TFM Midday Update 1-9-20


Corn futures are trading in very quiet ranges today, with Mar up 3/4 of a cent to 3.85, May up 1/4 of a cent to 3.91-1/2, and Jul steady at 3.97-3/4. Corn prices have been under pressure for the past few days due to strong selling action in the energy sector, as well as rainfall in Brazil and Argentina growing areas. Ethanol production for the week ending January 3 was down 0.38% vs the previous week and up 6.2% from last year. China has suspended their plans for a national 10% ethanol mandate for 2020, citing shrinking corn stocks and limited production capacity for ethanol. Most of today’s price action has been due to position-taking ahead of tomorrow’s USDA’s Supply and Demand report. The Mar contract briefly tested overhead resistance at the 10 and 100-day moving average levels but has since fallen back to support at the 50-day moving average level. Prices are drifting towards oversold levels, though the trend is still sideways. Speculative funds were thought to have stayed net even in corn yesterday.


Soybean futures are very slightly lower this morning, with Jan down 3 cents to 9.35-1/4, Mar down 3 cents to 9.44-1/4, and May down 3-1/4 to 9.57. For the first time last night, the Chinese government confirmed that the Vice Premier will be signing the Phase One deal in Washington next Wednesday. Weakness in energy markets has helped to keep soybean oil under pressure and rain in the forecast for Brazil and Argentina are also limiting gains. Mar soybean futures closed directly at their 10-day moving average resistance level yesterday, and though Mar beans have traded sharply above that line this morning, prices are falling back towards the day’s lows in some mid-session selling. Still, prices held onto nearby support yesterday and large moves ahead of tomorrow’s report are expected. Speculative funds were thought to have bought about 5,000 contracts of soybeans yesterday.


Wheat markets are showing solid gains so far this morning, with Mar Chi wheat up 8-1/2 to 5.61-1/4, Mar KC wheat up 8-1/2 cents to 4.88-1/2, and Mar spring wheat up 4-3/4 to 5.52-1/2. Wheat prices are finding solid support this morning from a quickly deescalating situation in the Middle East. Iraq is the number one buyer of wheat in the Middle East, so as tensions settle down, this should benefit global trade. However, the U.S. dollar is also higher today which may limit gains. Egypt bought 300,000 tons of wheat in their latest tender, sourced from Russia, Romania, and Ukraine. Mar Chi wheat pushed through its 10-day moving average resistance level early in the session and has made its highest trades today since January 2. Mar KC wheat tested support at the 10-day moving average level and is near the high end of the day’s range and at its highest prices since January 2. Mar spring wheat has pushed through resistance at the 10 and 200-day moving average levels which may turn the trend back higher. Speculative funds were thought to have bought about 3,000 contracts of Chi wheat yesterday.


Cattle markets are showing relatively modest gains so far this morning, with Feb lives up 60 cents to 126.95, Apr lives up 42 cents to 127.47, and Jun lives up 37 cents to 119.57. Jan feeders are up 62 cents to 147.45 and Mar feeders are up 72 cents to 147.25. Beef values have stabilized in a very tight range lately and Nov beef exports were down from last year and down from October. Cattle placements for the past few months have also been greater than a year ago which may add to short term beef supply. Despite a possible bearish tilt to fundamentals, there hasn’t been much technical damage lately to push prices lower. Feb lives are trading in the middle of the day’s range so far and have traded above yesterday’s highs, breaking the streak of inside sessions. Still, the trend looks sideways until futures can trade on one side or another of Monday’s range. Mar feeders are trending higher and are near the upper end of the months-long trading range.


Hog markets are trading with triple-digit losses so far today, with Feb lives down 1.95 to 67.07, Apr hogs down 1.52 to 74.22, and Jun hogs down 1.40 to 86.05. Fundamentals are currently leaning bullish despite pressure so far today. The Chinese government has confirmed that it will be traveling to Washington next Wednesday to sign the Phase One trade deal, and Chinese officials also made comments lately that they would need to increase pork imports to meet the demand for the Lunar Year holiday. Average hog weights in the U.S. are rising which is a pressure point. Feb hogs have broken below Monday lows and are currently trading at their lowest values since December 10. Apr hogs are testing Monday’s lows and Jun hogs are also testing Monday’s lows. Prices are nearly oversold after the sharp losses compounded from last Friday.


Carol Tillmann

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