TFM Sunrise Update 6-22-20


Corn futures were down a penny overnight following a weekend of beneficial rainfall across the heart of the U.S. corn belt.  The outlook for the early part of this week looks very good with periods of rain and sunshine for most key crop areas.  Losses are held in check overnight because rain is still way behind averages and the 11 to 16-day outlook sees ridging to dominate most of the pattern across the central U.S., producing above average temperatures and below average precipitation in all of the Midwest.   Large corn supplies will still be a limit on rallies, so look for choppy, two sided trade with Managed Money heavy embedded on the short side of the market.  As of last Tuesday, they were short 270,751 corn contracts, according to the latest Commitment of Traders report, but began covering shorts the balance of last week and are estimated to be closer to 259,000 short today, still a very big number for this time of year.  Today’s Weekly Export Inspections and Crop Ratings will help set the tone for the trade as we move toward the Quarterly Grain Stocks and Planted Acreage report scheduled for next Tuesday.


Soybean futures traded mostly unchanged overnight.   July soybean futures rallied to close above the 100-Day moving average last week for the first time since January, opening the door for additional renewed buying as we patiently await further confirmation that the longer term trend is, indeed destined to move higher.  The Commitment of Traders report pegged Managed Money on the long side of the bean market by 21,183 contracts, short 48,208 bean meal; And, short 4,786 soy oil as of last Tuesday.  With very manageable supplies, weather will be closely watched moving into July.  Meanwhile, the prospects for China to continue booking additional soybeans and Ag products this week will underpin the technical picture.  Grains traders are watching the movement of both Brazilian and US currencies to get a sense of if Chinese buying of US grains exports will soon increase.  Malaysian palm oil prices were down at 2,451 (basis September) at mid-session on a drop projections of consumption by a private analyst.


Wheat futures are called steady to lower after trading weaker overnight.  Chicago contracts were down 2 to 3 cents following losses of 20-¾ cents last week in the July contract.  KC wheat is fractionally lower this morning.  Pressure on global prices due to plentiful supplies and winter wheat harvest pressure will weigh heavy on wheat prices that appear aimed at challenging last fall’s contract lows.   Managed Money was shown to be net short 30,251 contracts in Chicago wheat as of last Tuesday.


Live cattle futures are called steady to lower in reaction to Friday’s Cattle On Feed report that was released after the markets closed.  Total cattle on feed came in heavy at 100% of last year and above expectations.  At 11.671 million head, this is the second largest total cattle on-feed inventory since 1996.  The report verified what was known of a large supply of cattle to work through in the weeks ahead.  Cash prices will still be the key for futures in the near-term, but with a large supply available, packers have no need to bid aggressively.


Lean hog futures are called mixed.  Hog prices consolidated at the end of the weak with firmer retail values.  Demand will be a key as the industry is trying to work through large slaughter supplies.  Export demand was strong this week, and that will need to continue in the future.


Lisa Heder

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