TFM Midday Update 12-16-19


Corn futures are trading moderately higher to start the week with Mar up 4-1/2 cents to 3.85-1/2, May is up 4-1/4 to 3.92-1/4 and Jul corn is up 4-1/4 to 3.98. Besides the obvious buying on the newly signed U.S./China trade deal, other fundamentals are tilting friendly today. Feed grain demand in ethanol margins are strengthening. U.S. corn is the cheapest on the world export market and Argentina export taxes have been moved up to 12% from 5% previously. In addition, the U.S. dollar is lower today after making its lowest weekly close last week since June. The three nearby corn contracts are trading above their Bolinger band resistance levels today, but have so far been unable to push through nearby resistance at the 50-day moving average levels. A close above the 50-day moving average in all three nearby contracts will be the first since November 5th, and it would be a very positive technical development. As of last Tuesday, funds were short nearly 115,000 contracts of corn, so the newly signed USMCA, as well as the U.S./China trade deal, could fuel further short covering. The U.S. shipped 687,000 tons of corn for the week ending December 12th vs 490,000 tons the previous week, and 887,000 tons for this same week last year. Cumulative shipments are still running nearly 9 mil tons behind last year’s pace. Speculative funds were thought to have  bought about 13,000 contracts of corn on Friday.


Soybean futures are trading higher this morning on some impressive follow through from Friday’s session. Jan beans are up 8-1/4 to 9.15-3/4, Mar beans are up 8-1/4 to 9.29-3/4, and May beans are up 8-1/2 to 9.43-3/4. With the U.S./China phase one deal agreed upon last week, China committed to buy an additional $32 billion of American agricultural goods over the next two years, or $16 billion per year more than 2017 baseline year. Soybeans are an easy target for meeting these commitments, especially given China’s hog herd rebuilding efforts. NOPA Crush in Nov was up 3% from last November. Last Friday’s sharp buying pushed futures out of the downtrend channel and have turned momentum higher. Mar soybeans have tested their 50-day moving average level again today, but are currently back below. Jan beans have also tested that level today, while May and Jul are currently trading above their own 50-day moving average levels. The U.S. shipped 1.3 mil tons of beans for the week ending December 12 vs 1.4 mil tons the previous week and 986,000 tons for this same week last year. Cumulative shipments are running about 3.5 mil tons ahead of last year’s pace. Speculative funds were thought to have bought about 10,500 contracts of beans on Friday.


Wheat markets are sharply higher this morning pushing to new highs for the recent move. Mar Chi wheat is up 16 cents to 5.48-1/2, Mar KC wheat is up 16-1/4 to 4.59, and Mar spring wheat is up 8-3/4 to 5.34-1/2. Forecasts for the Plains are still dry in the 1-5 and 6-10 day outlooks. Wheat markets are also finding buyer interest from the newly agreed upon U.S./China trade deal, though spring wheat futures may find the largest benefit from this. China has been the #3 or #4 buyer of U.S. spring wheat in recent years for blending purposes and this should continue given agreed upon increases of U.S. ag goods. Mar Chi wheat is trading at new highs for the move, and at its highest price since July 15th, Mar KC wheat is testing its 200-day moving average level for the first time since June 4th and is at its highest level since July 31st. Mar spring wheat is trading above its 50 and 100-day moving average resistance levels for the first time since October 25th. The U.S. shipped 506,000 tons of wheat for the week ending December 12th vs 366,000 tons the previous week and 686,000 tons this same week last year. Cumulative shipments are running about 1.9 mil tons ahead of last year’s pace. Speculative funds were thought to have bought about 3,000 contracts of wheat on Friday.


Cattle markets are lower this morning with Dec livestock down 22 cents to 122.15, Feb lives are down 75 cents to 126.80, and Apr lives are down 52 cents to 127.67. Jan feeders are down 67 cents to 145.00, and Mar feeders are down 97 cents to 145.27. Choice beef values made their first positive close on Friday afternoon in nine sessions, up a measly 64 cents. Cash trade was steady to slightly weaker last week and many are anticipating increased beef selling to China as part of the agreed upon ag purchases. Still, Friday’s session pushed live and feeder markets outside of their Bolinger band range and today’s selling appears to be technical in nature at this point. The best traded Feb live cattle contract briefly tested its highs from Friday at 127.90, but have since set back. Jan feeders have shown similar price action, briefly testing their highs from Friday, but pulling back within their Bolinger band range.


Hog markets are slightly higher this morning with Feb up 32 cents to 69.82, Apr hogs were up 82 cents to 77.05, and Jun hogs are up 87 cents to 88.72. The recently completed USMCA and phase one trade deals are positive for hog markets as Mexico and China should ramp up pork imports in a big way. Chinese pork prices are up 146% so far this year, so pork is likely an easy target for increased imports. Pork production is expected to drop from quarter 4 to quarter 1 and from quarter 1 to quarter 2, which should mean tightening supplies in a time where exports are increasing. Price action on Friday was disappointing and trade today has been within Friday’s ranges. Feb hogs have tested their overhead Bolinger band resistance line today and Apr hogs are trading near the high end of Friday’s range. Jun hogs are trading above their 100 and 200-day moving average levels and a close above would be the first since November 15th.


Kelly Rubisch

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