Grains closed mixed soybeans higher, corn and wheat lower. Cattle were sharply higher, hogs were lower.
Wheat Sees Profit Taking, Removes War Premium
Wheat futures ended 16 to 20 cents lower in the three classes on Thursday on follow through selling and profit taking. The markets made new contract highs on Wednesday and were overbought.
Rich Nelson with Allendale says the market also latched on to Black Sea headlines indicating Russian President Putin was open to a peace deal with Ukraine.
“The Putin story did get a lot of interest because it was from Putin and he’s made these comments before. We have to be very skeptical of whether it’s a long term change in the narrative,” he says.
However, the market has now erased a third of the gains that it took a month put on. “That shows the wheat market is a little fragile. So I don’t think we have a clear top in mind here just yet, but certainly for now, a pause is here,” he says.
Nelson gives the peace deal a very slim chance of sticking. “I think it’s going to be a very tough issue, especially considering the fact that at the start of the week, Putin was very much against any type of deal. So we’ll see if anything changes.”
Traders Looking for Excuse to Take Profits
With the market just making contract highs in the previous session he thinks traders were looking for an excuse to take some profits.
“Keep in mind, the recent trade in recent days this week has not been 100% confident. We’ll have to certainly see if we have any strong rebound later on after our coming three-day weekend here,” he says.
Corn Follows Wheat, Sees Profit Taking
Corn futures saw spillover weakness from wheat and some profit taking after new contract highs on Wednesday as well. Traders were also positioning ahead of the three-day holiday and the WASDE.
Nelson says the WASDE will focus on both supply and demand and many are thinking USDA could raise old crop corn exports and will lower new crop yield.
Corn Yield Questions
So what does size corn crop is the market trading?
Nelson believes it is very close to the 178.7 bu. per acre yield Allendale found in their farmer surveys. “We see about a two bushel hit to corn. So I do think that’s what the market currently has priced in. I do not think it has priced in the low yield numbers that the crop tour implied earlier,” he states.
He says their survey was done in the last two weeks of August after the very heavy rains. “So this gave producers just a few days to kind of let that rain soak in so they could determine the impact it might have on yield.” he says.
Corn Crop is Shrinking?
The general consensus is that the crop is getting smaller compared to the August WASDE but how much has yet to be established.
While there was excess rain in the east which is increasing the incidence of disease, the west saw drought and heat.
That could mean yield estimates will go down in the September WASDE and beyond.
“I do look for lower yields in these months ahead but not anything dramatic. In fact I would say the better argument for lower yields in my opinion is not from the Eastern Corn Belt or Western Corn Belt. It is from the non-Midwest states such as Texas, Oklahoma, Georgia,” he states.
While he recognizes the problems in the Western Plains he thinks most of those problems were recognized already by USDA in August.
USDA to Slow Play Yield in WASDE
USDA in the past has also been slow to reduce yield in past September reports.
“And keep in mind here for that August WASDE report, they already had the whole state of Kansas down 13 percent, the whole state of North Dakota down 12 percent. Yes, while we know individual fields and certain locations are much worse than that, but for a whole state number, those are pretty sizable hits here,” he adds.
Funds Buy the Break in Corn?
Even with the correction in corn it ended well off its session lows for a second day and fund continue to buy on the breaks.
Nelson says, “The message right now it’s really not what the news flow is it’s how the market itself responds to that news flow. So the corn and especially with soybeans they see a good rebound towards the end of the day. These markets are in a strong uptrend and the market not yet ready to loosen up on that.”
So far there has been very little technical damage done to wheat or corn with the correction the last two days.
Soybeans Rebound on Demand
Soybeans started lower with corn and wheat but came back strong into the close.
China bought another 7.1 million bu. of soybeans for the 2026-27 marketing year plus new crop exports were at 71.6 million bu. which is strong. Total new crop exports are running more than double the pace of last year, which China was absent from the U.S. market.
“We’ve sold 36% of USDA’s whole year goal and here we are on September 3rd, just started the new year. So strong sales. We have between China and unknown we have 14 million tons already booked of that 25 million metric ton deal. So, overall the soybean export story is quite solid,” he says.
Soybean Yield Falling?
This leaves no room for error on yield but what will the September WASDE show?
The Northwest Corn Belt has not had the best finish to the season but Allendale only lowered their soybean yield .1 bu per acre from USDA’s August estimate to 52.6 bu.
“The general message for us right now is that soybeans specifically have done a very good job this summer in withstanding some moderate weather hits. So I do think in that soybean yield story, lightly lower. Our survey suggested minus 0.1 bushel. Maybe we’ll take off one, but I don’t really see a large change from USDA on soybeans,” he adds.
Beans in the Teens
If the yield stays static on soybeans it will be a near to record crop with the additional bean acres planted this year. Still with the strong demand Nelson thinks the market can hold above $13.
” I think that story is going to be with us here for a few more days at least. The big question for us is a lot of analysts, including ourselves, have said Q4 and Q1 have a lot of supportive stories lined up waiting for us. The question for us, in my opinion, is really just limited to the month of September. Do we have a downside event for oil seeds? If so, will it be dramatic or a minor one? So I do suggest Q4 and Q1 have a lot of positive news, maybe a 50-50 chance of having a moderate break on the soybean side, at least in the next 30 days,” he says.
Cattle See Nice Bounce
Cattle futures were up sharply in both the live and feeder cattle futures.
Nelson attributes much of it to short covering as the market was oversold. However, cash trade has been improving and providing a lift to the market.
He also thinks most of the bearish news headlines have been priced into the market.
“I would suggest that after our very tough news flow in August, which this market did get hit by quite dramatically, maybe we said enough is enough and we’re ready to find some stability here in the short term,” he says.
However, the pullback in corn and the DOJ probe on retailers for high beef prices may have also played a small role.
“Maybe there are some traders who believe that retailers are making a lot of money and stealing from the live animal level of beef pricing.
Maybe there are some people who thought this would be a bullish story. I personally do not. As a reminder, there is no fat in the retail end user end of things. Average margins, for the most part, among all retailers, are quite low. So I think it’s a story. Maybe some people bought into it. I personally don’t feel there’s going to be much fruition out of the story, though,” he says.
Cattle Technicals
So where do cattle futures need to close to negate the downtrend?
“You give us two more dollars and it would look like we’re trading a little different environment than we have in the prior three to four weeks. So really two bucks is all we need to have maybe a change in story on the cattle side. And when I say change story, I don’t mean a straight up bull market. I simply mean an end to the selling.”
Hogs Fail
Lean hog futures failed at resistance and saw some light profit taking but with the futures discount to the cash index and funds near record short can the market push back higher?
Nelson says, “In the long term, I do. But keep in mind for the hogs, we’ve had two days of lower pork. On top of that, I will point out we also have a gap waiting for us at lower prices on the chart. I believe on the intraday chart, that’s $81.90. on that October contract. So I do think we can have a little short-term break for the hogs.”
However, the seasonal buying pattern going into procurement for October’s National Pork Month, is still a strong story and there will be good general buying for this demand period ahead.
