Grain and livestock futures end mixed on Monday.
Soybean resumed buying interest, pulling corn up slightly.
Arlan Suderman with StoneX says both corn and soybeans have had a nice rally off the lows set in August.
However, he thinks most of it was fund short covering verses a change in fundamentals.
“We’re in a bear market and the funds are heavily short and so they started getting nervous. We get to multi-year lows and the funds start saying hey, we’re at risk for something unforeseen happening. So, they start taking some profits on that and lightening their positions,” he says.
The question will be how far can those markets go or does the market go back to rest the lows?
He says the key will be what USDA provides for corn and soybean yield estimates in the September WASDE.
“This will be the first estimate where they actually weigh field samples. That could lead to surprises. That is a big issue in a year when you have a very cool August which favors big seed size and higher than expected yields, but we were also pretty dry in some areas which favors lower yield surprises. I want to see how those balance out,” he explains.
After that the problem will be harvest pressure and whether the market can get all those bushels stored away.
Soybeans got some support from another flash sale of 4.85 million bushels of new crop soybeans to China, but Suderman says this isn’t even routine business as they’ve bought very little for November through January.
“The mystery is are they not buying because they anticipate lower prices or are they using soybeans out of their reserve? Regardless of the answer USDA may have to lower their export forecast,” he adds.
Are soybeans also putting in South American weather premium with the hot dry weather they’re expecting through September?
Suderman says it’s too early for the market to get overly concerned about that and there are forecasts for rain in October and right now they estimates for Brazil soybean production for 2025 range from 165 to 170 million metric tons.
Whether or not corn has put in a harvest low is also question.
However, Suderman says the market may retest the lows with a record crop, limited storage and more U.S. and South American farmer selling.
“It’s still possible the low is in but sustaining a rally is going to be a challenge moving forward,” he adds.
The lows holding in the wheat market will be dependent on if corn can bottom says Suderman.
Yet, he sees wheat unable to climb much higher because the U.S. is not competitive with Black Sea prices, as they have not started to firm yet.
Cattle see a big recovery with the stock market higher and expectations for better cash trade.
“Packers are looking like they are short bought and packer margins are better than expected. I think the board recognized that today,” he says.
