TFM Sunrise Update 7-14-20


Corn futures were mostly unchanged overnight ahead of today’s expiration of the July contracts in grains.  Weekly crop ratings dropped 2% to 69% in the Good-to-Excellent ratings which was slightly below expectations.  This could provide some short covering on initial opening of the day session.  The player sheet had funds net sellers of 32,000 corn contracts, swelling their holdings to an estimated 183,000.  Friday’s USDA report confirmed large supplies of corn, as expected, but the 6 to 10 day and the 11 to 16 day Midwest weather models are back to conflicting; the GFS is wetter for the Midwest with the European sees less rains and favoring the northern Midwest over the 10 day period; the outlook to the 16 day models has the GFS producing average to a bit below average rains and average temps while, the European sides with ridging.


Soybean futures rose 3-1/4 cents overnight along with meal and oil in what feels like a ‘Turn around Tuesday’ after two down days.  The USDA rated 68% of the U.S. soybean crop in Good-to-Excellent condition, down 3 percentage points from 71% the previous week. Analysts on average had expected a 1-point decline.  When it comes to soybean export demand, China made several purchases of US soybeans in recent weeks, but there has been little consistency in their buying habits.  We are now seeing China book soybeans from Argentina for August delivery, further cutting into US sales potential.  This makes it much less likely we will see China reach their Phase 1 objective.  Weather-wise, lines of showers made their way across the upper corn belt overnight and the trade will maintain a focus on further rain events during the warm forecast.   Funds were net sellers of 12,000 bean contracts on Monday and are estimated to be long a healthy 78,000 contracts.


Winter wheat futures were up a nickel overnight, Spring wheat up 3-1/4.  Chicago contracts are on pace to post back-to-back inside trading days as the market consolidates following the recent push above moving-average resistance.   Wheat is patterning the dollar which is also consolidating following a recent gradual pullback.  According to the Climate Prediction Center, the odds of a La Nina developing this year are increasing, claiming a 55% chance of a La Nina developing this summer.  They also claim there is a 50% chance of the event lasting into 2021.  With drought conditions already developing in the southern plain’s region a La Nina into 2021 could intensify the problem.


Live cattle futures are called mixed following choppy to firmer action to begin the week.   Cattle futures trying to push higher, but will need more steady to higher cash trade.  Ideas that live prices have bottomed will be tested in this week.  Cash trade  was undeveloped on Monday, but is viewed as steady to firmer.  Retail values saw weakness, but holding within most recent trading ranges.


Lean hog futures are steady to firmer.  Heavy supplies keep front month futures in check, but prospects of demand strength and a potential tightening hog supply supports deferred contracts.  Hog prices are likely to stay choppy, looking for an overall direction, however, recent strength in the pork market bodes well for underlying support as packer margins improve.


Matthew Strelow

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