Grain and cattle markets were lower early Thursday with hogs finally seeing a bounce.
Grains See Relentless Fund Selling
Grains futures were all lower again on Thursday morning as fund selling and liquidation continue to be relentless and pushed soybeans and wheat into more new lows for the move.
It is end of the month so there is profit taking going on in corn and soybeans plus liquidation ahead of first notice day Friday for November contracts.
Will the fund selling pressure stop when the calendar flips to November?
Darin Newsom, senior market analyst with Barchart, is skeptical because the fundamentals have not changed.
Still he admits that the funds had record long positions in corn and the soybean complex at the beginning of September that will need to be unwound and funds may be getting closer to doing that, at least in corn.
Fund Selling Overdone or Getting in Line With Cash?
So is the fund selling overdone? Because the managed money often over shoots the fundamentals on the way up and the way down.
“It looked like the market got out of line with itself, got it out of line with what might be its true intrinsic value. And so now we’ve got liquidation going on. Now we’ve got the markets just free falling, trying to find where that actual cash value might come in and it might start to prove, you know, it might start to build some support,” he explains.
Support From Demand?
The support to bottom the markets needs to come from demand according to Newsom and weekly exports were stronger Thursday morning showing lower prices are stimulating end user buying.
Weekly sales on corn were at 51.3 million bushels, soybeans at 94.7 million bushels and even wheat ticked up to 31.2 million, a marketing year high.
That didn’t even seem to phase the market however.
“If we’re just looking at wheat, it could, but I think we’re so far away from actually tightening the U.S. supply and demand situation. There’s plenty of wheat worldwide, and there’s certainly plenty of wheat in the United States. We can see that in spreads and basis and so on,” he says.
So, even if funds selling slows there isn’t any reason for funds to buy or move long, especially in wheat.
“I know funds don’t necessarily look at fundamentals, but there’s just no supply and demand reason for it.”
Geopolitical Concerns
The fund liquidation in the grains is similar to June’s pattern. Funds bought in the grain and energy markets after the Iran war broke out and then unwound most of that long in June and crashed the market.
Newsom says the algorithm headline following trade may be foolishly buying into the idea that possible peace talks will end the Black Sea War. While the grain markets have no war premium remaining that has been part of the pressure in the grains. Wednesday word that Russia was moving grain through the Kerch Strait and an Arctic channel not used since World War II crashed the futures.
He says the managed money traders trade headlines without any real knowledge of agriculture or export flows.
“There really isn’t any room at this point for human logic or any of these sorts of things. I remember back in the day, you know, algorithms were supposed to take the emotion out. But it seems now like they’re more reactive probably than they used to be because there’s no one to apply the brakes. There’s no one to step in and say, look, that just doesn’t make sense. Peace talks between Ukraine and Russia, that simply doesn’t
make sense. Most likely not real, but, you know, it’s in the headline and the headlines are fed to the algorithms and the algorithms react. And this is this is the situation we’re into now.”
Funds Too Far Away From Real Fundamentals
The funds set the direction of the trend the problem is they have skewed the markets to the point that the real fundamentals in agriculture don’t really matter according to Newsom.
“That’s why rule number one is don’t get crossways with the trend because you’d be getting, you know, on the wrong side of the funds,” he adds.
Back in the day he says pit traders had a depth of knowledge about what they were trading, but not any more. Plus, there are now predictive trading platforms that have opened trade up to the masses.
“And these are basically, again, unregulated casinos. So we’ve got more money coming in all the
time. And we can see this, particularly on report days. This is one of the reasons why the government needs to come up with new types of reports to release, because it increases the trade volume. And that makes the exchanges quite happy,” he concludes.
Brazil Elections Illustrate the Problem
A good example of that is the reaction to the Brazilian presidential election. Lula has been in office for three terms but the markets were betting he would not win again.
When Lula won the markets had to unwind that speculative trade which sent the Brazil real sharply lower and the U.S. dollar sharply higher and tanked the CBOT soybean futures.
“I mean, that’s all that was about. And it wasn’t that the situation in Brazil had actually changed. We have to remember Lula was the incumbent. But it’s just that most of the betting was leaning towards Bolsonaro. Well, you know, and when it didn’t happen. And, you know, they, as you said, they had to unwind these things. So we saw these collapses, even though, again, fundamentals didn’t change.”
Newsom says this goes against one of his market rules that fundamentals win in the end.
Harvest Pressure
One of the fundamentals the corn market is seeing is harvest pressure and that may be true in soybeans as well as there is commercial selling taking place.
The problem is funds are also selling which is a double whammy for the markets with the funds so long ahead of harvest.
“And there really wasn’t anything left for them to do but start coming out and moving to other markets, because headlines change and other market sectors become more interesting, and money starts coming out, we have nothing underneath. I want to say it’s a classic vacuum, but it’s more like a collapsing market where there’s just no one left to buy. All the money that was going to buy had done it already.”
With farmers pre-selling corn at higher prices on 2026 production there aren’t any buyers.
Plus, soybean yield may be better than expected and extending the hedge selling window.
Where Does the Market Bottom?
So where do the markets find a bottom or technical support?
Corn and wheat are both trading below the 200-day moving averages and soybeans are close to taking out that level?
Newsom hopes that market is signaling it is close and grain futures are oversold and statistically should be able to stabilize.
“I mean, if we look at the spreads, I mean, they aren’t hugely bearish. So, you know, we’ve seen corn and soybeans still carry some concern about Brazil’s 2027 crop. And I think that’s going to underpin the
soybean market as a whole.”
Interest Rates, Dollar Move Higher Despite Fed Decision
While the FOMC meeting resulted in the Fed leaving interest rates unchanged the market is betting on an increase in December and the interest rate markets are reflecting that.
That uncertainty has continued to push the dollar higher and that could continue to be a headwind for U.S. ag exports.
“It looks like the U.S. is in line for three more rate hikes over the coming year. Now, what this means for agriculture, again, I think we have to kind of forget the old idea that export sales and all this is done for economic reasons. It’s more of a political game at this point. And I don’t think that a country’s currency’s strength or weakness has as much to do with the final decision as political policy, tariffs, trade wars, and these sorts of things.”
