Top Farmer Closing Commentary 1-22-21

CORN HIGHLIGHTS: Corn futures plunged to limit lower (down 25 cents) near the noon hour and eventually finished 23-3/4 cents lower at 5.00-1/2 on March futures. December lost 18-1/2 cents closing at 4.30-1/4. Heavy liquidation was noted today presumably by managed money as well as small speculator. What may have led to today’s technical sell off is a concern that a new strain of African swine fever in China may be affecting the hog herd. It was said the fourth largest hog producer in China has over 1000 infected sows. Additionally, rain in South America was viewed as beneficial for both corn and soybeans. Today’s ethanol report indicated 95.474 mb were last week and this compares to 95.070 the week prior. Barrels of ethanol on hand were reported at 23.628 million, about the same as the week prior. Export sales were released today with 56.6 million bushels recorded for last week bringing the year-to-date total to 1.843 billion. Last year at this time 799.5 mb were sold. The expected yearly total is 2.550 bb which means sales are at 72.3% of yearly expectations.

SOYBEAN HIGHLIGHTS: Soybean futures finished with sharp losses as traders were either heading for the sidelines or were stopped out of longs or into short positions. This week private forecasters indicated a 1 to 2 million metric ton increase for the Brazilian bean crop. Additionally, demand concerns became paramount at the end of this week as a new strain of African swine fever has been reported in China. Concern that the covid-19 virus is on the rise have the markets concerned as well as talk of a world-world lock down gained traction. On a positive note, export sales were again excellent at 66.8 million bushels, bringing the yearly total to 2,108 bb, or 94.5% of the yearly total expected sales of 2.230 bb. It was a tough week technically for the market as front month March futures finished down $1.05. Many would argue the market was overdue for a correction and that from a technical perspective the downturn this week is nothing more than what has been anticipate it. The question now is whether the market has peaked for the year? At this time, we would say probably not. The weather in South America may be improving yet there is still likely to be a significant shortfall of exportable soybeans from the combined countries of Brazil, Argentina, and Paraguay.

WHEAT HIGHLIGHTS: Mar Chi wheat down 26 1/4 cents closing at 6.36 and May Chi down 23 3/4 cents closing at 6.24.  March KC wheat down 22 cents closing at 6.17 while KC May closed down 21 3/4 cents at 6.16 3/4. Nasty close for the wheat market, pressured by fellow corn & soybean liquidation. The week in review certainly doesn’t explain away today’s close. Paris milling futures were down today as well but were mildly supportive throughout the week. US wheat has become more competitive on a global scale this week, as can be seen by the daily sales of 138,000 sell of hard red winter wheat to Nigeria earlier in the week. Exports were strong this morning at 329,600 mt – one of the stronger export numbers in recent weeks. Russia’s crop expected to increase slightly to 77.7 mmt but still no where near last year’s record crop of 85.9 mmt. Drought still expanding and affecting 95% of the plains and not expected to ease well into April.

CATTLE HIGHLIGHTS: Strong move higher in the Cattle market as front-month contract saw triple digit gains. February cattle were 2.625 higher to 116.725, and April Cattle gained 2.575 to 122.525. This ended a strong week in the cattle market with February trading 3.950 higher and April was 4.325 for the week. Strength in the livestock market was fueled by technical buying and a strong sell-off in grain markets. Cattle prices pushed through nearby highs, and saw follow through selling after yesterday’s firm trade. February closed at it’s highest levels since last March. Beyond the money flow, the market may have been buying going into this afternoon’s cattle on feed report. The report came in slightly heavy with total cattle on feed at 100% of last year, placements at 101 percent of last year, and maketings at 101% of last year. The placement number was the heaviest, with expectations at 97%. This will likely pressure the trade to start the week, given the strength today. Retail carcasses had a strong week, and that continued at midday. Choice carcasses were 1.85 higher to 223.05, and Select gained 3.24 to 213.52. Demand was moderate at 85 loads. With the higher trade this week, Choice carcasses gain over $12 from last Friday’s Choice carcass close. This strength should improve packer margin and optimism for higher cash trade next week. Cash trade was quiet today with most business done earlier in the week. A cash range of $109-111 cover the majority of the trade for the week. Feeder cattle were the true strength in the market with strong gains on Friday. March feeders traded the $5000 limit higher to 144.150, and April feeders gained 4.250 to $146.125. The strength in the live market combined with the strong drop in grain prices fueled the feeder cattle market higher on Friday. Monday could see some selling pressure given the heavier placement numbers seen last month.

LEAN HOG HIGHLIGHTS: Hog futures finished with strong gains on Friday, as the February hogs were 1.825 higher to 69.925, and April hogs gained 2.250 to 76.150. A strong demand tone from weekly export sales, and a strong break in grain prices provided the buying support on Friday. Weekly export sales were at 42,500 MT for last week, and shipments at 40,800 MT. This was a strong improvement over last week, and China was back in the U.S export market buying 9,700 MT. Beyond the demand, news reports of an isolated breakout of AFS in China, may have helped the buying enthusiasm. This will be a headline that will need to be closely watch for a potential impact. Fundamentally, cash market stay weak, burden buy heavy supplies. The Lean Hog Index traded .27 lower to 65.41, and now has a 4.520 discount to the February contract. That could limit upside movement going forward.  Beyond February, hog prices saw strong technical moves, that broke out through resistance levels, and could lead to additional buying strength next week. Retail carcasses were up 3.64 to 83.90 at midday. Load count was moderate at 229 loads. Hog carcasses have trended higher most of the week, and are trading $5 higher on the week from Tuesday’s close. Next week could bring a lot of volatility, being lead by the grain markets, but the improved technical picture will likely stay supportive hogs.

Market Commentary provided by:

Total Farm Marketing
137 South Main Street, West Bend, WI 53095
Phone: 800-334-9779