Grains ended mixed, with cattle higher and hogs lower on Monday.
Corn Falls Ahead of Reports
Corn ended lower divorcing itself from the energy markets and shifting to the USDA reports on Tuesday according to Jeff Hoogendoorn with Professional Ag Marketing.
He says the market was somewhat disappointed with the RVO levels EPA released on Friday or at least they were priced into the market.
“I don’t think it would be totally uncommon for the grain markets to switch gears a little bit and start thinking about okay instead of just being hooked at the hip to whatever crude oil is doing, maybe we better look what’s this report going to say?”
Funds Take a Break
Funds have been piling into the long side of the corn market and so they are taking a break before the report in case there are more corn acres than expected.
“They added 50,000 contract as of last Tuesday. I’m sure we put a little bit more onto it as the week progressed last week. So they’ve been very interested buyers. I think they just want to get past the reports and figure out their next move,” he explains.
The USDA Quarterly Stocks Report could also be bearish as average trade guesses show an additional 1.0 billion bushels of corn over the previous year.
“Here, right at home, and especially in the West, we’ve got a lot of old crop corn around, right? So that potential is out there. I really think the reaction to the market here tomorrow is going to be probably as important as anything as you try to learn things from the marketplace,” he adds.
End of Month, End of Quarter
The markets are also into the end of the month and quarter which also triggers from positioning and profit taking.
“Today funds may be trimming some of those positions as it really got beat up here on the close today,” he says.
After the report Hoogendoorn says he will be watching to see if the grain markets go back to trading with crude oil.
Soybeans Hold Fractional Gains
Soybeans were strong most of the session with help from a sharp rally in soybean oil, which was following higher crude oil. However, gains were trimmed late in the day to end with only fractional gains.
Hoogendoorn again attributes that to report positioning and squaring end of month and quarter.
Funds Record Long in Soy Complex
With soybeans, bean oil and soybean meal combined the funds are record long in that complex. Are they running out of buying interest or do they need another bullish story?
Hoogendoorn says he doesn’t see funds exiting those long positions this time of year because there is too much risk with the planting and growing season.
“They’re going to stick to their position. You know, do they want to get any longer here today? I think that’s what they’re struggling with is, you know, give us something new for that next boost of energy. They need reasons to throw some more money at this soybean complex,”
He says they’ve already priced in the higher RVO levels and higher soybean acreage but are still waiting for news on the outcome of the China trade meeting.
Cattle Make New Highs for the Move
Live and feeder cattle futures were higher on Monday and made new highs for the move on technical buying.
Are they on the verge of scoring a chart breakout?
Hoogendoorn says, “I think the technicals are kind of friendly, this cattle market right now. But you look at those old highs back to what was that about six, eight weeks ago. And that’s kind of we did get most of these months to close right at or slightly above those old highs today. Boy, I think if you come into the trade tomorrow and can be a little bit higher, I think that’s going to give this market some pretty good energy.”
The key will be if funds take end of month profits or not.
Cash News Positive
The cash cattle news was also positive late Friday and into Saturday which lifted futures.
Cash in the North was mostly $235 live and $370-$372 dressed, which was steady. However, late trade were up to $238 in the North and South, $3 higher.
“I would almost call it a change in trend on the cash last week week. We were trading sideways after coming off the highs and with lower packer margins you had to be concerned that we would take another $1 or $2 off of it. Last week they tried to get that job done of course but the fact that feedlots really held their ground very late into the week, probably more so in the South, than the North. But those guys being able to get a couple dollars higher than the week before really, I think, sets a strong stage going into this week.”
Hogs See Profit Taking
Lean hog futures had a strong rally after the friendly USDA Hogs Pigs Report and spent most of the day higher before a selloff into the close.
He says this was some end of the month profit taking. “You know, a really nice push off the report first off. And it’s a little hard anymore
these days to get more than a day, day and a half of trade off that type of a report. That’s just not as big an influencer as it used to be. So maybe that was what we had going on. We had a really impressive day Friday. We were up over $1 for a while today. Maybe that was
all leftover buying from the report last week and that just kind of died out throughout the day. No doubt there’d be some people wanting to take some profits going into the end of the month and end of the quarter,” he states.
He says front end supplies are still ample and that is hurt the near term fundamentals. However, that could change with the disease pressure in the industry and support the back month contracts.
“Yeah, what we believe we got going on, what you were referring to is it looks like we have just a few more pigs around than what we’d like to see. And I do think it’s short term, but I do think we’re going to shorten up the kill a bit this week with the holiday coming. If you get into mid to late April this story will be behind us,” he says.
