TFM Midday Update 1-28-20


Corn futures are stabilizing from losses yesterday, with Mar up 3-3/4 to 3.84-1/4, May up 2-3/4 to 3.89-1/2, and Jul up 2-1/4 to 3.94-1/2. Crude oil is higher today, providing some support through the ethanol relationship. The U.S. dollar is trading at its highest levels today since December 2, keeping the earlier recovery bounce in check. Markets are still a bit shaken by the coronavirus outbreak in China as many believe this could lead to an economic slow down in China. May corn is trading back above its 50-day moving average level but has yet to close a gap left by yesterday’s open. Nearby resistance lies between 3.86 and 3.87-1/2, where the 10, 20, and 100-day moving average levels converge. Speculative funds were thought to have sold about 16,000 contracts of corn yesterday.


Soybean futures are down slightly this morning, rallying up from early session losses in some consolidation action. Mar beans are down 2-1/2 to 8.94-3/4 and May and Jul beans are down 2-1/4 cents to 9.08-3/4 and 9.22-1/4 respectively. Soybean oil is lower today despite a bounce in energy prices. Palm oil was down 10% overnight, keeping pressure on. Brazilian soybean harvest is running about 9% behind last year’s pace, with excess rains lately keeping farmers out of the fields. Still, the market is looking for a record Brazilian crop. Mar beans retested yesterday’s lows this morning, trading as low as 8.97-1/2. Prices have since bounced back within their Bollinger Band range though Stochastics are still giving an oversold reading. Mar beans traded as low as 8.82-1/2 on December 2 and this seems to be a major line in the sand. Speculative funds were thought to have sold about 6,000 contracts of soybeans yesterday.


Wheat markets are lower this morning, with Mar Chi wheat down 3/4 of a cent to 5.71-1/2, Mar KC wheat is down 3-1/2 to 4.83, and Mar spring wheat is down 4-1/4 to 5.43. Global cash markets are still rising despite the coronavirus fears from China. Expectations are that China buys less wheat in the near term but that demand reverts to a more normal level once the virus has been contained. Winter wheat conditions in the U.S. were down 6% in Kansas from December and down 4% in Oklahoma from December. Chi wheat closed very slightly lower yesterday after an impressive late-session recovery. Mar Chi wheat has tested nearby support so far this morning and is currently trading just below nearby resistance. Mar KC wheat is trading in the lower third of the day’s range so far and Mar spring wheat has held support at the lower Bollinger Band support level. Speculative funds were thought to have sold about 4,000 contracts of Chi wheat yesterday.


Cattle markets are stabilizing today after sharp losses over the past few sessions. Feb lives are up 35 cents to 122.60, Apr lives are down 7 cents to 121.22, and Jun lives are up 17 cents to 113.20. Mar feeders are up 75 cents to 135.92 and Apr feeders are up 77 cents to 138.77. Choice beef values have begun to pull back a bit and cash trade so far this week has been quiet. The stock market is stabilizing today which has a supportive effect on consumer demand sensitive products like beef. The best traded Apr live cattle contract has traded at its lowest levels today since late October though has not exactly compounded losses from the recent selloff. Live cattle are sharply oversold though continued fund liquidation could cause further pressure. Mar feeders tested yesterday’s lows but have held them so far today and are currently trading in the middle of the day’s range.


Hog markets are recovering from losses yesterday, with Feb up 85 cents to 66.80, Apr hogs up 1.72 to 72.17, and Jun hogs up 1.12 to 84.62. The Brazilian meatpacker, JBS, signed a memorandum of understanding to supply China with 717 million dollars worth of fresh beef, poultry, and pork per year. This may or may not impact demand for U.S. pork products, but the negative headline along with the technical breakdown yesterday does not look supportive. Still, U.S. pork values in the CME Lean Hog Index are rallying lately and the export outlook is still strong for both China and Mexico. Apr hogs are currently trading in the gap created between Friday’s lows and yesterday’s highs. The gap has not been filled but the stabilization action looks promising.


Carol Tillmann

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