Top Farmer Closing Commentary 1-15-21

CORN HIGHLIGHTS: Corn futures closed with small losses in the old crop contracts with March leading the decliners, closing 2-3/4 lower at 5.31-1/2. December gained 2-1/4 cents closing at 4.60. It has been quite a week for the corn market as front month futures registered a gain of 35-1/4 cents, pushing into new contract highs and the highest level in 7 years. Strong export sales, weather uncertainty in South America, a downtrend in the dollar and friendly USDA reports all provided underlying support. The big surprise for the week was the drawdown in production, where yield dropped from 175.8 bushels an acre to 172. On the surface, just as equally surprising was the 100 million bushel drop in exports. The implication may simply be that higher prices equal less quantity demand or a higher level of confidence that Brazil will have a strong second crop. Whatever the case, the market responded very positively to a drop of 150 million bushels in carryout. This figure is supportive, but the market was anticipating about a 100 million bushel drop so not that much of a surprise.

SOYBEAN HIGHLIGHTS: Soybean futures were the recipient of traders bear-spreading futures today, reversing bull spreads from earlier in the week. Nearby March futures lost 13-3/4 cents, closing at 14.16-3/4. November gained 1-1/4, closing at 11.97-1/4. For the week, front month March futures gained 42 cents. Supportive news came in the form of lower projected carryout on Tuesday’s Supply and Demand report. Yield was dropped 0.5 bushels an acre to 50.2. Today’s crush figure was also viewed as supportive at 183.59 million bushels for the month of December. Expectations were slightly higher at 185.7, yet today’s figure was still 4.8% above a year ago and a new record for December. Good export sales this week were notched as well placing doubt as to whether the USDA has raised the projected export figure enough. Additionally, one might ask if higher prices are curbing demand. Projected carry out at 140 million bushels confirmed tight supply and this had traders on the offensive aggressively buying after the USDA report.

WHEAT HIGHLIGHTS: Mar Chi wheat up 5 1/2 cents closing at 6.75 1/2 and May Chi up 5 1/2 cents closing at 6.76 1/2. March KC wheat up 6 1/2 cents closing at 6.46, while KC May closed up 6 cents at 6.46. From last week’s close to today’s Chi wheat gained 36 ¾ cents and KC wheat gained 48 ¼ cents. Prices were up early in the morning, fought out the negative, and once again closed positively for the day. A few things were pulling and pushing on wheat prices today. This morning Paris milling futures gapped higher again, and US wheat was pulled along as well. Also, Russia released today that they will be imposing a 50 euros export tax starting March 15, 2020 – up from the 25 euros that will be applied on Feb. 15, and 5 more euros than rumored 45 euros earlier in the week. However, corn and soybeans turned negative today which reluctantly pulled wheat back to the red midday today. However, between Russian production concerns, export concerns, and EU prices continuing to press higher, wheat came back toward the close. The EU ag resources reported, a much larger wheat harvest is expected than in 2020 and this rebound could outstrip the projected rises in human/industrial demand. The forecast for EU wheat 2021-22 production was revised up by 100,000 tons to 129.7 mt. The figure is substantially higher than the 119.3 mt produced by the 27 nations for the 2020-21 season.

CATTLE HIGHLIGHTS: Cattle futures finished the week with buying strength, as February cattle gained 0.700 to 112.775, and April cattle gained 0.975 to 118.200. The cattle market saw some short covering going into the three-day weekend with the market closed on Monday. For the week, February cattle still were 1.700 lower, and April dropped 1.100. The front month cattle have struggle with a large slaughter pace and lower cash market this week. Cash trade was quiet today, as most business was done earlier in the week. Trade this week was disappointing at $109-111, lower than last week. Estimated slaughter on Friday was 115,000, steady with last week and last year. This has kept pressure on the front of the cattle market, despite a strong move in carcass values. Choice carcasses were 0.25 high at midday to 213.62 and select gained 2.08 to 203.15. Choice carcasses have traded high this week, gaining over $6.00 from last Friday’s close. The strength in the retail market may led to some cash optimism to start next week. Today’s close improved the technical picture in front month cattle, and the market may be open for additional short covering next week. The strength in the market stays in the deferred contracts as these are trading at or near contract highs. The technical picture looks strong going into next week in the back end contracts and will likely keep their strength. Feeder market posted strong gains on Friday. January feeders gained 1.975 to 134.575, and March finished 2.450 higher to 135.825. The overall strength in the cattle market help led to short covering in the feeder complex as well. A quiet day in the corn market also helped bring buying support.

LEAN HOG HIGHLIGHTS: Hog futures finished mixed on Friday, with buying strength in the front end. February hogs gained 1.625 to 67.925, and April was 0.575 higher to 72.650. For the week, February hogs dropped 00.775, and April was 0.175 lower. The hog market saw some short covering and profit taking going into the three-day weekend. Selling pressure has stayed in the front month hogs, as slaughter numbers have stayed heavy and production strong. The cash market has stayed quiet but may be poised to start working higher. The lean hog index has trended higher this week and gained another 0.39 today to 65.87. This may be reflective of an improving cash market. Pork carcasses have been choppy this week but saw strength at midday today, gaining 2.24 to 82.79. Moderate load count of 240 loads at that time frame. The product movement has been key given the record or near record weekly production. This will stay a key going well into 2021. Deferred contracts have shown good strength this week but were softer on Friday. Those contract have trended higher and show good technical strength. The number of hogs is expected to soften going into the second quarter of the year, and with feed prices trending higher, production may be more limited.




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