Grain and cattle futures were mostly lower early Monday with hogs mixed.
Corn Falls Below Report Day Low
Corn was lower early Monday on harvest pressure and fell below the key $4.70 1/4 report day low on the charts.
Craig Turner of StoneX says a close below this level would be negative for the market and open the door to further fund liquidation even though corn is oversold.
He says it will be difficult to bottom the market until harvest passes the 50% market and with an open week for progress.
“If we close below $4.70 today, you would make the argument on the charts that we could then, you know, test $4.60, you and yeah, it’s going to be tough if we don’t get export news to come in and help the corn market here. Really, the path resistance is going to be lower this week because we’re going to be harvesting a lot of corn out there.”
Harvest Pressure on Corn and Soybeans
Turner says both corn and soybeans are suffering from hedge pressure.
“Farmers from what I hear is they’ve been harvesting soybeans first. And if you take a look at the crop progress report, it’s right there for you. You can see the crop progress really accelerate for soybeans at the expense of corn here. And farmers are selling beans and storing corn, it sounds like, which is nothing new.”
He adds that there is no shortage of beans right now and USDA is still projecting a carryout of about 300 million. “So, without having a big deficit or reason to price ration exports right now just hard to get buying during traditionally a bearish harvest period,” he adds.
Funds Liquidating
Funds have liquidated over 200,000 of their record long or near record long position from September according to Turner, exiting 83,000 week over week. “So yeah, they’ve cut that in about half since the highs.”
For soybeans the fund selling was more muted he says. “For soybeans, they only took off maybe about 8,000 week over week. The trade was looking for about 20 to 30 000 less on that Commitment of Traders Report.”
Turner says funds have realized corn yields went up, while exports are behind so they’re shedding some length in corn, plus the infusion of 173 million bushels of old crop stocks adds to the balance sheet weight. U.S. corn prices are not competitive with South America and Argentina is undercutting the U.S. to sell to Europe. Some of that has to do with the stronger dollar. However, he says the U.S. is quickly narrowing the gap.
With soybeans funds are more bullish. “The yields have been fairly consistent for soybeans, but really has been that demand from China that’s kind of helped it along here.”
Soybeans Fade China Buys
Still soybeans saw flash sales of 4.2 million bushels to China Monday morning, another 9.6 million bushels to unknown.
The market faded it as there were already rumors of the business on Friday and harvest pressure is overwhelming the good news especially with the reports of strong yields.
Soybeans Support
Turner says for Nov soybeans the next area of support on the charts is around $12.50 to $12.55.
He says soybeans at these price levels are starting to be competitive with South America so they should be competing well for the rest of the world.
Basis Levels Surprise
National basis levels are strong for corn even with the ongoing harvest and some areas of Iowa are reporting $5 plus corn.
Turner says, “You’re hearing some pretty strong numbers in the Midwest and you’re not going to send that grain back up river, right? And, it’s interesting because, that quarterly stocks report added to the balance sheet. Yet you take a look at some of these basis levels and you kind of got to scratch your head. You know, what’s you know, what’s really going on here? You know, export demand has been strong. Right. But it seems like domestic demand has been stronger in some of these places.”
Soybean basis has been supported in areas around processing plants trying to get caught up on crush and supplying soybean meal needs.
Wheat Falls on Exports
Wheat futures were down again on Monday with poor exports continuing to weigh on the market as Turner says the U.S. prices are still relatively high.
“When you compare it to Canada, Argentina, Australia, Australia ended up having a better harvest than originally was thought.
Now, Europe still needs, you know, has a shortage of wheat. They’re still having a tough time getting wheat out of the Ukraine and Russia. been running about 50% capacity. When you take a look at the global prices, U.S. wheat is just starting to become competitive in the world market. So we’ll see what happens here.”
He says December Kansas City wheat was $8.50, $8.75 a month, two months ago and now is at $7 which is still relatively high.
Putin Meeting?
Crude oil and wheat were also lower perhaps on the headline that Russia President Putin wants to have a summit with President Trump and President Xi to try to end the war in Moscow in his favor.
“When I first saw that headline, I’m sure when a lot of traders saw that headline, there was probably a little bit of an optimism, right? But then they’re not including Ukraine, right?”
He says it will be tough to get the market excited until Ukraine is involved in the talks.
Even if a deal was brokered between Russia and Ukraine, it would not have an immediate impact on diesel supplies.
He explains, “I think you can get the grain trade ramped up faster than you can get the energy. You can even start pumping crude faster, but for the distillates, for producing, and it could be heating oil, diesel, or RBOB gasoline. When that kind of infrastructure is damaged, that’s the hardest to usually get back up and running.”
Turner says it takes a lot of capital investment and not a lot of banks or companies want in the foreign investment world to get involved. So that’s going to stay high for a while.
Cattle See Profit Taking
Cattle futures were seeing some profit taking early on Monday after hitting some chart resistance. That’s despite some strong fed cash trade late last week.
The South traded at $288 with the North at $226 to $227.
Nov feeders hit the 200-day moving average and could not break through.
He says. “We’re back in that range of about that $330 to $370 and we did try to test that 200-day moving average cash prices have been strengthening here but we’re getting some profit taking today and you’re kind of a risk off feel on the market overall.”
