Top Farmer Closing Commentary 10-30-20

CORN HIGHLIGHTS: Corn prices finished steady to higher with December closing unchanged at 3.98-1/2 and September leading today’s recovery closing at 3.87-1/4 gaining 3-3/4 cents. This week’s technical picture is mixed. On the one hand, price reached new contract highs in front months and then posted a negative hook reversal on Tuesday. This was followed by further downside price action with futures testing an upward channel line yesterday as well at support at the 40-day moving average. The weekly charts will indicate bear key reversal, ap less that strong signal if you are bullish. The question, with a national election on Tuesday, will bulls or bears come out on top. Weekly export sales were great and harvest well beyond the mid-way point. Yet, lack of carry and good basis suggests the market is wanting your corn now. What to do? Take a balanced approach. Get current with recommendations. Between cash sales at 65% on puts on 10% as well as short 3.80 calls in March on 10%, the crop is mostly covered if prices erode. If prices rally, 35% is yet to be priced and we can retain ownership if need be.

SOYBEAN HIGHLIGHTS: Soybean futures closed higher with gains of 5 to 8-1/2 cents. November gained 4-3/4 cents closing at 10.56-1/2 and May lead today’s gains closing 8-1/2 higher at 10.44-3/4. On the week, November lost just over 27 cents. After having a strong start to the week as futures pushed into new highs, a bearish hook reversal on Tuesday and fund liquidation was concerning. Follow through selling on Wednesday and Thursday didn’t look good but today’s rebound likely is reflecting continued strong demand and expectations that funds may have reduced long positions enough moving into the weekend as well as the election on Tuesday. In recent days, there hasn’t been much for daily export sales figures to provide support yet the weekly sales totals on Thursday’s report were outstanding at just under 60 million bushels. We can’t get away from the fact that the sales pace is well ahead of what is needed on a weekly average to meet USDA projections. The focus in the months ahead will be on South America crop potential. We believe there is an autonomous amount of demand which means there is minimum demand threshold. To meet this demand futures price may have to move higher to source inventory. Record high prices for soybeans in China and Brazil keep underlying support alive and well for US soybean prices.

WHEAT HIGHLIGHTS: Dec Chi futures down 5 1/4 cents, closing at 6.98 1/2, and March down 3 cents, closing at 6.00. Dec KC wheat down 3/4 cent, closing at 5.41 1/4 and March down 1 1/4 cent, closing at 5.47 3/4. Wheat down every day this week, losing 22 ¼ for the week. Nothing new today to report, recent rains in Russia & U.S. plains continue to ease drought concerns for the moment and put pressure on prices. Both are expected to turn warm and dryer moving into next week, with little to no further rain on the horizon for either area. Exports were strong this week, but not nearly as strong as fellow grains, showing demand is still not as needed there. European wheat prices continue to fall today due to economic pressures of 2nd wave of coronavirus.

CATTLE HIGHLIGHTS: Live cattle future closed higher for the fourth consecution day with small gains. The last trading day for October cattle was today, with final trade at 105.975, down .300. December live cattle gained .325 closing at 108.300 while February was .025 at 110.400. Friday finished a strong week for the December contract, gaining 4.725 on the week. The firm close on Friday was encouraging for the market holding the strong gains for the week. The prospects of improved demand going into the 4th quarter brought the strength into the Live Cattle market this week. Staying with their recent strength, cutout values traded firmer with Choice trading at 208.32 up 1.00, while Select gained 3.10 to 194.33 in the morning reports. Key will be holding these values into the afternoon report. The most noticeable trend has been the uptick in Choice product movement the past couple days as retailers are looking to lock in supplies for the holiday season. This has brought stability to the retail markets, ending a previous three week slide. Cash trade has stayed choppy this week. The majority of trade was done at $106, steady with last week, but volume has been relatively light. There may be additional trade late Friday afternoon. Bids stayed firm at $106. The strength in the futures market and retail values my help build the feedlot resolve holding out for higher bids. Asking prices stayed at $108-110 on Friday. The feeder market was the strength in the cattle market with strong gains. The lead month, November was 1.675 higher to 137.400. and January Feeders gained 2.775 to 134.125. For the week, January Feeders gains 8.575, setting up a V-bottom type recovery of the recent push lower. The feeder market saw additional short covering supported by the firm live cattle market, improved fundamentals, and weak grain markets. In addition, improved weather forecast for moisture in the southern plans should help improve pasture conditions, keeping more animals off the lots.

LEAN HOG HIGHLIGHTS: Lean hogs futures finished mixed on Friday, but failed to hold early session strength in the front months. December lean hogs were .050 lower to 65.575, and February hogs were .050 lower to 65.550. For the week, December hogs lost 1.450, closing softer for the last four sessions. Charts look technically weak, and are subject to long liquidation. In addition to the weaker technical view, near-term fundamentals have been softening, adding to the selling pressure. Pork cutouts have been trending lower since challenging the $100 level a few weeks ago, but Midday today saw carcasses trade higher Carcasses were .95 higher at midday to 888.52 but still down significantly from recent carcass value highs. The biggest fundamental weakness has been seen in the lean hog index. Today, losses accelerated as the lean hog index softened .78 to 75.49. this week the lean hog index lost 3.11, which is reflected in cash market values. The index is still holding a premium to the December contract, which is keeping support to the December contract for now, but the near term high looks to be in for the index. The key in the hog market will be the demand. Supplies are comfortable in terms of slaughter hogs available, so will to continue to see strong product demand to maintain strength in the market. The relationship between retail beef and hog prices has beef cutouts the cheapest and weakest to pork since 2016, so the question is, is beef cheap or pork over valued? Next week could be extremely volatile with election uncertainty, and a difficult technical trend.




Market Commentary provided by:

Total Farm Marketing
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