TFM Sunrise Update 9-28-20


Corn futures were down 2 to 3 cents overnight, again adhering to 20-day moving averages after establishing a top 1-1/2 weeks ago.  Dec corn is at 3.64-1/2, mid-range of Monday’s 9-1/4 cent trading range and consolidating ahead of Wednesday’s Quarterly Grain Stocks report.  The last weekly crop progress report for the year released yesterday afternoon showed 61% of the U.S. crop rated good-to-excellent, unchanged from last week. Export sales of 207,000 mt of corn to unknown destinations and 112,000 mt of corn for delivery to Japan were announced this morning. Recent dryness in Argentina has been relieved in the southern portion of the country, but the northern portion remains dry


Harvest pressure and a projected 17% stocks to-use-ratio highlighted by a 2.5 billion bushel carryout in the latest USDA report has the market on the defensive to begin the week.  We’ll get Weekly Export Inspections later this morning followed by the on Wednesday.  Record Chinese purchases should help keep some fundamental support underneath the market, but for how long?  For now, we’ll look for corn to endeavor on a path of price discovery to the downside until prices reach a desirable technical ‘buy’ level for Managed  Money to step back in and defend their long position.  Heading into today, they’re net long an estimated 93,000 corn contracts, down from 95,912 last Tuesday, according to the latest weekly Commitment of Traders report.


Soybean futures were mostly flat with Nov oscillating around the $10 mark again overnight.  The contract traded a 10 cent range from 9.97-1/2 to 10.07-1/2, just inside Friday’s 12-3/4 cent trading range.  The bean market will look for some sign of stability after back peddling more than 40 cents last week from contract highs.  10.08-3/4 and 10.14-3/4 are the next resistance areas.  On the downside, the market is targeting first support around 9.96-1/4 and then 9.89-1/2.   Managed Money is now net long an estimated 196,000 soybeans; 63,000 lots of soymeal, and; long 97,000 soyoil.  The 6 to 10 day forecast for the Midwest sees light to moderate rains falling in most of the region with the lighter amounts falling in northern sections of the Midwest and Ohio River Valley.  Temperatures will run below average.


Winter wheat futures were down 3 to 4 cents overnight.  The recent rally in the dollar is a negative force for wheat, however, the green back fell nearly 40 basis points overnight.  Better weather for crops in Argentina and Ukraine, along with softness in row crops is adding to the negative tone in wheat.  Both Chicago and KC contracts are back below their 10-day moving averages to their lowest point since Sept 17.  Ukraine is expected to get enough rain over the next 10 days to support planting.  In tender activity, Pakistan bought 300,000 tons of option-origin wheat.  MPLS spring wheat was down 2 to 3 overnight.


Cattle calls are mixed based on heavy placements in Friday’s Cattle on Feed report, and firmer cash last week.  Cash developed at $105/cwt, $1 to $2 higher than the previous week and boxed beef also trended higher the majority of the week.

  1. Strong Placements in Friday’s COF numbers, prices gapped lower to start Monday, but quickly recovered off support. 
  1. Boxed beef Values were softer at Midday on Monday, which limited gains. 
  1. Cash trade undeveloped to start the week, expected trend is steady to higher. 
  1. Mostly in line, but heavy placements will weigh on 2021 prices. 
  1. COF report showed the 150+ cattle still 255 over last year due to COVID slowdown this spring.  Down from 48% from Aug., but expected to be caught up in Oct. 

COF data showed Cattle on Feed Sept 1 at 104%; Placements in Aug at 109%; and, Marketings at 97%.


Lean hog futures are called steady to firmer.

  1. Market believes USDA number are inaccurate and front month supplies are tighter than believed. 
  1. Cash hog market is remains strong supporting front months. 
  1. Cash index at 74.53 +.83 on Friday supports front months and highest since Aug 2019  
  1. Midday carcass values were very strong, up $5.72 to 97.04.  Strong price gains in ham and belly cuts 
  1. Pro Farmer Tweet on Mon. Afternoon:  Many view the USDA inventory stats as suspect, with sharply higher cash markets, reduced weights & moderating kill rates all indicating much more current hog inventories than the USDA stats would imply. 

Strong cash fundamentals will support nearby futures.  Retails are trending higher supported by good demand and the cash index stands at 73.70, up .81 on Friday to its highest level since Sept 2019. Thursday’s Quarterly Hogs and Pigs report was in line with expectations with heavy weight animals (180+ lbs) at 110% of last year keeping supplies heavy in the near term.


Matthew Strelow

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