TFM Midday Update 2-7-2020


Corn markets are trading with moderate gains, with contracts 3-5 cents higher. Front month Mar corn is up 5 cents to 3.84-1/4, while May corn is up 4-1/2 to 3.89. Corn futures are seeing buying support after yesterday’s test of the lower end of the trading range, setting the market up for some technical recovery. U.S. export sales have been picking up over the past few weeks, with three consecutive weeks of over 1 million metric tonnes of sale, as U.S. corn is the cheapest in the world and available to our export customers. Strength in the cash market also keeps underlying support, as the national corn index was running at a premium over its 5-year averages with basis and cash strength seen in the countryside.


Soybean markets are mixed, with strength in the front months. Front month Mar beans are 2 cents higher to 3.83, while May beans are 1-1/4 higher to 3.96. At these levels, front month bean futures can maintain a turn on the weekly charts, as prices are currently trading 8-10 cents higher over last week’s level. This will be our first gains on a weekly level in three weeks, which could bring additional short covering moving into next week’s Supply and Demand report. Expectations are for carryover projections to slightly tighten on the February report, which figures line items only on the supply and demand table. South American harvest anticipation of a big crop is limiting rallies in the short term.


Wheat markets are currently trading 4-5 cents higher in the Chi contracts, with Mar up 4-1/4 to 5.60-1/2. May is up 4-3/4 to 5.58-1/4. Other classes of wheat are still seeing good buying strength to start the session today. Wheat futures are trying to put a turn into daily and weekly charts, as the front month Mar contract has tested and held the key psychological 5.50 level this week. Export demand stays supportive, as U.S. prices are relatively competitive on a global scale. The wheat market does still see pressure from a strengthening U.S. dollar versus foreign currencies, which directly weighs on U.S. wheat prices for our importers.


Cattle futures are currently trading mixed, with the front month Feb contract up 2-1/2 cents to 121.15. Apr is 17-1/2 cents higher to 119.925. Today brings Feb cattle options expiration, which might leave the market choppy, as prices hover around areas of largest open interest in cattle options for the Feb contract. IN addition, the market is still looking for cash trade to develop, and with last week’s trade at 122, expectations are for trade to be mostly steady this week, keeping some premium with Feb at a discount to cash prices. Charts posted a favorable technical reversal on the Apr contract in yesterday’s trade, as prices have been holding the 50% retracement from the September low to the December high.


Hog futures are currently trading mostly higher, with the exception of front Feb, which is down 32-1/2 cents to 57.375. Apr hogs are the strength of the market, up 1.175 to 66.05, and that strength also leads into all the deferred contracts. Apr hogs are seeing some follow through buying after yesterday’s limit high close. Hog futures did gap higher on today’s trade, which is posting a favorable technical signal of developing an island bottom if today’s price action still holds. The hog market is extremely oversold, and the anticipation of Chinese demand for U.S. pork may make short sellers nervous and bring some short covering, given the improved technical picture.


Lisa Heder

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