Grain and livestock futures saw a mixed trading session
Grains Quietly Mixed Pre-WASDE
Grain markets were mixed for a second day in a quiet session as fund selling subsided heading into the June WASDE.
John Heinberg with Total Farm Marketing says the grain markets saw similar action last year during June.
“We just traded sideways through the middle of June and I think that the WASDE report is a part of it here. I mean, obviously, we’ve sold the corn and wheat markets very aggressively, did find some support, and we’re holding those,” he says.
Heinberg says traders aren’t expecting much in the June WASDE Thursday. “Usually the June report just gives us some line item changes for both corn and soybeans. Obviously, the big focus is going to be on the Acreage and Grain Stocks reports at the end of the month,” he says.
First Notice Day Selling
Also coinciding with the reports at the end of the month is first notice day for the July contracts, which he thinks could be bearish.
He says, “Last year, we saw strong selling into first notice day, which is right before that USDA Acreage Report as we took July corn down to the $4 handle. Kind of feels like that could be a bit of a target again, especially with the surplus corn that’s out there and the pressure that could put on the marketplace if guys have to make some pricing decisions.”
Corn Bulls Point to Less Acres
However, the corn market may also see a cut in corn acres in the June 30th report and the funds have exited most of their long position in corn which should take some relief off the market.
“I think we’re at a swing point for the funds in terms of that decision, and maybe we need to see what that acre number is. A lot of talk that there very well could be an increase in both corn and soybean acres off of the March numbers here. Again, I still think that insurance piece with basically the subsidized put under the corn market that we’ve got because of the One Big Beautiful Bill could still be a bit of a factor there, especially with how some of the early planting went. So we’ll have to watch that very closely,” he explains.
He says wheat and cotton acres could also spill over into corn as farmers made those decisions at the first of the year before the fertilizer issues arose.
Quarterly stocks will also be a key report for corn as it will show the amount of product still in farmers hands.
“Then this market knows they’re going to have some people over the barrel here ahead of first notice day,” he adds.
Corn Demand Uncovered
The lower corn prices are uncovering some demand from end users, including exporters. Flash sales were reported again Tuesday morning with 4.7 million bu. of old crop corn sold to unknown destinations.
“Biggest thing that we are focusing on, not so much maybe the old crop sales now, it’s new crop sales. What do we get on the books in that regard? Obviously, there’s some speculation that China should be coming into the market for more corn, soybeans, wheat in general. Obviously, they’re not here now,” he states.
That’s because China is focused on freshly harvested South American crops and Heinberg doesn’t expect China to step into the market until the seasonal lows hit in the August-September window.
Soybean Complex More Vulnerable?
The soybean complex may be more vulnerable with funds holding a combined 433,000 long contracts in the soybean complex and the possibility of more acres is negative.
Heinberg says, “Yeah, I’m still very concerned about the soybean market at these levels now. I got some support on that old crop, about $10.90. We’ll see if that breaks to that level and we can do that very quickly.”
He says corn rolled over easily and soybeans could do the same with weakness on old crop exports and the lack of China business, plus soybean meal and oil rolling over.
“If that continues to be the trend, that could obviously make a pretty big impact in terms of that lack of support. Just feels like we’re trying to get the U.S. bean market and product market in line with the rest of the world,” he says.
China Business Delayed?
China has not started to buy U.S. ag products yet and may not until August as the USTR is setting up a Board of Trade.
He says, “And then also, it’s just looking at competitive pricing. Corn-wise, the Pacific Northwest is still in the game. The Gulf is a little bit more expensive than those South American supplies. Those sales that we’re seeing for corn here are PNW sales in that regard. I mean,
you’re still looking at a very large supply of product coming from South America as harvest is starting to ramp up in Brazil on that second crop corn. Argentina is in the middle of that harvest and record supplies out are covering any losses Brazil is going to have.”
Market Comfortable With Weather and Crop Conditions
In Monday’s USDA crop progress report 65% of the soybean crop was rated good to excellence, 67% on corn, both were a bit below
expectations and last year.
Still the forecast shows no threat so the market is comfortable with the crop.
“I mean, even though we’re a couple percentage points below the five-year average and things of that nature, the real warmth didn’t hit until this week and combined with recent moisture that should help the crop and improve crop ratings,” he adds.
Wheat Trying to Bottom?
The hard red winter wheat market has been up the last three days on short covering but is looking like it is trying to bottom.
Will USDA provide lower production figures in the WASDE on Thursday to support the market or does USDA wait for more harvest results?
He says, “Obviously, we’re now getting some harvest going. USDA could adjust to that KC wheat crop a little bit more. But still the biggest problem in the wheat market is the fact that when we talk about global production, that KC wheat crop is just a small sliver of global wheat supplies. The Russian market still demands the global price. We’ve seen some bump ups in their forecasts for their crop, as well as watching what happens in the trend in their export prices. And they’re going to control things.”
He adds that wheat needs to get back in line with global prices and that was part of the recent drop in prices.
Cattle Rebound on NWS Tightening Supplies
Cattle futures had a decent recovery on Tuesday after a sell-off on Monday.
Heinberg says the market is pricing in tighter supplies with the New World Screwworm (NWS) movement restrictions, especially the feeder market. Plus, there has been no consumer push back on fear of NWS.
“There’s probably some concerns that we’ll see things get really tightened up in that area. You’re already looking at a market that
had tight supplies overall anyway, and now we restrict movement. We’ve seen a nice jump in the index on feeders yesterday. I had another $1.20 to it today. Trading still well above the board. We’re still, what, $14 above the August contract. So that gives it a little bit of room,” he states.
Still he would like to see the August live cattle get about resistance of around $237 because the market keeps rejecting that level.
“Big bullish reversal on Thursday, hook reversal to the upside today. I think a combination of that strong feeder market, tight front end supplies, plus seasonality, the August contract typically gets a pretty good bid here mid-June into expiration. And with that discount to cash, we need to tighten that basis up like we saw last year when we posted a really strong rally about the 20th of June on in the August contract,” he says.
Cash the Key
He says where cash trade develops this week will be a key for the market. “Asking prices at $258, $260 and so we’ll see if the packers meet it with some bids,” he adds.
There was some light dressed trade at $403 in Iowa on Monday, which was lower money.
But he thinks the cash could be steady this week, which would be a victory.
“And actually, if you look at the box movement over the last couple of weeks, we’ve seen a pretty big jump in box movement year over
year. You know, we’re getting ready for the Fourth of July holiday right now. We need product in that regard from the retail case. And I think the packers are going to be willing to bid up in this area and get some cattle moving,” he explains.
Talk of Plant Closure
There was also talk on Monday that the Cargill beef plant in Fort Morgan, Colorado was permanently closing.
The plant has been dark since April but the idea of losing another packer spooked the market.
“They haven’t been killing at that plant since realistically the middle end of April. And so we’re not really going to see any major impacts in that regard. The market’s already made the move to this in terms of those cattle moving to a different location and still being absorbed by plenty of packing space,” he says.
Hogs Make More New Lows
Lean hog futures made more new lows for the move with the funds short almost 20,000 contracts.
Heinberg says, “We’ve been selling this since February now they’re in a short position looks like they want to extend that short position. I think we’ve got a target in the July at about $94. That matches our previous low from earlier in the year so that might be a spot I think we’re headed to right now. We need a little more strength in that that cash market right now the index is still actually still trading underneath both the June and July contract.”
So improved cash and cutouts would help.
