Grains markets opened higher Wednesday, then turn mixed. Cattle also saw early strength.
Grain markets started strong after seeing some profit taking in soybeans overnight on news that the Trump Administration was also looking at 10% tariffs on China by Feb. 1.
However, the markets were running into chart resistance and seeing farmer selling which may result in lower closes, not usual after a big rally.
So with all the headline noise what is the market really trading?
Is China really buying, is the crop smaller than advertised in South America or is it just a head fake by the fund traders?
Darin Newsom with Barchart says the forward spreads have been bullish in corn since August indicating strong underlying demand.
However, there was market talk on Tuesday that China was in buying not only U.S. soybeans, but also corn.
That was followed by USDA’s flash sale announcement of 5.35 mb of corn to unknown destinations.
So was that China?
Newsom says it could be but he doesn’t think it means there is a larger trade deal in the works between the U.S. and China.
He says it could indicate there are some growing issues with the crop in Brazil that may not be known for a while.
That could explain why China rejected soybeans from five Brazilian firms due to quality issues and why China has continued to buy U.S. soybeans even though Brazil basis is over $1 below the U.S. in the Gulf.
Wheat futures saw fund short covering on Tuesday and more of the same on Wednesday according to Newsom and the intermediate weakness in the U.S. dollar may be helping.
Cattle continue higher on record cash and Newsom says as long as consumer demand also stays strong at these levels he thinks the market is on solid footing.
