Soybeans were slightly higher early Tuesday, with the rest of the grain and livestock markets lower.
Beans Bounce
Soybeans were slightly higher on Tuesday seeing a technical bounce after losses of 15 to 16 cents on Monday.
The market saw technical selling and pressure from the surprise results of the Brazilian presidential election which sent the real sharply lower and the U.S. dollar index higher. Betting markets did not have Lula winning and so that caused a sharp unwinding of positions even in the Brazilian stock market.
Randy Martinson of Martinson Ag says the selloff was overdone in his opinion and with the real stabilizing on Tuesday that is taking pressure off the soybean complex.
“Overall, I do think it was a knee jerk reaction to outside news. We still have decent demand. We’re still shipping a lot of soybeans,” he says.
Soybean harvest is still behind in key states like Iowa and Nebraska so he thinks that is lightly supportive.
Dollar a Headwind
The U.S. dollar is still stronger with caution as the FOMC meeting started on Tuesday. The market isn’t expecting a rate hike until the December meeting, but it still cautious.
Martinson says, “That, I think, is adding a little bit of push to the dollar as well,” he says.
Slow Harvest
USDA reported soybean harvest at 79% done, which is ahead of the five year average but key states like Iowa and Nebraska are still behind.
Those states are running even further behind on corn harvest with Iowa 20% behind normal, South Dakota 18% behind and Nebraska is 9% behind.
Nationally, corn harvest is at 60% done, trailing the five year average by 6% and there is rain in the forecast for some of the states that have been lagging.
Holding Support
Soybeans are still holding support at the 100-day moving average and the uptrend line on the charts is still intact.
He says, “As far as the January contract, since November goes into delivery here soon, I’ve been watching January more. You know, and I’m looking at that, you know, that $12.20 areas where I think major support line is holding or is sitting. I think we could go down and maybe test that.”
He says strong demand from China will only be enhanced by lower prices, so he thinks that will continue to help the market hold technically.
China Looking for More Soybeans
Soybean export inspections were the strongest in two years on Monday at 91 million bushels and nearly 61 million bushels of that went to China. That is positive because the beans are not just being sold, they are being shipped.
Plus, China was in late Monday, early Tuesday asking for soybean bids off the Gulf and Pacific Northwest, so Martinson says they could buy another 10 cargoes.
He thinks China has already bought around 19 million metric tons and with unknown destination purchases that number could be higher.
“Now, it would be nice that some of this and more of this would be coming out of the Pacific Northwest to kind of help us up here in the Northern Plains. But the fact that it is, is that they are taking the beans and that’s really, you know, they’re going to take that 25 million metric ton they talked about. So that is what’s really kind of the best news for the market,” he adds.
Corn Market Falls With Wheat on Peace Hopes
Corn futures were lower on Monday following soybeans and wheat and with the higher dollar and lower real.
Martinson says the market is down again on Tuesday in tandem with wheat as traders fear the possible talks between Russia and Ukraine could finally result in a peace deal.
“You know, I mean, right now, and it’s been a little bit more talk of peace over the last couple of weeks as Russia’s now agreed to sit down and talk with Ukraine. I think there’s something slated for the next, you know, within the next week to 10 days, they’re supposed to sit down and meet.
Still the export disruptions in the Black Sea region have lead to little if any extra export business for the U.S.
Slow Corn Exports
Exports are running nearly 34% behind last year on corn, which has been a concern to the market. However, last year the U.S. did not have a soybean export program in the Pacific Northwest because China was not buying. So, there was no alternative but to ship corn, so it may not be a fair comparison.
Martinson says, “And there is only so much lift capacity. And when you’re lifting 2 million metric ton of soybeans for shipments, you know, to ship out of the U.S. port, it’s tough to get anything else in there to take its spot. So right now it seems like everybody’s concentrating on moving soybeans and wheat and corn are taking a back seat.”
Corn Holding Support
Dec corn has been holding the key $4.50 support area on the charts and that is also where the market sees strong end user buying and demand.
“That’s a very strong level we’re hoping that we definitely do not penetrate through. That would take us down to the new lows so hopefully those lines continue to hold,” he says.
Wheat Makes Fresh Lows
Wheat futures were making new lows for the move again on Tuesday, despite hard red winter wheat correcting over $2.00 off the September 2 highs.
While war rages on in the Black Sea region the market continues to see pressure from possible peace and a resumption of exports from that area.
So the market continues to search for a low as U.S. exports have been dismal. The U.S. dollar strength is a headwind as well as the higher freight charges.
“We continue to trail last year’s pace. And I think we’re at some of the slowest start in wheat exports in history,” says Martinson.
Can Wheat Bottom?
So the question is after a $2.00 correction in HRW wheat and a $1.60 plus correction in HRW wheat when will the market find a bottom?
Martinson says, “I am looking at that $6.50 area as kind of a bottom on the March Minneapolis. That’s the one I watch more than the other two. But that’s kind of, I think, where I’m hoping that we can see a little bit of floor in this. That’s the old low as well. So hopefully that can stop this market going down. But we’re going to need to see some demand.”
He says also adding pressure is the expectation of more winter wheat acres as planting is going pretty good down in the southern plains.
Cattle Market Hits Pause
The cattle futures were lower early Tuesday with some profit taking setting in as live and feeder cattle run into chart resistance.
The futures were slightly higher yesterday after what was a very bullish Cattle on Feed Report with placements down 12% from last year and higher fed cash trade. The response overall was muted.
He says, “We started off pretty good, but we faded that market. So it was disappointing to see that. It shows that maybe they’re getting a little bit tired. I think they want to see how many, you know, what the cattle are starting to come in with some of these more of these ports opening up. Overall, we do know that, you know, supplies continue to be tight. You know, demand continues to be strong.”
Some of that may have been priced into the market as November feeder cattle have rallied about $50 off the August lows and December live cattle have retraced more than $20.
“We’re getting over that 50% retracement. So you could likely see a little bit of a test to see if the recent longs coming into this market have holding power. I know the funds were doing some of the buying. Hopefully they continue to be a little bit of buying into this market or continue to buy into it.”
He adds that the market is also keeping a cautious eye on what the Fed does with interest rates.
Hogs Hit More Contract Lows
Lean hog futures can’t seem to find a bottom trading more new contract lows on Tuesday.
The cash and cutout values continue to slide and negotiated cash hogs were down nearly $8 on Monday which continues to apply pressure and cause fund selling.
He hopes the market can find a low soon. “We start to see a little bit more consumption as we go into the holidays with some of the pork things, the pork products, but hopefully we can start to see a little bit
demand.”
