Corn and wheat are lower early Wednesday, with soybeans, cattle and hogs mostly higher.
Corn Sees More Fund Selling Following Crude Oil
Corn futures are lower again on Wednesday following the easing crude oil market as Iran peace talks continue to progress.
DuWayne Bosse of Bolt Marketing says, “It sounds like overnight, Iran was going on their local television and saying that the war is basically settled. I think they called it a letter of letter of understanding. It seems like the market feels like the war is generally over so energy prices go down that takes a little bit out of the corn market.”
Weather Bearish Corn
He says planting progress on corn was at 86% nationally on Tuesday and ahead of the five year average of 83% and weather looks a bit bearish.
“I feel like with a hot dry forecast this week, some guys are trying to tell me that’s a bullish. But right now that’s exactly what a lot of this crop needs is hot dry so we can get the emergence caught up. And then to finish planting in the Northern Plains,” he explains.
Corn Hold Support?
July and Dec corn are both fighting to hold key support areas on the charts.
“Dec and July corn, both broke the up long standing upward trend line overnight. We’ve got normally that would freak me out. And I think we’re going to run stops, but the technical seem to have just a little bit less importance on the overnight session than the day session. I understand it still makes the mark, but the day session here, we’re managing to rally above the upward trend line. And I think that’s very important. I think you need to close back above that today,” he says.
Otherwise, the funds that are extremely long are going to start to be nervous and liquidate in the corn market.
He says funds don’t have a lot of reasons to stay long in the market except for fear of a weather problem or lower acreage.
“If 10 days from now you’re still hot and dry maybe we could add a little premium back in but if that slips to above normal precip and the crop is in the ground I don’t know why the funds would really want to stay long anymore, especially as China is not going to buy here anytime soon,” he adds.
Wheat Extracting War Premium
The wheat market is also dragging down corn and according to Bosse is also removing war premium.
The market ignored the historically low crop ratings which were down 1% to only 26% good to excellent and the poor to very poor category is at 44%.
There is also some rain in the forecast for the Southern Plains which he says is coming too late to help the crop.
“At this point, the rain isn’t going to matter. In fact, we’re going to start to get to the point where rain is actually a bad thing for the Southern
Plains as they’re trying to harvest whatever crop they’ve got out. But yeah, I think there is a little bit of a more premium still in wheat.”
Wheat Holding Uptrend
The wheat market is still holding above the uptrend line in hard red winter wheat, so technically that is supportive.
“I think wheat should be the first commodity on the grain side that finds support here because to me, we have reduced our production enough that we do have to curb export demand going forward. And we’ve done that with a rally, you know, up to $7.50 on Kansas City. But we can pull back here a little bit, still curb export demand,” he adds.
Soybeans Bounce with Meal
Soybeans started lower on Wednesday but have moved higher with the rally in the products, including meal.
Soybeans Still Sideways
Bosse says the market is still in a sideways trading range but is vulnerable to fund selling.
“I’m concerned there too. The funds are extremely long, the entire soybean complex. I don’t think China is going to buy any additional old crop soybeans from us,” he says.
Soybeans Watch Weather
So he thinks weather is the next catalyst for the soybean market and crop conditions.
“Next week, we’ll get our first crop conditions report. It might not come out as high as some of the trade expects because of the slow emergence. I mean, we’ve needed heat, but I think, you know, as barring normal weather, I think that’ll start to improve and that’ll probably push us through these downward support areas I’ve got drawn on the charts. So I think that’s your first catalyst,” he says.
However, the market will also be watching the June 30 report closely to see if additional acres were shifted from corn to soybeans since March with the higher input and fertilizer costs.
Cattle Futures Rally
The live and feeder cattle futures were higher early Wednesday after successfully digesting a bearish Cattle on Feed report and holding support areas technically the market needed to hold.
Boxed beef values were also sharply higher on Tuesday’s close indicating strong holiday clearence.
“I think we absorbed a lot of negative news here recently on the cattle market. I’m kind of a cattle bear. I feel like the highs are in, but yet I feel like we went a little down too fast. I mean, last week was rough in the feeder market so a little bit of a bounce back would make sense what’s crazy about this market is five dollars is a little bounce back now,” he adds.
Do Funds Defend Their Longs?
He is also concerned Cargill still has a lockout in place at the Fort Morgan, CO plant and the Mexican border reopening is still a question.
“Funds are extremely long so, I don’t know if we have a bolder story to make them buy more but they don’t have to sell out of everything here instantly because demand is still strong,” he states.
Lower gas prices and the higher stock market should also support stable consumer demand and help keep fund traders interested or not?
Bosse says, “If you want to keep the funds long and in this market you need to go make new highs and it feels like that’s a ways way and going to be hard to do. The high gas prices I’m afraid are going to hang on throughout the summer. You know, just saying the strait is open today, even Iran said it’ll take like a month for them to allow traffic to get back up to the pace it was before the war. So I’m kind of worried we’re here for higher energy prices for a while. And that means higher transportation costs, higher diesel prices.”
Cash Cattle Trade
Cash trade was lower last week with the five area weighted average at $260.49, down $2.36 from the previous week.
Bosse thinks the market could be steady to slightly better as packers buy for a long kill week.
“The show list is a little bit less, I’m hoping packers come in here and buy more. But I think we can hold steady this weekend at worst.”
Nearby Lean Hogs Bounce
Nearby lean hog futures were higher as well on Wednesday morning with some bull spreading and short covering as the market got oversold.
Hopefully the futures premium to the index has also been rectified.
“The June contract probably had to go down that $95 level to meet cash a little bit better. Large spread between June and July. You know, that market’s still struggling with a downward trend, but I think $95 does hold. I sure hope so anyway,” he explains.
He adds that with beef prices as high as they are pork should be finding a bid soon and with cutouts up $2.59 yesterday that should also support the front end of the board.
