Grain and livestock futures were mostly higher early Wedneday.
Wheat Making More New Highs
Wheat futures were leading the gains again with new contract highs in hard red winter and hard red spring wheat contracts, which was pulling up soft red winter wheat.
Mark Knight with Farmer’s Keeper Financial says wheat continues to add weather premium with the drought conditions hitting the HRW production areas and deteriorating crop conditions.
The extended forecast has some rain in the works but totals from past forecasts have been disappointing and may be too late in some cases.
Knight says the wheat market is also adding risk premium tied to the prolonged Iran war and crude oil prices going back above $100 with the Strait of Hormuz still closed.
This is also adding to the fertilizer crunch and record price push that is driving global production concerns.
How Much Higher Will Wheat Prices Rally?
Knight says it’s tough to tell how high wheat prices may run.
“You know, when a market makes new highs in any of these markets, it’s difficult to try to pick a top and dangerous to try to pick a top, by the way. So we’ll just continue to see how that plays out. But yeah, it’s definitely leading the charge higher,” he says.
The two year highs in hard red winter wheat is also pulling soft red winter wheat along for the ride even though that crop is not seeing the same production concerns.
Knight says funds are buying HRW and SRW wheat just the same.
Corn and Wheat Add Fertilizer Premium
Both wheat and corn are also pricing in the higher fertilizer prices and the supply issues tied to the Iran war that may lead to lower acres and yields.
Knight explains, “Fertilizer prices are a real concern for wheat and corn, especially. You know, it still has me second guessing some of the acreage numbers that we’re dealing with on the corn side. Guys are going to, you know, I’ve talked to too many guys that just don’t want to chase those prices and they’re getting worse. I mean, I think we’re up $5 today in crude oil. So, yes, the Iran thing seems like it’s going to just continue.” he says.
Dec Corn Hits New Contract Highs
December corn made new contract highs on Tuesday night just shy of the $5 mark but is it just a matter of time before that level is cleared?
Knight says, “That’s a great question. There are so many orders around $5. I would encourage farmers to take advantage of these price levels. Like you said, we just put in a new high by, I think it was only a penny or so, or maybe even less than that. But take advantage of these price levels to get some grain marketed. Keep in mind what we did last year. I mean, I know we kept planting more corn, but markets kind of fell apart this time of year. Not to say that that’s going to happen anytime soon, but yeah. I think these are price levels that are profitable for guys.
And, yeah, I would absolutely get some marketing up here.”
Farmers Switching Out of Corn?
Farmer’s Keeper did a survey of 4,000 farmers and found that around 20% had decided to cut corn acres since the Middle East war drove up fertilizer prices.
Around 3.7% were going to plant more acres but the USDA Report will have the final vote.
“You know, I’m going to lean that when it’s all said and done on June 30th acreage report that we’re going to probably plant a little bit less corn than than even the planting intentions report said,” he adds.
Funds Buying Corn
All of those factors have funds back buying in the corn market and re-adding to their long position he says.
“I mean, look, the thought process is that, you know, beans are going to get the majority of those acres and you know funds are funds are long a 200,000 contracts of beans and they’re long 200,000 contracts of corn. Now they have just like you mentioned they have just gotten back into buying a little bit more corn as of as of late. So soybeans have been the laggard,” he explains.
Plus, corn has a record demand story and is slowing chewing through last year’s record crop.
“But you know we’re planting we’re likely to plant probably four million less acres less acres and demand remains really strong on the corn,” he adds.
Planting Slowed by Rain
Planting process nationally on corn was at 25% and soybeans were at a record 23% this week but that is likely to change with the heavy rain system that moved through the last few days.
“I was really surprised we were as far ahead as we are. Of course, I’m in Missouri here, and looking out my back door, we’ve caught every rain
possible. Iowa’s kind of in the same boat. But it was impressive to see, you know, we’ve got a quarter of the crop planted. I’m with you. I would think that we’re 11 points ahead on beans and six points ahead of the five-year average on corn. And I would expect that we’re going to probably look more like the five-year average or maybe even under it come this next week because with the cold, wet rains not much is getting done this week,” he states.
Soybeans Rally with Corn and Wheat
Soybeans were higher on Wednesday in tandem with corn, wheat and bean oil.
Despite the talk of more acres of soybeans the market has been held up by bean oil rallying to catch crude oil and higher diesel fuel prices.
However, the market is also holding China premium according to Knight.
“You know, I think there’s China premium and the Iranian thing is keeping bean oil extremely high. I am most worried about soybean prices long term and encouraging my farmers to really take advantage of these prices. Trump is is expected to go to China May 14 and 15 to get a deal signed. That meeting got kicked down the road once already. I’d give it a 50% chance of probably getting kicked down the road further. And I don’t think the bean market’s going to like that,” he says.
So he feels like prices are elevated.
“Trump has said multiple times in the last six months to a year, soybean farmers are really going to love me. And so there’s that anticipation that some great deal is going to get struck and signed with China. But it feels like to me that a lot of that’s already built into the soybean market. And so that coupled with my anticipation of more acres on the June 30th report has me really fearful for soybeans. So I would really encourage farmers to get more heavily sold, especially on the soybean side, and maybe keep some more risk open on the corn side.”
Soybeans Still Sideways
Even with all of those factors at work soybeans have remained sideways for weeks, so what will it take to break out of that range?
Knight says, “Some global event, weather-related event here in the U.S.”
Plus, if wheat and corn continue to rally he thinks they could lift soybeans.
EU Rejects Argentina Meal
The EU also rejected some cargoes of soybean meal this week as well due to non-approved GMO traits being detected and Knight says if that becomes a bigger issue it could push some business over to the U.S.
Knight says, “I’ve heard that it’s been happening quite a bit as of late. They’re throwing warning signs that could absolutely lead to to more U.S.
business. Obviously, we’ve had more crush facilities and crush capacity come online in the last couple of years. And the biggest worry has been, OK, we’re using more beans here are we going to fill up with meal? You know, what are we going to do with all the meal? And so that is obviously a positive for the U.S.:
Cattle Futures and Cash Hit Records
Live cattle futures were making record highs for a second day push by record cash trade on Tuesday.
Sales ran from $250 up to $256 late Tuesday and even some $257 was reported on Wednesday morning.
“The last six months every time we talk, it seems like we’ve just put in new highs. And I don’t know where it stops. It’d be great to be a cattle guy. Fundamentals are very strong. We’re getting into the grilling season. I don’t see prices declining anytime soon.” he adds.
