TFM Midday Update 10-15-19


Corn futures are moderately lower this morning, with Dec down 3 cents to 3.94-3/4, Mar down 2-1/2 to 4.05, and May down 1-3/4 to 4.10-3/4. Traders are still trying to determine how much damage was done to the late-planted corn in the Dakotas, Minnesota, and Iowa from the hard freeze and snow over the weekend. Corn maturity in those states was very far behind as of October 6, with just 36% rated mature in South Dakota, 39% in Minnesota, 52% in Iowa, and 22% in North Dakota. This afternoon’s Crop Progress report will likely show declining conditions. Still, uncertainty about the U.S./China trade deal as well as better harvesting weather have kept prices on the defensive. Corn futures are also technically overbought and may be looking for a reason to correct in the near term. Summer corn traded as high today as 3.98-1/2 and as low as 3.93-1/4. Yesterday’s unsuccessful test of the 200-day moving average does not look bullish, but open interest fell nearly 25,000 contracts yesterday and funds were still short nearly 91,000 contracts as of last Tuesday, so more short covering may emerge on technical developments. Speculative funds were thought to have sold about 4,000 contracts of corn yesterday.


Soybean futures are slightly higher this morning, with Nov up 2 cents to 9.42-1/2, Jan up 1-3/4 to 9.56-3/4, and Mar up 2 cents to 9.67. Buying action today is likely limited by uncertainty surrounding the Phase 1 deal between the U.S. and China. A final written deal could be signed in Chile next month, but China is looking for further negotiations ahead of time. Winter storms over the weekend in the Dakotas, Nebraska, Iowa, and Minnesota have ended the growing season in many of those areas and may eat into production. Brazilian soybean plantings were seen at 11% complete this week vs 20% for the same week last year. Soybean futures are technically overbought, another reason for the lack of strength this morning. Still, soybean markets have made higher highs and higher lows for a number of sessions in a row and the trend is still higher. Speculative funds were thought to have bought 9,000 contracts of soybeans yesterday.


Wheat markets are lower in early trade this morning, with Dec Chi wheat down 3-1/2 to 5.07-1/2, Dec KC down 4-3/4 to 4.21, and Dec spring wheat down 5 cents to 5.47. The recent surge in wheat prices have likely been due to speculation that China could begin to purchase U.S. wheat in anticipation of a trade deal. However, global ending stocks were still near a record high and this will continue to pressure longer term. The U.S. dollar is off today providing a measure of support along with rallying Russian prices. Dec Chi wheat has tested and held its 200-day moving average support level so far today, Dec KC wheat has fallen back within its Bollinger Band range, and Dec spring wheat has come off of the session lows by 3 to 4 cents. Speculative funds were thought to have bought about 2,000 contracts of Chi wheat yesterday.


Cattle markets are slightly lower today as futures prices run into technical resistance levels. Oct lives are down 7 cents to 110.55, Dec lives down 40 cents to 113.05, and Feb lives down 22 cents to 119.05. Oct feeders are down 37 cents to 145.17 and Nov feeders are down 35 cents to 145.72. Cash cattle last week traded about 1.00 higher than the previous week and many are expecting China to begin importing larger amounts of U.S. beef if the Phase 1 deal can be signed next month. The first nine months of year, China beef imports are up 53.4% from last year and China’s now the second largest importer of beef in the world. Retail beef values had a solid close last night, gaining over 1.50. The pressure today is mostly technical in nature, with the best traded Dec live cattle contract testing and failing to break through its 200-day moving average resistance level both yesterday and today. Dec live cattle are sharply overbought, and unless we see a major surge in cash trade or retail beef values, could be some air to take out of this market short term. Nov feeders are testing and holding nearby support at the 200-day moving average level.


Hog markets are showing solid gains early this morning, with Dec up 2.25 to 71.37, Feb hogs up 1.55 to 78.80, and Apr hogs are up 92 cents to 84.50. Hog traders are still expecting China to import significant amounts of pork down the road despite current uncertainty regarding the Phase 1 trade deal. The CME Lean Hog Index is rallying which is supportive and pork values are also trending higher. The best traded Dec lean hog contract is currently testing its 200-day moving average resistance level. Dec hogs have only been able to close above that line a handful of times since falling below in August. Feb hogs are trading at their highest values since July 30 and Apr hogs are trading at their highest level since July 29. We expect volatility to continue and traders to drive most market movement unless their is significant news regarding U.S./China trade relations.


Carol Tillmann

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