have been very supportive lately which is expected to continue over the next few months in part because African swine fever has now been brought under control.  In addition, Brazil and Europe have both cancelled import tariffs lately due to tightening domestic supplies.  Charts support and deliveries against the September corn contract will be watched.  Dec corn now has a bullish tilt and is flirting with 3.65 which is a selling target for many growers who have held out on this rally to make sales, or are looking to add.  Managed Money has been shrinking their short position in the market which appears to be continuing today.  They were estimated to be short just shy of 50,000 contracts coming into today.  Weekly Export Inspections are on tap for later this morning followed by Weekly Crop Ratings which have been on the decline in recent weeks.  The trade is expecting numbers to slip further this afternoon.  Iowa, the biggest U.S. corn-producing state, is facing its most widespread drought since September 2013, the state agriculture secretary said, compounding problems for farmers after a damaging windstorm.


Soybean futures gapped higher overnight on gains of 16 cents to get to 9.66-3/4 (Nov) and within 16 cents of this year’s high of 9.82-3/4 from January 2.  Last week’s rally left soybean futures extremely overbought from a technical standpoint. Stochastics are sharply overbought and the November contract closed more than 0.04 above the upper Bollinger Band level on Friday.  However, serious concerns about yield damage lend credence to the urgent buying.  It does not take a huge drop to the national average yield to see the balance sheet tighten quickly.  The next monthly USDA Crop report is scheduled for next Friday, September 11.  The 6 to 10 day forecast for the Midwest has both models indicating little in the way of rains for most of the region; some light rains are seen for Wisconsin and western Minnesota but, both models indicate little to no rains for IA, IL, IN and OH.  Coming into today, Managed Money is estimated net long 159,000 soybeans, 11,000 meal; and, 73,000 oil.


Wheat futures were up a dime in Chicago overnight, 8 cents in KC and 6 cents in MPLS.  The push higher in row crops combined with a lower dollar is giving wheat a head start to the week despite not much fundamental backing.  Momentum is building to the upside, though global supplies are still plentiful and Black Sea supplies continue to out-compete U.S. supplies for most buyers.  Tender activity includes Pakistan buying 320,000 tons of option-origin wheat.  South Korea seeks 70,000 option origin feed wheat.


Cattle markets are called steady to lower. Without the support from the cash market late last week, cattle futures sustained some significant technical damage.  However, beef prices have been extremely strong, and cattle futures have made very impressive bounces on a number of occasions over the past few months.  As box prices rose last week, live prices fell $2 to $5.  Today’s session should set the tone for the near future.


Hog markets are called lower this morning.  Friday’s session saw serious technical damage, and unlike the cattle complex, strong fundamentals may not be there to provide much support.  October and December contract both posted bearish weekly reversals.  The cash trend higher has been quiet but steady, and pork values have been choppy at best.  Meanwhile, weights are high and slaughter numbers are huge.


Matthew Strelow

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