Ag markets saw higher closes in corn and cattle with the rest of the complex lower.
Corn Bottoming?
Corn futures made new lows for the move on Wednesday morning in tandem with the rest of the grain complex but reversed to close higher on the day and back above the August low.
So, is the corn market bottoming?
Naomi Blohm with Total Farm Marketing says the technical action is feeling like the market is probing for a low. Seasonally as harvest pushes past 50% corn can often carve out a bottom.
“What was important today from a technical standpoint was the fact that we did test the August lows, dip below it just a little bit as some sell stops were triggered but were able to reverse higher and close above $4.60,” she describes.
That’s the first uptick in a couple weeks, so she says its encouraging. Plus, the market is oversold with the RSI relative strength index level below 30.
Funds Done Liquidating?
She says traders exited short positions and there was some bargain buyers down at these levels.
So are the funds done liquidating their long position in the corn?
Blohm says, “Yeah, I think so. So we think it’s been about 200,000 contracts that they’ve liquidated.”
Corn yield reports are coming in below expectations and consistently below five-year APH averages from
Nebraska all the way to Maryland, she says, with the exception of a few pockets of Minnesota.
She thinks the funds and the market place in general is starting to realize this, which may also stop the selling.
Funds Still Selling Soybeans
Soybeans made new lows for the move again on Wednesday as the funds still hold a sizable long position in the soy complex and may not be done liquidating.
Blohm says, “You’re seeing a combination of funds exiting and some technical selling. The November
contract got below the $12.50 price support area. So $12.25 is the next target lower. That takes us closer to the 100 day moving average. There should be some real good support at that level.”
November soybeans are also dealing with option expiration coming up on Friday. So sometimes the futures market can gravitate towards where there’s the most volume and open interest on strike prices.
China Buying Fails to Stem Tide
Soybeans have not even been helped out by the export business coming at the market but that should change after harvest pressure subsides and domestic processor buying also picks back up.
China bought another 4.9 million bushels of soybeans, with Spain in for 6.1 million bushels. She thinks China has bought about 17 million metric tons of the 25 MMT they need to purchase.
With better than expected soybean yields is it possible the extra bushels overwhelmed the market and the recent China export demand.
“The news that China continues to be a buyer here consistently, is absolutely welcome. I think you’ll see the crush demand and pace pick up again, especially now that there’s beans harvested and they’re getting into those crush plants so well,” she adds.
So she looks for soybeans to bottom later this week or early next week with an eye on China and South American weather.
Wheat Trades Peace Deal
Wheat futures ended lower with new lows for the move and both classes of winter wheat trading below the 200-day moving average. However, futures at least held the one year uptrend line says Blohm.
Headlines regarding a possible peace deal in the Black Sea once again weighted on the market.
“So what happened this morning, President Putin from Russia came out and said that he would be willing. OK, right. So we get this back and forth conversation all the time. He’s like, OK, yeah, we’ll be willing to sit down and talk with Ukraine and with the United States, but not until November 10th. So November 10th, of course, post. the US midterms, but the day before the WASDE report. So convenient timing for Russia to come to the table to potentially have a talk.”
She says the wheat market has no war premium built in any more with assumptions the Black Sea region is going to be able to export product in some capacity and that the world will have just enough wheat to get by.
Longer term though El Nino could impact several wheat producing countries and result in lower wheat production and result in the market putting risk premium back in pretty quick.
Cattle Make Fresh Highs
Cattle futures made new highs for the move and settled at levels not seen in three months. Funds are buying with the strong technicals but higher cash ideas are also at work.
“If you’re a trader only looking at charts, what you’re seeing is that inverted head and shoulders formation on the feeder cattle market that points to a little bit more of an upside. Live cattle also had a swing objective. We’re getting closer to that objective higher, maybe another four bucks or so, but it’s really encouraging that we are back up, getting closer to those June highs,” she adds.
Cash Market, COF
However, it’s the cash market and the domestic demand that is leading the way according to Blohm.
The market is also looking ahead to a bullish USDA Cattle on Feed Report with expectations for lower placements, the early trade guess is 8.3% lower.
“Most likely, it’s just going to confirm that the herd is not growing. So we’re really focused on the placement number for that report. That’s going to be what traders are watching.”
She is cautious that the market is too bullish on the expectation and could be disappointed which could trigger some profit taking.
Milk Markets Correct
The Class III milk futures were lower on Wednesday seeing profit taking after a huge rally of $2.50 from the Sept. 30 contract lows.
So is the rally over?
Blohm says the rally the last couple of weeks was in part due to the oversold nature of the futures. However, cheese prices also got so cheap buyers came in and bid up.
“And so that really supported the Class III prices along with technical buying. So the last couple of days that we hit some upside objectives on charts and then we saw on Wednesday profit taking. And the reason that it was significant on Wednesday is because Thursday is going to be the milk production report,” she says.
Milk Production Report
All year the reports have shown higher month over month, year over year milk production numbers. So the market is waiting to see how much it is up.
“We’re expecting probably that milk production number to still be up. But is it not up as high as what we’re expecting, or are we starting to see some decreases in production? We’re going to be very curious to see what’s happening state by state,” she says.
Blohm adds the market is also watching cash values for butter, whey and cheese going into the holiday season.
