10:30 a.m. Market Snapshot

Posted on Fri, 05/22/2020 - 10:35

Corn futures are fractionally lower and near session lows, which is also just above last week’s lows.

  • July futures are near key support at $3.14 ½ this morning, hitting a low at $3.16, after falling to sustain the rally to near four-week highs on Tuesday.
  • Prices are falling on generally beneficial weather forecasts into early June and falling oil prices.
  • Oil fell over 4% on Friday on rising U.S./China tensions and doubts about the pace of demand recovery from the coronavirus crisis.
  • China is set to impose new national security legislation on Hong Kong, prompting a warning from U.S. President Donald Trump. Beijing also failed to set an economic growth target as the pandemic hammers the world's second-largest economy.
  • The lack of a stronger recovery in China raises questions about overall demand for imports and its purchase commitments in the Phase I trade deal.
  • Premier Li Keqiang told the assembly that Beijing remained committed to implementing the Phase 1 trade deal, despite the coronavirus hit to the economy and tensions between both sides.
  • China is expected to receive a shipment of U.S. ethanol later this month, which is likely the first such shipments since the two sides reached the Phase 1 trade deal. Much more will be needed as cheaper sugar-based ethanol from Brazil dominates the world market.

Soybeans futures are 1 to 2 cents higher at midsession, after dropping to one-month lows overnight. Soymeal futures are $2.20 to $3.30 higher after holding contract lows earlier. Soybean oil futures have erased early gains and are trading roughly 40 points higher.

  • Soybeans opened steady last night and tumbled to the lowest since April 21 overnight. The market has recovered to turn higher on short covering before the long holiday weekend and the expiration of June options tonight.
  • The lack of any new Chinese sales confirmations in the daily USDA export sales report this morning limited buying interest after the reopening.
  • Soybeans followed the short-covering rally in soymeal. Meal is rising on unwinding of oil/meal spreads after soyoil futures formed a double top formation earlier this week.  
  • Prices fell overnight as traders weighed the latest Sino-U.S. tensions against hopes of more stimulus to revive the battered economy.
  • China on Friday unveiled details about its plan to impose a national security law in Hong Kong that could see mainland intelligence agencies set up bases in the global financial hub.
  • U.S. Secretary of State Mike Pompeo on Friday rebuked China for its proposed national security legislation on Hong Kong, calling it arbitrary and disastrous and saying it could have an impact on the favorable U.S. treatment of the territory.
  • The market will remain tentative until there is evidence the U.S./China trade situation moves past rhetoric to possibly implementing new tariffs.

Winter wheat futures opened lower overnight and extend declines this morning, with prices currently down 6 to 8 cents. Spring wheat futures are down about 2 to 3 cents.

  • Prices are falling on better rain forecasts for next week in southern Europe and parts of the Black Sea region.  
  • U.S. prices continue to follow Paris and Black Sea futures. Today both are retreating.
  • Rains are also forecast for the U.S. Plains, which will aid yields but may hurt protein levels. There is talk that millers are beginning to shop for higher protein supplies.    
  • The Kansas wheat tour finished yesterday with statewide average yield of 44.5 bpa and total production of 284.4 million bu., compared with 306 million bu. forecast by USDA last week. Total production for the four-state region toured this week, was 476.7 million bu., below the 601 million bu. harvested last year.   

Live cattle are mixed, but feeders are moderately higher at midsession.

  • June live cattle opened lower and held Thursday’s session low. Prices are paring losses a midsession and trading above the opening range.  A close above Monday’s high at $100.00 would open rally potential into June.  
  • Live cattle may pause, but charts remain positive and futures are trading at a wide discount to cash markets where tops bids are holding near steady with last week’s tops at $120.
  • Thursday’s daily slaughter rose to 103,000 head, a new six-week high
  • On Thursday, USDA reported that inventories of frozen beef fell 12.3 million lbs. from March to April, which was a bigger drop than is typically seen. But this decline is more a reflection of reduced production than increased demand.
  • Boxed beef prices continue to slide, but the severity of the decline has moderated, which signals prices will likely remain elevated for some time. Choice dropped $2.23 on Thursday while Select tumbled $8.65. 
  • On Friday, USDA is set to release the April Cattle on Feed Report. Traders look for on feed numbers to fall about 5% from a year ago on May 1 as placements last month fell about 22% and marketings dropped 25% from last year.

Lean hog futures are slightly to moderately lower in quiet dealings ahead of the long holiday weekend.  

  • July futures opened lower but found some buying interest to bounce back near midrange.  Prices are headed for a third weekly drop.
  • The CME hog index was down $1.39 at $64.59.
  • USDA’s Cold Storage Report for April reflected a contra-seasonal drawdown in pork stocks during April as Covid-19 upended processing and supply chains.
  • The big news is that processing continues to improve, with Thursday’s kill coming just shy of the 400,000 head threshold.
  • Cash hog bids climbed an average of $1.42 on Thursday.
  • The pork cutout value dropped $2.07 on Thursday, with prices now down $12 from week-ago.
  • Pork’s affordability relative to beef has retailers aggressively featuring the meat heading into Memorial Day.