Grains ended quietly mixed on Thursday, cattle sharply lower and hogs higher.
Grains Fail to Extend the Rally
Grain markets opening higher on Thursday morning but ended narrowly mixed and off of session highs and disappointing the bulls that wanted to see the rally extended for a third day.
Allison Thompson with The Money Farm says the failure was likely position squaring heading into the three day holiday plus markets ran into chart resistance and saw some profit taking.
“I mean, we had some really good movement early this week, obviously with following that USDA report, we got a good boost. So it doesn’t hurt things to see a little bit of profit taking or a little bit slower trade going into a longer three day weekend.”
She says the market doesn’t have anything fundamentally changing right now until the July 10 WASDE. “And I think some of the trade is already taking expectations for what that report’s going to be. And we’re probably seeing that get priced in here over the next couple of days.”
Corn, Wheat Higher Week
Old crop corn and all three classes of wheat were higher for the week but did not score key weekly reversals.
“On the weekly charts, we were actually really close to printing some key reversals higher, which would just be a technical indicator to give us a little bit more of a boost going into next week, especially when we printed new lows in a lot of contracts ahead of the USDA report on Tuesday. So we got really close to them,” she explains.
Thompson want to see a close in Dec corn above $4.46, $11.60 on soybeans and the wheat market needed a 20 cent rally to close with a key weekly reversal.
“Honestly, going into next week too, those are going to be resistance levels. They’re just the highs from last week. So if we can overcome them, it definitely gives the bulls something to work with. And hopefully maybe we’re starting to see some of these lows being printed here as we go into important months of July and August,” she adds.
Soybeans Close Lower for the Week
Soybean futures did post a lower weekly close in part due to the implosion in bean oil.
She says, “Yes, bean oil really struggled this week. Part of it had to do, obviously, with crude oil turning lower and geopolitical headlines continuing to move the market.”
Plus, the Stats Canada report and the USDA Acreage report both showed higher canola acres and both are at record levels.
“Here in the U.S., we’re looking at record canola production going into next year. So those two things really hampered that market. Now, we didn’t see that market completely collapse to finish the week, but it just adds another scenario to the demand we’ve really been talking about for oil seeds, which is biofuels. So if there’s going to be a cheaper alternative and there is going to be a lot of canola around, that just kind of gives soybeans some competitiveness. And I think that’s what we started seeing emerge this week.”
Grains Still Digesting Reports: What’s Next?
The corn market continues to price in the lower than expected quarterly stocks at 5.29 billion bushels on record demand.
So what does the market need build on that momentum and the higher weekly close?
Thompson says weather is part of the story.
“Right now it doesn’t necessarily look like we’re seeing any huge threats. Obviously there’s areas that are dry, there’s areas that are wet, but overall the forecast doesn’t see one, you know, outweighing the other at this point. So coming back next week as we start looking further into the July and obviously August, another important month, we’ll probably see the market take more consideration and more action just based. on those updated forecasts.”
She also thinks it comes down to continued strong demand.
“Obviously, the report proved demand was better than expected, kind of across the board but now we need to see it continue especially in the weekly export sales.”
The last thing she is watching is money flow.
“We didn’t get a commitment of traders report today just because of the three-day weekend. So we’re going to have to wait till Monday to get that. But we know that the funds were short corn. They were short wheat going into the USDA report. So they were obviously wrong given what the report said. So is it enough for them to switch sides or are they going to at least go back more towards a
neutral position and see? what weather or demand do here going forward. I think that’s the things that are going to be most important to drive us technically here going ahead into next week,” she adds.
Wheat Also Watching EU Crop
Wheat got a push off the record low U.S. acreage and that helped produce a higher weekly close in all three classes but the market has not really taken off yet due to harvest pressure.
“Next week’s crop progress report should show harvest 50% or more complete at this point. So we really should be getting towards the end of it. And so now it’s going to be time to move on. And I think the focus, you know, we got a good amount. of data thrown at us this week for the US. And we know that’s going to be incorporated in next week’s USDA report. So we’re going to obviously be talking about that,” she says.
However, the market is also watching deteriorating crop conditions in the EU with the record heat and drought. If that intensifies over the long weekend it could drive markets after the holiday.
“We see it in headlines. We don’t exactly know how it’s going to affect the crop yet. But that could be something the USDA might surprise with in next week’s monthly report is we start seeing some production cuts in some other places like the EU,” she says.
So world production is getting tighter.
“Globally, it started pretty strong in the Black Sea, Australia, and we’ve seen started to see some of that move down. And I think that just ultimately should help wheat out here as we get further into summer.”
China, China, China
The biggest hope for all of the markets is some increased demand from China as part of the agreement we struck with them.
Rumors continued to swirl this week that China was bidding for both corn and soybeans for September/October delivery. However, there was little evidence of any China buying again this week in the weekly export report.
She says, “We got some unknown destinations that have been taking place, but it’d be really nice to see China take that. And if they’re
going to make that 25 million metric tons (MMT) by the end of the year, we should see them starting to make those buys, especially if they’re going to buy that ahead of Brazil’s upcoming harvest in 2027.”
She estimates China has purchased less than 1 MMT of soybeans but those sales should start picking up in order for Beijing to hit 25 MMT by December 31.
“If they were to start next week, we need to see 1 million metric tons sold a week through the rest of the year. And I think this morning with export sales being lower than what the trade was expecting on the soybean side, it just gave them another reason to sell it today.”
China to Drop 10% Tariff
To see more consistent demand from China for soybeans they will need to drop their 10% tariff which could come in the July 10 meeting with trade officials.
Thompson says, “Yes, it’s possible. I mean, these headlines are certainly helpful. Any kind of reduction there would certainly think that we’d have some more incentive for them to start buying some U.S. needs.”
USMCA Not Extended
The U.S. decided on July 1 not to renew the USMCA agreement and will go to rolling annual reviews of the trade pact for the next 10 years.
Thompson says Mexico is the top buyer of corn, wheat, pork and other products. However, the market was able to shrug off the headline because it won’t fundamentally change how the three countries trade.
“Just because we didn’t renew it doesn’t mean that that trade comes to a halt. So everything that has been in place stays in place as the talks and reviews continue,” she says.
So the export demand should continue.
“And I think that’s why the market ignored it. It’s a big headline. It sounds really scary, but ultimately it still keeps that demand open and obviously relationships open too.”
Cattle Lower Thursday
Cattle futures ended sharply lower on Thursday and for the short week with the drag of lower cash and cutouts.
Cash trade was mostly $255 to $256, down $2 to $3 from last week and dressed prices were mostly $403, down $5 from the previous week as packers use their own formula cattle to break the cash and the psychology of the market.
But Thompson says, “Honestly, it’s kind of a seasonal thing too. You know, we’re getting through the holiday and cash was lower, which should continue after the holiday.”
Fundamentally though nothing has changed in the market and so a big pullback in prices is tough to justify she adds.
