TFM Midday Update 2-6-2020


Corn markets are soft this morning, with Mar down 3-3/4 to 3.77. May is down 3-1/4 to 3.83-1/4, and Jul is down 3 cents to 3.88. The U.S. dollar is higher again today, and the market is currently concerned that China may not reach their phase 1 purchase commitments due to the spread of coronavirus. South American weather is also non-threatening lately. The U.S. sold 1.25 million metric tonnes of corn for the week ending 1/30, up 1% from last week and up 57% from the previous 4-week average. Mar corn is drifting toward the low end of the recent trading range. A close here would be the lowest since 1/16, and if the lows from 1/16 are broken today, a retest of the 12/11 lows may be next. Speculative funds were thought to have sold about 7,000 contracts of corn yesterday.


Soybean markets are sluggish this morning, with Mar down 2 cents to 8.78. May beans are down 1-1/2 to 8.92, and Jul beans are down 1-3/4 to 9.05-1/2. Soybeans found some buyers overnight on news that China has reduced import tariffs on U.S. soybeans from 30% down to 27.5%. Though this is a very modest reduction, the tone is still positive. China has stepped up purchases of soybeans lately, though mostly from South America. Heavy rainfall in Brazil may continue to delay harvest. Soybean futures put in tests overnight of the 10-day moving average resistance level but were stopped for the second session in a row. Stochastics are still getting oversold readings, and momentum higher from Monday and Tuesday this week could be waning. The U.S. sold about 704,000 tonnes of beans for the week ending 1/30, up 76% from last week and up 29% from the previous 4-week average. Speculative funds were thought to have sold about 4,000 contracts of beans yesterday.


Wheat markets are moderately lower this morning, with Mar Chi down 4-1/2 to 5.57-1/2. Mar KC is down 4-1/4 to 4.69-1/2, and Mar spring wheat is down 1-1/2 cents to 5.33-3/4. The general feeling that China may be positioning to avoid reaching phase 1 purchase commitments is weighing on the wheat markets today. China is not a major purchaser of U.S. wheat, though the negativity persists. The major factor today is the higher dollar, with the index trading at its highest levels since 11/29. Good weather in the U.S. is another bearish factor. The U.S. sold 339,000 tons of wheat for the week ending 1/30, down 48% from last week and down 35% from the previous 4-week average. Mar Chi wheat tested its 10 and 20-day moving average resistance levels for the third session in a row today but was unable to break through and has since turned lower. Mar KC wheat tested overhead resistance at the 10-day moving average and has turned lower since. Mar Spring wheat made an unsuccessful test of its 50-day moving average resistance level this morning. Speculative funds were thought to have bought about 3,000 contracts of Chi wheat yesterday.


Cattle markets are trading slightly higher today in choppy action, with Feb lives up 35 cents to 121.10. Apr lives are up 15 cents to 119.32, and Jun lives are up 5 cents to 110.87. Mar feeders are up 57 cents to 136.25, and Apr feeders are up 55 cents to 137.80. Packer margins are currently positive, but expectations for surging beef supply into quarter two are limiting gains. The announcement overnight that China will reduce tariffs on many U.S. ag goods is positive, though it will likely take more time before China becomes a significant buyer of U.S. beef. Long liquidation is also a major factor in the recent cattle sell-off. Apr live cattle traded at their lowest levels today since early October but have since recovered off the lows and are trading with slight gains. Stochastics are still giving oversold readings. Mar feeders are currently testing their 10-day moving average resistance level, and a close above would be the first since 1/14.


Hog markets are trading sharply higher today, finding buyers on news of reduced Chinese pork tariffs. Feb hogs are up 40 cents to 57.50, Apr hogs are up 3.00 to 64.87, and Jun hogs are up 2.80 to 80.20. The CME lean hog index is slightly lower this morning, though news overnight that China is reducing tariffs on some U.S. goods is positive. Hog markets are also sharply oversold, which means futures are increasingly sensitive to positive news. Apr hogs are locked limit higher and still have three gaps to fill overhead, created during the last week of January. If China can become a bigger buyer soon of U.S. pork, then we could see a bounce.


Lisa Heder

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