TFM Sunrise Update 9-30-20


Corn futures were down 2-1/2 cents overnight in a continued consolidation phase ahead of today’s Quarterly Grain Stocks report.  Industry analysts are predicting a highly unlikely scenario when it comes to Sept. 1 supplies of U.S. corn and soybeans, which could set up a surprise when the USDA publishes those numbers; the trade expects both Sept. 1 corn and soybean inventories, effectively ending stocks for the 2019-20 marketing year, to land within 0.2% of what USDA projected earlier this month; in the last 20 years, that has happened once for corn and never for soybeans.  The average guess for production is 13.607 billion bu.  Corn stocks on September 1 are expected to reach 2.25 billion bushels compared with 2.22 billion last year.  While this number is higher than a year ago, strong demand from China and a possible lower U.S. yield are factors providing underlying support.  Dry weather forecast for the next five days across the entire Midwest means harvest will stay on track, provided the corn crop has dried down enough in some areas.  Dec corn is at 3.62-1/2 as the charts approach territory that could turn more negative with move below 3.60-1/2.  Heading into today, Managed Money is net long an estimated 90,000 corn contracts.


Soybean futures were down 3 to 4 cents overnight while staying inside Tuesday’s trading ranges.  Yesterday’s mid-session weakness pushed the November contract to its lowest level since Sept 16 as good harvest weather and yields weigh on the complex.  Managed money holds a massive long position in beans that could spark a selloff should they decide to exit.  They are estimated to be net long 187,000 soybeans; 57,000 lots of soymeal, and; 95,000 soyoil.  A pause in new U.S. soybean sales to China and favorable U.S. harvest weather offers resistance.  There was some talk that lack of rain in Brazil could delay 2021 soybean plantings. This could widen the window for U.S. soybean to China into February.  USDA will revise the U.S. 2019 soybean crop today with an average guess for 3.575 billion bu. Sept 1 grain stocks hold an average guess for 576 mil bu, up slightly from the last estimate of 575.


The wheat complex was higher overnight, posting gains of 4 to 5 cents across the board as dry weather in Russia, Argentina and U.S. south plains offers unseasonable support. Today’s USDA quarterly Grain Stocks report is expected to show wheat stocks on September 1 at 2.24 billion bushels as compared with 2.34 billion last year.  Sometimes this report shows lower than expected stocks with Q1 marketing-year feed use higher than the annual pace.  The next USDA World supply and demand report is Oct 9.  Production in today’s report should come in around 1.84 billion bushels as compared with the August estimate of 1.83 billion.  Tender Activity showed Turkey in the market for 135,000 tons of optional-origin wheat; Thailand seeks 213,000 tons of optional-origin feed wheat.


Cattle calls are for steady to higher after breaking out of a modest near-term downtrend in feeders and sideways pattern in fats on Tuesday.  Dec live cattle are at a 1-month high of 113.12 and back above moving average support.  The technical action is positive and cattle owners are pricing cattle this week from $108 to $110/cwt which would keep the cash market moving up week over week.


Lean hog futures are called mixed after closing sharply lower on Tuesday.  With Dec hogs trading as low as 61.57, the lean hog index is closer to 75.50, so the premium of cash to futures should offer some support if yesterday’s selling interest fades this morning as the trade digests talk of China’s weaker cash hog market, coupled with ideas of fewer Chinese imports of pork into next year.


Matthew Strelow

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